Oracle is wagering serious money that PLM (product lifecycle management) software will become more critical to all kinds of IT customers with its $495 million bid this week for PLM specialist Agile Software.
PLM tools help an organization track the development of its products and document and support that process.
"It's increasingly hard for a company to differentiate itself from the competition," said Jon Chorley, vice president of supply chain execution and PLM strategy at Oracle. "There's really not much left. There's really only innovation. How you develop new products will be critical."
Subject to regulatory and shareholder approval, Oracle hopes to close the acquisition of Agile in July. Agile will then become part of Oracle's applications business and the company plans to more tightly integrate the PLM software with its other business software. For instance, Oracle will look to integrate its Siebel customer relationship management software with Agile so that customer feedback on products can be fed into the product, as well as linking demand management data from its enterprise resource planning applications to the PLM software.
Oracle will no longer sell its existing PLM software, although it will continue to support customers who are already using it, Chorley said. Agile will become the vendor's de facto PLM offering and Oracle at some point may encourage Oracle PLM customers to transfer to Agile. Oracle PLM, which to date has only attracted a small number of customers, lacks some key functionality including the ability to integrate with computer-aided design (CAD) software, whereas Agile has links into a wide variety of CAD vendors' products.
Oracle intends to support Agile's links into third-party applications, notably those of Oracle's prime applications competitor SAP. A couple of hundred of Agile's 1,250-plus customers also use SAP's software, according to Jay Fulcher, president and CEO of Agile. By contrast, he estimates that 98 percent of Agile customers are also Oracle customers and more than 40 percent of those are running Oracle applications.
Although Agile's competitors vary by the markets they play in, "SAP is far and away our primary competitor across industries," Fulcher said. The company has tended to run into CAD players like Dassault Systèmes in the aerospace and auto industries. Dassault bought PLM software vendor MatrixOne in 2006 for $408 million.
In recent years Agile has received many inquiries from potential buyers, Fulcher said, with the company embarking on a strategic analysis of its future direction about 18 months ago. He noted that when discussions began last year with Oracle, Agile was also in conversations with other vendors whom he declined to name. More details on the bidding process should appear shortly in Agile's filings with the U.S. Securities and Exchange Commission in relation to Oracle's offer.
Acquiring Agile will also net Oracle the Cimmetry collaborative visualization software, which is used by more than 10,000 customers. Agile purchased Canadian vendor Cimmetry in 2005 and it became a wholly owned subsidiary. Agile tended to keep Cimmetry as something of a separate entity since many of Agile's PLM competitors have ongoing OEM (original equipment manufacturer) deals to embed Cimmetry in their software, Fulcher said.
"We do see Cimmetry as a great asset," Chorley said and Oracle is determining how best to incorporate that product line into the company.
Chorley also committed to maintaining the four different flavors of Agile. As well as the core Agile 9 enterprise PLM software, there are Agile Advantage, an offering aimed at small to midsize enterprises; Agile e6 for companies engaged in complex engineering operations; and Agile Prodika for consumer packaged goods and food and beverage vendors.
Over time, Oracle plans to bring some of Agile e6's functionality into the Agile 9 product, Chorley said. He also thinks that Oracle' JD Edwards applications customers, many of which are in manufacturing, may be interested in Agile Advantage.