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10/17/2005

IBM Acquires Datapower, Software Will Never Be The Same

IBM announced today that it was acquiring Datapower, the pioneer of message aware networking.  As some may know, I invested in Datapower and given that I’ve written another post on some of the venture capital aspects of the deal, but I thought I would also write this post about the higher level significance of deal from an industry perspective as I think it is pretty interesting for anyone involved in software.

From an industry perspective, IBM’s announcement is significant for a few reasons:

  1. It represents very a powerful endorsement of the long term promise of message aware networking.
    Message aware networking involves shifting the processing of software messages away from applications (and their associated middleware) into specialized hardware devices.   These devices dramatically improve the security, performance, and manageability of software messages.  As I have written before, message aware networking is one of the top trends in the software industry, but up until recently most of the major technology companies had yet to make a commitment to the space.  However in just the past few months a number of tech heavyweights have weighed in on the space.   First, Cisco announced its AON line of message aware network equipment and then Intel surprisingly announced that it was getting back into the space when it acquired one of Datapower’s smaller competitors, Sarvega.  IBM’s move now marks the first major enterprise software vendor (and arguably the most influential one) to embrace the trend.  So in the space of just a few months, message aware networking has gone from the province of just of few enterprising start-ups to a major battle-zone between some of the tech industry’s biggest titans.  Much of this has to do with the growing realization that as software is broken into smaller and smaller pieces that are distributed further and further apart, that the messages between these software pieces are becoming an incredibly important.  In this environment “the message is becoming the software” to such an extent that the processing and handling of the messages is becoming as important if not more important than the application itself.  IBM’s entry into the space, with its vast stable of enterprise customers and huge enterprise “stack” will likely accelerate the adoption of message aware networking (and the Service Oriented Architectures that sit on top of it) and will put pressure on other software vendors to follow suit.
  2. It underscores the inevitable collision between enterprise software and enterprise networking vendors.
    Message aware networking sits in a supposed “no man’s land” in between enterprise software and networking. It looks a lot like networking because it requires high speed dedicated devices to process large numbers of standards-based messages, but it also looks a lot like software because it requires intelligent middleware to make content and context sensitive decisions.  Because message aware networking did not naturally fit into the networking space or the enterprise software space, the big guns in each space weren’t really sure what to do.  However with a potentially huge market at stake, neither side was prepared to concede the market to the other.  Ultimately, Cisco broke an uneasy truce and moved into the market with its AON products.  In this light IBM’s purchase of Datapower can be seen as a direct response to Cisco’s moves.  These moves and countermoves come despite the fact that Cisco and IBM are supposed to be the best of friends.  However, as I outlined in an earlier post, Cisco and IBM are destined to find themselves competing head-on much more frequently thanks in large part to the inexorable melding of the traditional networking world with the traditional middleware world.   Who knows, they might have even competed over Datapower.  This “battle of the stack” will likely be one of the most important enterprise computing stories of the next decade.
  3. It marks what is likely the beginning of a very aggressive push by IBM to develop a fully featured SOA “stack”.
    As a wise man once said “He who says A, must say B”.  In buying Datapower, IBM is making it clear that they intend to build to a robust stack of message oriented products.   As relatively “dumb” yet critically important message processors, Datapower’s products will likely serve as the foundation for a wide array of message oriented products, which will mostly be grouped under the Service Oriented Architecture (SOA) label.  With the foundation in place, IBM will likely add products with other features such as SOA management, BPEL-based business process management.  Datapower’s acquisition is critical because it secures IBM’s rear flank from attack by the networking vendors and allows them concentrate their full force on enterprise software related issues.

I admit, it’s a bit of a stretch to say that software will never be the same after IBM’s acquisition of Datapower, but I do think that the acquisition underscores the fact that some of the biggest names in technology now endorse the fundamentals tenants of message oriented networking and that this promises to help spur long term changes in not just the architecture of software programs but in the competitive positioning of the technology industry.

October 17, 2005 in Middleware, Software, Venture Capital, Web Services | Permalink

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The thoughts and opinions on this blog are mine and mine alone and not affiliated in any way with Inductive Capital LP, San Andreas Capital LLC, or any other company I am involved with. Nothing written in this blog should be considered investment, tax, legal,financial or any other kind of advice. These writings, misinformed as they may be, are just my personal opinions.