Analysts see turbulence ahead for some vendors

Sellers of business process management software are yanking their seat belts tighter.

A $3 billion industry that prides itself on helping others manage change in enterprise systems is being reshaped in a new phase of growth and consolidation expected to last five years, analysts say.

“I wrote in 2001 that the business process management market was about to explode. Here were are in 2004 and it really hasn’t,” said Eric Austvold, research director at AMR Research Inc. of Boston. “What happened? There was a depression in how companies buy technology.”

But as the economy picks up and companies and governments begin to boost spending for technology upgrades, sales will grow for BPM systems that help streamline workflow without requiring wholesale changes in legacy systems, analysts say.

“I think you will have a lot of smaller pockets of success,” Austvold said. “Is there going to be a billion-dollar BPM company? I doubt it.”

Austvold was among the speakers at ProcessWorld, a three-day conference that drew about 300 executives, analysts and consultants to South Florida in late April. The conference was coordinated by IDS Scheer, one of Europe’s business process pioneers.

One industry estimate puts the number of business process companies worldwide at 120.

“That’s going to collapse, because there are way too many,” predicted Jim Sinur, vice president and analyst at Gartner Inc., a Stamford, Conn., research and advisory firm. “There are some that aren’t going to survive.”

Other developments:

* In late April, Tibco Software Inc. of Palo Alto, Calif., announced plans to buy Staffware plc, based in the United Kingdom. At the same time, Fair Isaac Corp., an analytics software provider, said it wants to buy enterprise management software provider London Bridge Software Holdings plc of London.

* Major companies such as Microsoft Corp., IBM Corp. and SAP America Inc. are tightening their grip on the market. SAP and Microsoft recently agreed to work more closely in Web services software, a shift that analysts said would smooth the interoperability of their different applications. Most BPM packages use Web services technology.

* Intalio Inc., a San Mateo, Calif., business process management company, said it has lined up $11 million in venture financing to help it expand.

Business process management “is not just another fad,” said John Wheeler, the executive in charge of business process changes at Nova Chemicals, a $4 billion Canadian plastics company with U.S. operations based in Pittsburgh. “This is about building a culture of change in organizations … All of us have to do that if we are to survive.”

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