Investing In IBM i: Adventures In Venture Capital
August 28, 2017 Dan Burger
The IBM i community was stirred last month when Vision Solutions, the dominant software vendor in the high availability arena, was acquired by a private equity company that believes the IBM i market is worthy of an investment estimated in the hundreds of millions of dollars. That’s some serious cash. In addition to buying software, intellectual property, and a significant customer base, this private equity firm’s deal commands attention among IBM i observers who have seen investments lead to consolidation of software and service providers.
For now, it looks like a trend without end for a handful of vendors building i-centric and multi-platform portfolios.
We hope a healthy and vigorous Vision Solutions benefits the entire IBM i community. Regardless of what some people say, money can buy happiness. It’s more a matter of how much happiness is there? Some will say the rising tide caused by the investment in Vision Solutions will rise all boats floating on the IBM i ocean. Vision is already the big ship on that ocean, particularly at the enterprise level, where HA has been in place for many years. But it is also well situated in the midrange, where new business opportunities are expected to blossom in the coming years. The company also expanded its product arsenal with the acquisition of IBM i security vendor Enforcive, which places another iron in the data security fire.
Nicolaas Vlok, formerly the CEO at Vision Solutions and now a senior advisor for the Centerbridge Partners, the firm that acquired Vision, indicates additional acquisitions that fit with the Vision organization are in the pipeline. Everyone who works for a private equity-backed company says the same thing about shopping for acquisitions. It’s the mode of operation. That doesn’t necessarily mean the company will be fishing solely for companies in IBM i waters, but that would be the first place IBM i observers will look. Investors, however, want return on investments, so they may decide there are better returns from acquisitions outside the i community.
Vision is a company with a history of making acquisitions and being acquired. Most notably were the purchases of rival high availability vendors Lakeview Technologies and iTera. Those moves put Vision in the driver’s seat of HA in the IBM i market. A series of private equity firms bought and sold Vision as well. From 2010 until 2016 Vision was under the same roof as the Windows-based HA provider DoubleTake. During that time, practically all we heard about from Vision was the DoubleTake story. The IBM i community was lost in the shuffle. It appeared the IBM i objectives were moved to the back burner. When the DoubleTake brand was eventually sold to another private equity company, Vision quickly proclaimed it was regaining its focus on HA for IBM i and AIX on Power Systems.
With the Syncsort marriage, once again Vision is paired with a non-IBM i mate. And, by the way, the Vision Solutions brand has been retired. The familiar MIMIX brand name remains on the HA products and on a product that was not widely publicized in the IBM i community during the DoubleTake years. That product, called MIMIX Share, is a data sharing solution that runs on Power Linux. Data sharing software is Syncsort’s specialty. So, MIMIX Share may turn out to be the prize possession in the Vision-Syncsort deal. If Syncsort creates a single data integration product for the Windows and Power Systems markets, that would be significant.
No one expects MIMIX HA to be left unattended. It’s the source of tremendous reoccurring maintenance revenue. But Syncsort does not know the IBM i HA business, which means a lot rests with Vlok’s role as a strategic advisor. It’s unknown at this time whether members of the Vision executive and development teams will remain in place. How the chips fall might be an early signal of how the HA business fits with the long-term Syncsort strategic picture.
We’ll have to wait and see if MIMIX development delivers continual enhancements at a pace that keeps customers satisfied. Although Vision maintained separate development staffs for the MIMIX and iTera brands, that could be a target for consolidation with new ownership calling the shots.
Large acquisitions are complicated business. To determine when and where decisions hurt or help the community is problematic and perplexing. I believe that when gaining financial advantage becomes the first rule of business and short-term goals overtake long-term value, employees and customers generally feel like they’ve been kicked in the teeth. Employees lose jobs and those that remain employed are required to do more with less. Customers feel the sting of higher maintenance fees and reduced services. When employees and investments get cut so that businesses can be resold at a gain for the equity group, it handicaps the organization in the long term and reduces stability in the marketplace.
I’m not saying that’s what’s happening here, but it is a scenario that sometimes plays out and time will tell which way the wind blows. Not all strategies designed for short-term gains automatically create long-term negative effects. But let’s at least acknowledge that emphasis on the short term has a different effect than emphasis on the long term. You don’t hear people talking about the benefits of short-term stability.
In the quest for short-term profits, there are examples of software companies holding their customers hostage while raising maintenance fees, adding harsh penalties for not staying current on maintenance, and adding upgrade fees that didn’t previously exist. The behavior has led to decisions to delay modernization and even migrate from the IBM i platform in some instances. These are the types of short-term profit tactics that have a negative effect on the IBM i community. (See the Related Stories list below for more on that topic.) They are not exclusive to software companies owned by private equity firms by the way.
It’s premature to predict whether this will be good or bad for the IBM i community. But in the interest of long-term sustainability for the community, we have to hope that Syncsort maintains the “laser focus” on IBM i that the company formerly known as Vision Solutions declared just six months ago.