This week, Progress Software embarked on its first big strategy shift in 29 years as they announced the Responsive Process Management suite. This announcement is the culmination of a dramatic change in focus that's been coming for months as new CEO Rick Reidy slashed headcount, picked a new target market, fired most of the old guard leadership, and consolidated a previously balkanized organization structure.
As a former executive at Progress Software (2003-2007, general manager of Apama), and now the CEO of StreamBase, I’ve been asked by Progress prospects, customers and analysts about the "new Progress." So far, analyst coverage of the new Progress has been politely indifferent, so I'll try to help harden the discourse and pose a few simple, but tough questions about the new strategy. But first, let's recap the new plan.
THE ELEMENTS OF PROGRESS SOFTWARE 2.0
Progress Software has a new product strategy, a new sales organization, a new target market, and a new culture. Bold is the only word for these changes, and Rick Reidy and the board of Progress have to get some credit for having the courage to change. In fact, there's so much change I’ll refer to the new Progress as “Progress 2.0." John Rymer from Forrester ably reported on Progress Software’s Coming Out Party on his blog. So rather than report what’s already been said, I’ll analyze the Progress 2.0 business as an investor would view a new business plan, and look at the essential elements of the business as a whole: 1) target customer, 2) product, 3) customer, 4) differentiation 5) selling strategy, and 6) culture and leadership.
The Progress 2.0 target customer. Progress 2.0 CTO John Bates describes their new target customer as a "global 2000 enterprise that needs operational responsiveness.” The first part of this - the G2000 - is a big shift for Progress, which was built on the small and medium sized (SMB) market. As for the subset of firms within the G2000 Progress 2.0 will target, that's unclear. Analyst Sandy Kemsley reported it this way: “[Progress says operational responsive means companies that] want real-time business visibility, the ability to immediately sense and respond, and continuous business process improvement in a cycle of responsive process management." In other words, the target customer for Progress 2.0 is a big company that wants to make better decisions faster.
The Progress 2.0 product: RPM. Instead of selling 20 best-of-breed products, ￼Progress 2.0 has a single product suite called the Responsive Process Management suite, or RPM. RPM combines 7 of 20 Progress products and “accelerators,” or pre-packaged applications for market surveillance, smart airlines, and telecom revenue assurance. The product elements of the RPM suite are SOA management (Actional), complex event processing (Apama), and business process management (Savvion), messaging (the Sonic Enterprise Service Bus), IBM System z connectivity (DataDirect Shadow), RDBMS mapping technology, and a portal.
The prototypical RPM customer. At their analyst day, Progress used a fictitious "smart airline," as an example of RPM use. The demo showed CEP, BPM and network monitoring working together to manage the operations of an airline. Southwest Airlines, State Street Global Markets and Italian telco 3Italia all presented at their analyst day, but none of them use RPM; in fact, State Street and 3Italia use only one Progress product.
The Progress 2.0 differentiation. Historically, Progress has won deals by having the best product in a category like BPM, CEP, ESB, CORBA, JDBC, and an embedded database. But by combining these formally best-of-breed products into one suite, Progress 2.0 can't differentiate based on how good the pieces are; they must differentiate on some attribute of the suite. While other vendors like IBM, Oracle and Tibco already have all these products, Progress claims their differentiation is that they are the first vendor to combine them into one suite.
The Progress 2.0 selling strategy. Progress has made sweeping operational changes. They unified their 10+ specialist sales teams into one sales organization that sells RPM. That means that a sales team (rep, pre-sales engineer, and consulting) that used to sell, for example, Apama in the financial services will now sell a suite of seven products. In addition, Progress will sell more consulting - historically, only 5-8% of Progress revenues came from consulting - their new competitors, TIBCO, IBM, and Oracle, sell a lot more consulting - 20%-40% of overall revenues.
The Progress 2.0 culture. Historically, Progress innovated by buying innovative companies. Now, with RPM as the key to their future, Progress will need to innovate from within. Progress didn't announce any cultural changes designed to spark that innovation.
FIVE FUNDAMENTAL QUESTIONS CUSTOMERS SHOULD ASK ABOUT PROGRESS SOFTWARE 2.0
From a customer's perspective, the Progress 2.0 business plan leaves several big questions unanswered. Here are five of them:
#1: "Who does Progress 2.0 NOT sell to?"
As Bill Cosby once said: "I don’t know the secret to success, but I do know that the secret to failure is trying to please everybody." Cosby is right - focus is the most essential element of business success. Yet on analyst day, when asked about the fate of the individual products that compose RPM, CTO John Bates said that he "believes that [Progress] can continue to compete in their specialty areas such as CEP and BPM, but also as an integrated product suite.” John was either pandering to existing customers or naive to suggest that a company the size of Progress can compete simultaneously with larger foes like IBM and smaller innovative companies like StreamBase. And even if Progress 2.0 focused on their RPM strategy, that focus is blurry. "Big companies that want to make better decisions faster" isn’t a type of customer, it’s a marketing slogan.
So prospects should probe behind the marketing slogans and understand who Progress 2.0 WON'T try to please.
#2: "Exactly who is the prototypical RPM customer, and does it look like me?￼"
Every business needs a stalking horse - a prototypical customer that's in their sweet spot. And every VC that funds a new company insists that they win that pilot customer and make them successful before going after a second, third, and fourth customer.
But at their coming out party, Progress used old customers to justify their new strategy. Three of them use only Apama. The other, Southwest Airlines, uses three Progress products, but with no connection or synergy among the products. The only value Southwest shows from buying three products from Progress is that they can have a single contract. Then, without a real customer to serve as an example, Progress demoed a fictitious company called “National Airways" which is rumored to be modeled after a deal that Progress lost to new rival TIBCO at Air France.
If you're an existing Progress customer, ask them to describe their prototypical customer for RPM, and then compare yourself to it. If your firm doesn't resemble the stalking horse, think hard about options for the future.
#3: "How is Progress 2.0 unique?" [In other words, is Progress 2.0 viable?]
Joe Alsop, former Progress CEO, always asked one excellent question when assessing companies to acquire: “What’s your special sauce - what makes you unique?”
What is Progress 2.0‘s defensible advantage that will enable them to beat IBM and Oracle? Will RPM be technologically better? Does Progress have some unique channel IBM and Oracle doesn't have? Is RPM cheaper than Oracle? Does RPM outperform IBM's offering? Since Progress consultants are vastly outnumbered by their bigger foes, are they smarter? Faster? More vertically aligned?
We don't know because Progress doesn't say why they're different. If I were a customer or investor, I'd ask directly, because the longevity and success of a company depends on both understanding, then exploiting, your special sauce.
#4: "Specifically, what is the future of Apama (and Sonic, and Savvion, and Actional)?
In my field of competition (CEP), Progress used to be a leader. Now, Apama is eliminated quickly (other than in geographies where StreamBase has no sales presence), because CEP is an innovative and changing field, and Apama is distracted - Apama sales people have to learn 7 new products to sell and the Apama engineering team is integrating CEP with products that their existing customers don't care about.
And it will only get worse. In the future, instead of building CEP, Progress will be building RPM. Instead of building solutions for trading on Wall Street, Progress will build solutions for telecommunications firms like 3Italia. Instead of fixing the graphical development environment to make it suitable for finance applications, Apama's tools will be merged with Savvion's BPM tools, and so on. Apama innovation will stop for years.
While Apama stalls, the CEP market is exploding - CEP was named one of the most innovative technologies in the world by the World Economic Forum in Davos, and customers are making enterprise wide decisions for CEP. The time for rapid innovation is now, and customers are demanding better tools, more robust debugging, even lower latency and higher throughput, not a faster BPM tool.
So CEP prospects should ask to see the RPM roadmap and see if matches with your future requirements.
#5: "What innovation changes has Progress made?"
Progress isn't known for innovation - only 1.5 of their 20 products were organically developed. For Progress 2.0, their stated differentiation is that they've put three products together that, as Doug Henschen from InformationWeek reported, IBM, Oracle, and Tibco already have. So their success will depend on their ability to stay ahead of their competition.
As described in big companies can innovate if they act small, Progress has historically been classically anti-innovation - terrified of failure, internally focused, and conservative. The exceptions were in the divisions that were allowed to develop their own culture; now, in unifying the culture, they'll need to re-think how they manage Progress 2.0.
Customers should ask Progress to be explicit about the management measures, policies, and philosophical changes that will help facilitate innovation.
Summarizing the questions to ask Progress
Progress Software has good people and good products, and has made a big, bold move with RPM. But the Progress 2.0 business plan raises serious questions about their business, and how they will compete. Leaders at prospective customers shouldn't put money on the table without getting good answers to these fundamental questions.