Reinventing Progress Software—Boston’s Next Billion-Dollar Company?
Most businesspeople around Boston can give you a thumbnail description of anchor companies like EMC (storage devices and information management) or Nuance (speech recognition) or Boston Scientific (medical devices). But what does Progress Software do, exactly? Considering that it’s the largest software-only company headquartered in Massachusetts—with $500 million in annual revenues, 1,800 employees around the world, and 70 of the Fortune 100 among its customer base—the Bedford, MA, business has a remarkably indistinct profile.
But Richard Reidy, who joined Progress (NASDAQ: PRGS) shortly after its founding in 1981 and became CEO in 2009, is out to change that. Under his leadership, the company’s disparate operating units and products—the legacy of 14 acquisitions and at least two big restructurings since the company went public in 1991—are being brought together under the slogan “One Progress.” That means not just eliminating redundant staff (the company laid off 250 workers, more than 12 percent of its workforce, back in December), but making it much more obvious to customers how the company’s products and services, which are designed to help companies build and run business applications, fit together.
Reidy says he wants to double the newly consolidated organization’s revenues to $1 billion per year, and make it the go-to software provider for organizations seeking to improve their “operational responsiveness”—a bit of management lingo that boils down to knowing more, sooner, about changes in the conditions affecting your business and having the means to act on them.
In a way, increasing this responsiveness is the whole reason companies buy enterprise software. But in practice, things don’t always mesh.
You might think of Progress as the BASF of the enterprise software market. The German chemical manufacturer’s tagline is, “We don’t make a lot of the products you buy; we make a lot of the product you buy better.” Well, Progress doesn’t make a lot of the software that big corporations use, but it makes that software work better.
Its main specialty is “business process management” software, which ties together other systems such as financial, human resources, and supply chain management programs and makes it easier for managers to routinize repeated tasks and spot problems. Closely related to that is the company’s “complex event processing” software, which can spot patterns in business data that aren’t detectable by humans, allowing organizations in industries such as financial services, transportation and logistics, and telecommunications to respond faster to changing conditions. Finally, Progress is still strong in its original business, selling tools that help software developers build and debug business applications of all stripes.
On March 15, Progress released a new product called the “Progress Responsive Management (RPM) Suite” that combines the company’s event processing and process management tools into a single platform, managed through a so-called “control tower” that presents business leaders with real-time alerts, performance indicators, and interactive tools. Reidy said in a statement that the suite, which represents a reshuffling and re-assembly of software components that came into Progress through the January acquisition of Savvion, among other deals, provides managers with “total control over their business.”
Recently, Reidy and Progress Software’s chief technology officer, John Bates, visited Xconomy for an extended joint interview. The unification campaign provided the jumping-off point, but we also talked about the company’s history, its strategy for acquiring and integrating new companies, and the way its software can help customers in industries like finance and transportation. Along the way, I also got to quiz Reidy and Bates about the company’s role in the Boston high-tech ecosystem, and their take on trends like cloud computing and the mobile revolution.
Below is Part 1 of my interview with Reidy and Bates; we’ll publish Part 2 tomorrow.
Xconomy: Progress Software has been around for a long time, but it isn’t an easy company to describe in a sentence or two. How do you sum up the company?
Richard Reidy: If there’s a unifying theme through our history, it’s always been providing whatever a developer needs to build, deploy, manage, and integrate a complete, soup-to-nuts business application. Now, what a “business application” is has changed quite a bit from 25 years ago. As a result, Progress has evolved over 25 to 30 years to take advantage of the new types of business applications and environments.
We started off in a dentist’s office—and I was there. The world of application development was very simple back then. You had a screen—and in those days it wasn’t even a graphical screen, it was a green IBM screen—and you’d put stuff in, you’d store it on disk, and you’d pull it out to process it or print an invoice. It was a closed environment. We started the company around building development tools that you could use to build an entire application. This was before Java, but it had the promise of Java: write once and deploy everywhere. You could be a three-person software company, hang out your shingle, and write software that would run on 50 Unix or PC environments.
Since then, obviously there are new interfaces; client-server, the Internet, cloud computing, and Web-based software; and a whole bunch of different environments and requirements. Applications have matured, and the integration requirements have become much more complex. We plug all the various gaps, so that whatever you need to build, deploy, manage, and merge in business applications, you can get it from Progress.
X: Describe how the company got to this stage, with so many separate parts that need unifying.
RR: About 10 years ago we embarked on a diversification strategy, which culminated in us starting companies on our own but also acquiring other companies—14 of them so far. For example, we started Sonic Software, which pioneered the whole category of enterprise service clouds, which is now the standard way people interact with clouds. People think of it as Sonic, but we started it.
Over the course of seven or eight years, we built up a collection of products and divisions and companies with different brands that were utterly unassociated with Progress. You had to carry business cards that were from Sonic or Data Direct. If you wanted to buy a Sonic or a Data Direct product you had to go to two different offices and call two different numbers for tech support.
And we had doubled the size of the company to half a billion dollars a year, but now we want to get to a billion. To do that, we have changed our strategy. More and more, we are going to integrate and go to market as Progress Software, with a more complete set of products that can be bundled and sold together. We’re pretty much 80 percent of the way there now, and we are now beginning to proselytize and promote Progress Software as a brand.
X: Why the change in philosophies from diversification to unification? Was the old philosophy mistaken in some way?
RR: No, it was for a very good reason, and I used to be the biggest separatist in the company. I ran one of those divisions, and I wanted nothing to do with Boston [i.e., headquarters]. For Progress, it was the right strategy at the time, based on the fact that we were trying to become best-of-breed in each segment. The market at the time was accepting of companies that did it this way, versus pulling everything together. I thought we did a good job, and one of the reasons we were successful is that we were able to keep a lot of these teams together.
There’s nothing wrong with that approach, but it just isn’t the right thing for the next transformation we have to go through. Our size and scale is different, so there is a lot more to the synergies than we might have had 10 years ago. And the market has changed. People are not looking for best-of-breed, they are looking for solutions. So, I make no apologies. If there is anything we did wrong, it may have been waiting for too long. Maybe we should have started a year or two sooner.
X: What do you want the Progress Software brand to represent now?
RR: Going forward, okay, we’ve got all this stuff, now how do you simplify? We have a product that allows customers to get visibility into their infrastructure. We have other products that allow them to sense and respond to events as they occur. Then there is implementing the business processes themselves. If you have visibility, and you can sense and respond to what’s going on, and based on that you can dynamically change your business process, we call this overall benefit “operational responsiveness.” See, think, and act.
So those are three three categories of products: business transaction management, complex event processing, and business process management. We think that a combined category will emerge at some point in the future that includes all of these—visualizing, analyzing, and acting. The best name we have for it right now is “business event and process management.”
I should be clear—you don’t have to buy all these products together. You can buy them separately and combine them. Progress Software’s strategy going forward is to be the company that brings operational responsiveness to business.
X: How about some examples of how these capabilities would help specific industries?
RR: You can think of a number of verticals—financial services, transportation, and logistics. One very hot trend in financial services right now is that everybody up to President Obama is talking about concerns about high-frequency algorithmic trading. The concern is that this puts a lot of institutions at risk. So one of the solutions that Progress has been working on with customers in the banking community is real-time market surveillance. This means actually detecting patterns that indicate insider trading and market abuse and being able to stop that before it affects the market.
Traditionally, you might find out that something nefarious had gone on months afterward, by looking through a database with analytics software. But if this even moved the market by even one percentage point, think of all the money that has changed hands that you can’t unwind. So we’ve been working with regulators and banks to gain visibility on that data. First we have to see all the exchanges and the data flowing into them, to be able to sense and respond to patterns that indicate insider trading and market abuse. For example, was there anybody trading at greater than 300 percent of their usual volume in a public instrument within 5 seconds before a news article came out with some information? When you get that kind of data, you need to invoke business processes to automatically cross-reference it with past cases. Has this happened before? Is there some pattern to indicate this might not be just a one-off? You can create business processes to raise alerts and manage them and discover trends and patterns.
I can also give you an example from the transport and logistics industry. We have been working with customers from all over the world. One is Royal Dirkzwager, a Dutch logistics company that manages the container ports in Rotterdam. There’s a lot of complex thinking going on there about the availability of berths and docks in the ports. But what has happened for the last 100 years is that a ship might radio ahead and say “Okay, I’m going to arrive at 2:00 p.m.,” and some crusty old geezer on the dockside with binoculars would look for the ship. There is tremendous waste for the shipping lines; let’s say you steam at full speed to make it to the port but then there isn’t a berth for you. You burned all that fuel unnecessarily. But you can gain visibility on events in ports, and on the allocation of ships. You can potentially track every ship in the world and relate it to the availability of ports and docks and manpower and resources, then you can send real-time course and speed changes to ships to get them to the right port at the right time and optimize the use of those resources. That’s saving millions of dollars every year for Royal Dirkzwager.
Coming tomorrow in Part 2: Perspectives from Progress chief technology officer John Bates; what it means to be an anchor technology company in the Boston region; how the company’s acquisition strategy has evolved; and whether Progress itself might be an acquisition target.
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