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M&A Impact: Xcellenet Purchase for Sterling?

Over the years Sterling Software has bought rather than built its market presence. On its most recent $255m acquisition trail starting in June 1998, Sterling Software picked off in quick-fire succession the three CASE businesses of TI Software, Cayenne and Synon. Much was made at the time of its plans "to combine the strengths of the acquired products to provide powerful solutions for all of our customers." But the purchases have since merely been regrouped, the products re-branded and today they are sold as a multi-purpose software engineering toolset under the umbrella title of Cool:Stuff. Around that same time, Sterling's business-to-business electronic commerce spin-off of Sterling Commerce was also on a shopping spree, exchanging $74m in cash and 2.4 million shares for the remote systems management house of Xcellenet and its RemoteWare suite.

Back in July 1998, Sterling Commerce was talking of rolling the acquired Xcellenet RemoteWare products into its own Connect suite, and of the potential for leveraged sales of new integrated product lines across its Commerce value-added network (VAN) services operation and into the customer base of its Gentran business-to-business communications software. But Sterling Commerce too, likes simply to buy and re-brand. So far, RemoteWare has merely been re-named Connect:Remote and Connect:Manage.

Despite what a Sterling Commerce spokesperson describes as "lots of opportunities for integration" there is still no sign of the promised tie ups between the acquired Xcellenet products and any of the lines in the 100 strong Sterling Commerce portfolio.

What makes this all the more surprising is that the market for remote systems management across intranet and extranets is growing fast. And Sterling Commerce has established itself quite a presence in the business-to-business electronic trading sector. It claims 42,000 customers and produced revenues for 1998 of $490m, an increase of 40% over the previous year. Operating margins are running in excess of 30%. It is clearly in an expanding market. To add to this latest estimates put the number of remote and/or mobile users needing access to the company intranet or across a corporate extranet at 137 million by 2003.

Systems operated by site engineering and mobile field forces, traveling sales staff and independent resellers and assets operated by agents, remote offices and business subsidiaries can all call for remote systems management. Across an extranet, systems owned by suppliers and trading partners also need to be touched by systems administrators from time to time.

Whereas enterprise systems management routines managed using CA Unicenter, Tivoli TME10, or Microsoft SMS are targeted for use across a network with more than adequate bandwidth to continuously connected clients, managing systems remotely requires know how of a rather different nature. Here there's a need to optimize connections over slow often unreliable dial-up lines, to perform key tasks off line whenever possible, and to queue events in readiness for the next connection.

The Xcellenet products use data compression and off-line caching to reduce the amounts of data transferred and the length of connection times. During an IP-based session, an administrator might want typically to remotely install some software or scan a PC's software inventory, to deliver some data, content or document, or execute an application or some custom scripts. The system can also be used to manage data back-ups and anti-virus protection, or the distribution and collection of application files.

Sterling Commerce had good first-hand knowledge of the company and its products, having been an Xcellenet reseller since 1995. In theory its acquisition of the software vendor gave it a means of establishing a common infrastructure for inter-company and intra-company electronic trading. It brought with it expertise in distributed application management across low-bandwidth networks. And it provided it with products targeted to midsize and small trading partners - many thousands of which count among users of Sterling Commerce's VAN and EDI services and software

In practice though, Sterling Commerce appears to be doing little more on this front than when it had simply been reselling Xcellenet products. "They [Sterling] have left us alone," the spokesperson said confirming that Xcellenet is run as an autonomous division of the Sterling Commerce Managed Systems Division. With Sterling's financial backing the division has been able to add to its sales force though, which has been increased from 30 to 50. International sales efforts have also increased since its merger. Today there are said to be 2,000 companies using the products, with the average deal running anywhere between $40,000 and $50,000.

The spokesperson claimed that product development had been speeded, too. She would not be drawn on the nature of Sterling Commerce's future strategy or its product integration plans, however, preferring to point as evidence of progress since the takeover to the accelerated delivery of major releases of both Connect:Remote (version 3.3) and Connect:Manage (version 2).

Noteworthy is the arrival of a couple of new Connect:Manage modules for use across intranets and extranets. One is for remote inventory management that enables PC hardware and software to be scanned while offline, and makes use of a rules-base to determine automated software distribution rosters. The other is concerned with application management and the remote execution and launch of third-party software so that, for example, a system administrator can synchronize applications by forcing a Lotus Notes replication remotely.

In the field, the Connect:Manage/Remote products come head to head with very few rivals. IBM's Mobile Equalizer comes nearest in terms of features. But there are also some aspects of products from the likes of Marimba and Callisto that offer some similar functions. Indeed the future development of these push technologies may well help validate Xcellenet's marketspace. Whether this will help consolidate Xcellenet's future is uncertain, however.

While Sterling Commerce says it is still working on its integration plans and that announcements will be forthcoming, according to one pronouncement from Gartner Group, in all probability by 2001 Xcellenet's development autonomy will be lost, stand-alone sales will cease and the product will be placed in maintenance mode.

This article is part of ComputerWire's M&A Impact information service. Some articles from the service are being provided to ComputerGram subscribers for a trial period only.
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Publication:Computergram International
Geographic Code:1USA
Date:Mar 8, 1999
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