I recently had a conversation with Marc Borbas, INETCO's VP of Marketing. He had a big sense of déjà vu reading about the Riverbed/OPNET acquisition. Having lived through an eerily similar acquisition, he had a pretty good idea what the teams at Riverbed and OPNET are about to encounter. In 2004, Business Objects acquired the Vancouver-based company he worked for, Crystal Decisions, for just north of $1B.
Other than the size of the deal, here are some of the similarities:
- Crystal made about 2/3rds of their revenue selling software that made up less than 10% of Business Objects revenues. OPNET gets about 2/3rds of their revenue from APM (Source: TRAC Research). The Cascade NPM products generated a rumored ~50M last year (Source: Seeking Alpha).
- Crystal had invested heavily in transforming this product line from a low-level toolset into a high-level enterprise solution. It was growing at 30% a year (Source: 451 Group). So is OPNET's APM business.
- Business Objects had been successful making technology acquisitions, but had never made a large product acquisition. Same as Riverbed.
- Business Objects was a sales machine. Crystal was a technology/product company. Riverbed is a sales and marketing machine. OPNET was founded out of MIT.
As the senior product marketing guy for the product line that Business Objects bought Crystal for, he was dropped right into the middle of this process. Here's what "business as usual" might look like for the next six months:
- The deep dive APM vendors that OPNET competes against (e.g. Compuware) will announce trade-in/trade-up/trade-out programs within a week's time. So will their NPM competitors (e.g. NetScout, Fluke, CA NetQoS)
- Every APM sales rep on the street will be trained to use the "uncertainty" around the deal and Riverbed's intentions to create FUD (Fear, Uncertainty, Doubt) in late-stage deals
- Every major customer has already called in to schedule a roadmap update. Customer loyalty and net promoter scores are being checked daily.
- Everyone working on anything related to OPNET or Riverbed's overlapping NPM technology is trying to figure out if their product and job will survive.
- Everyone in marketing, product management, senior engineering, and senior management at OPNET just got a second job - as a member of at least half a dozen integration committees.
In the midst of this environment, here are some of the really hard decisions both organizations will be grappling with:
- Product: What does the combined NPM product suite look like? Which Cascade pieces survive, which OPNET pieces continue? How do you manage the transition for large customers?
- Messaging: How do you convince Riverbed customers who bought "application aware NPM" that they now need "network-based APM" as well? Do you call it more application-aware NPM?
- Sales: Do you let the entire Riverbed sales force sell the whole OPNET product line or do you create an "overlay" sales specialist team (and double up commissions)?
- Competition: How do you equip a sales force used to competing with half a dozen vendors in a consolidated market (WAN optimization) how to handle the nuances of competing in a fragmented market (APM) with over 200 vendors?
- Marketing: Both companies probably have significant product launches in their respective pipelines. How do you allocate airtime between these?
- Customers: How do you sell software made for IT operations and application development teams (the OPNET APM software) to Riverbed's network-centric buyers?
- Culture: When a big sales culture meets a mid-sized product culture, only one leaves the room alive.
- Strategy: Every senior leader at OPNET and a significant number of their counterparts at Riverbed will be engaged in integration planning and execution for the next 6-9 months. Integration is the new strategic plan. Any strategic plans OPNET had go on the back burner, and a number of Riverbed ones probably get less attention than they deserve.
But, there is a silver lining for both organizations:
1. They can really put the spurs to F5 and Citrix, who have yet to articulate more than a loose "ecosystem" based APM strategy. You can bet that Riverbed's formidable marketing machine will play the advantages of in-house capabilities to the hilt.
2. They can target the somewhat grouchy Network General and Packeteer customer bases with a very compelling rip, replace, and enhance story.
3. They can leverage Riverbed's relationship with (and presence in) major cloud providers to offer OPNET's APM products as a credible alternative to the AppDynamics/New Relic duopoly.
The deal is expected to close in December 2012. Until then, it's "business as usual", except that it's anything but.
Stacy Gorkoff is Director of Strategic Marketing for INETCO.