Progress Software's acquisition of IONA Software today is one of the end game moves for "enterprise" middleware and the traditional enterprise sales model as we have known it. Open Source, Software as a Service, and Platform as a Service have won. And only the organizations with planetary momentum (inertia) like IBM, Oracle, SAP, HP, Sun have the staying power to survive under the blistering sun of the old enterprise model.
One of the great moments in film is the Lawrence character in Lawrence of Arabia determining to seize the town of Aqaba by crossing the uncrossable Great Nafud desert. As we are told the Nafud is the "anvil of God" where anyone who does not complete the crossing in 3? days and nights will die.
For many years now I have thought that the traditional Enterprise Software model has had its own Nafud - which is the amount of revenue you have to achieve to in order to be "safe". And for a long time I believed that number was 1 billion in revenues and reasonable profitability. Any number less than this was not a permanent place to be. Either you got to the billion or you were doomed to be dependent on coming out with "hit technologies" to stay relevant. If you succeeded at always being on trend - then you survived in the desert longer. But as soon as you missed - and didn't have a hit on your hands - you slipped down in revenues and relevance - because you were technology driven - whilst pursuing a business model strategy that requires you to be sales-driven; which you can only do with much larger revenues.
The Enterprise Nafud has grown. The BEA sell-out to Oracle made this ominously clear. Even with revenues in excess of $1 billion, with global infrastructure paid for by the dot-com era, and with an enormous amount of human capital - BEA looked at its self and its business model and decided that it couldn't grow its stock price a modest amount on a go-forward basis. The Oracle price was about a 30% premium. BEA had to admit that the decay in their core business model (traditional bag carrying enterprise sales reps) was far faster than any renewal they could create from their product lines and new innovative services.
What is the new benchmark - how do you survive as a vendor pursuing traditional enterprise business model? Easy, be IBM, SAP, Oracle, HP or Sun. Other than that you can consume smaller lifeforms wandering the desert with you, to sustain you a little longer. Progress gobbled up IONA's enterprise products and customers like a wanderer at a desert oasis. Refreshed, they will live a little longer.
Even among the remaining middleware players SUN, IBM, Oracle, etc., how much of their product line is actually open source components being aggressively innovated on by teams outside of their organization? Increasingly more parts of WebSphere have the word "Apache" scratched out and the word "WebSphere" written on the packaging in red crayon.
I am not saying that enterprises don't buy software. I am not saying that there can't be awesome software/service vendors who make less than $1 billion in revenue and thrive. I am saying that the traditional model has clearly ended. Equally as true, the ending will go on for quite some time.
So if you are an existing small vendor or a startup, how do you survive? How do you thrive? Don't enter the desert! Aqaba actually doesn't have to be taken. It is a big world with OSS, PaaS and SaaS customers waiting for the new generation of value-oriented, instant-on IT suppliers.