IBM to Acquire Mobility Vendor Worklight – An Analysis

IBM has jumped into the MEAP (mobile enterprise application
platform) competition with yesterday’s announced intent to acquire MEAP vendor
Worklight.   Worklight is headquartered
in New York and was founded in 2006 by CEO Shahar
Kaminitz.  Worklight’s software supports
HTML5, hybrid and native applications for smartphones and tablets with
industry-standard technologies and tools.  
Their solutions include an Eclipse-based software IDE (integrated development
environment), mobile middleware, mobile solution management and analytics.

Worklight Studio competes with Appcelerator, Verivo (formerly Pyxis Mobile), Sybase
Unwired Platform (SAP), Antenna, Syclo, ClickSoftware, Kony Solutions, Rhomobile (Motorola), Webalo and
other mobility vendors that are experiencing rapid growth.

The deal size was not disclosed by IBM or Worklight, but the
Israeli website Globes (www.globes.co.il) reported the acquisition to be $50-60 million.  Worklight raised $21 million
in investment capital, from investors Genesis Partners, Pitango Venture
Capital, Index Ventures, and Shlomo Kramer.  Globe also estimated 2011
revenues for Worklight at between $5-10 million
(http://www.globes.co.il/serveen/globes/docview.asp?did=1000720723).

My analysis is that all ERP vendors need a standardized
approach for supporting mobility. 
Mobility, and MEAPs in particular, are far too strategic to leave up to partner ecosystems to deliver.  SAP
acquired Sybase, IBM will acquire Worklight, and we are all awaiting Oracle’s
expected 2012 move to acquire a MEAP vendor.

Interesting note, I cannot think of many situations where an ERP vendor bought a mobile apps company.  I am told that SAP’s proposed acquisition of SuccessFactor will involve some mobile apps, but have yet to see them.  ERP vendors seem to want to buy the middleware, so they can standardize integration, syncing, security and management, and leave most apps to their partner ecosystem.

In a recent IBM study of more than 3,000 global CIOs, 75
percent of respondents identified mobility solutions as one of their top
spending priorities.  Nearly all of the
global analyst and research firms are also reporting enterprise mobility to be
a top three priority.  In the Enterprise Mobility Survey 2011 that I conducted in September of 2011, 80% of survey respondents said enterprise mobility was “very important” to “critical” to their company’s future success.

IBM officials said
with this acquisition, IBM’s mobile offerings will span mobile application
development, integration, security and management.  Dow Jones Newswire reported on an internal memo
from IBM’s senior vice president in charge of middleware software, Robert
LeBlanc that highlighted their ambitions, “”Now is the time to make IBM essential in the era of
mobile computing.”

I had the privilege of interviewing Worklight’s COO Kurt
Daniel about 15 months ago and published the
interview on this site.  Here are some
excerpts that you may find interesting given this week’s news.

Worklight has developed a MEAP (mobile enterprise
application platform) and a mobile SDK (software development kit), not for
their own use, but rather for systems integrators and end customers to use to
develop their own enterprise mobility solutions.  They want to be a technology company, not a
mobile application company.

Kevin: What are your areas of responsibilities at WorkLight?

Kurt:  I look after
our worldwide business channels, partnerships, sales and marketing.

Kevin:  Tell me about
your solutions.

Kurt:  We have the
WorkLight Studio, WorkLight Server and WorkLight console.  ISVs and OEM partners use these solutions to
build their own packaged mobility applications.

Kevin:  How do you
avoid competing with your partners in the mobility market?

Kurt:  We don’t sell
applications.  We are not experts on ERPS
or other backend systems.  We focus on
developing the best mobile technology possible, not services or mobile
applications.

Kevin:  How do you
fund your start-up business in the early years without generating revenue from
services and mobile applications?

Kurt: We raised over $17 million.  That affords us the opportunity to invest in
the technology without losing focus by delivering services and enduser
solutions.

Kevin:  How do you
keep your users loyal to your technology?

Kurt:  We provide them
with a platform and SDK that supports the latest modern devices.  We provide them with great productivity tools
that enable the same code base to be used across multiple devices and mobile
operating systems.  We offer trial
versions for 60 days.

Kevin:  Where do you
see mobility going in the next 18-24 months?

Kurt: Enterprises are going to need to support a larger
number of mobile devices and mobile operating systems.  They will need to support iPads, tablets of
all kinds, Android and many more mobile apps. 
Internally, companies will be launching large numbers of their own
mobile applications that were developed in-house.

Kevin: Who do you compete with?

Kurt:  In-house
development teams, Sybase and Antenna.

Kevin:  In conclusion,
where does your company fit in the enterprise mobility ecosystem?

Kurt:  WorkLight is a
100 percent technology focused company. 
We develop a horizontal MEAP.

It is fascinating to ponder Worklight’s strategy.  They decided to build a new and powerful MEAP, but not to provide services or sell mobile apps to end users.  They chose to use their investment capital to focus exclusively on developing technology and developer support.   That is a rare strategy.  Sybase mostly followed that strategy with their embedded mobile database and synchronization business (iAnywhere and former Extended Systems) and was purchased by SAP, and now Worklight who followed a similar strategy will be acquired by IBM.  What does this tell us?  Perhaps ERP vendors don’t want the burden of supporting a large MEAP or mobile app enduser base that does not fit their traditional customer profile.  They would rather just acquire the technology stack?  What do you think?

Most MEAP vendors depend on services and end user app sales to help cover expenses as they develop and mature their solutions and channels.  Worklight refused to follow that path.   It doesn’t appear they had yet reached profitability, since it seems they took in another $4 million in investor funding in the past year, but they did accept IBM’s offer as their exit strategy.  They committed to focus on the technology, rather than indulge the temptation (and distraction) to grab short term end user sales.

End user mobile app sales are sexy.  They get the press and show well, but ultimately I think the MEAPs themselves are the mobile market consolidation points.  Not just the mobile middleware, but the IDEs.  The integrated development environments that are used to design and develop the apps.  Some mobility vendors like ClickSoftware and Syclo actually support several choices of mobile middleware under their IDEs.  The customers often only see the IDE, but underneath the covers are middleware options.  SAP and the Sybase Unwired Platform also offer numerous choices (SUP, NetWeaver Gateway, Sybase 365, etc.) for middleware in their architecture.

If all the large ERP companies are going to ultimately acquire their own MEAP solution, that means MEAP market fragmentation will be hardened along ERP lines.  If that is the case, would mobility vendors that focus on mobile end user applications find it necessary to support all the major MEAPs if they want to sell into those markets?  That would be expensive!!!  If that is how the market evolves, then it seems cloud based ERP-to-mobile app integration hubs would be worth a consideration.  Mobile app developers would simply connect to one cloud based integration hub that integrates with all the ERPs.  Wow, this line of thinking reminds me of my early days working with EDI/B2B translators and EDI hubs.

It will be interesting to watch the choices companies will make that have a mix of different business solutions and ERPs across their IT landscape.

If I have any bad data or information in this article please correct me!

Please share your thoughts and ideas with us!!!

Kevin Benedict, Independent Mobile Industry Analyst, Consultant and SAP Mentor Volunteer

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Full Disclosure: I am an independent mobility analyst, consultant and blogger. I work with and have worked with many of the companies mentioned in my articles.