Some recent correspondence with clients and prospective adopters of business rules technology indicates interested mainstream has become increasing concerned and confused by consolidation in the business rules market.
On the analyst front, they read advice such as the following from Gartner:[1]
As Gartner has stated, the BRE market is a volatile technology sector, and market trends point to increased consolidation. In recent research, we stated that some consolidation will come from rules-to-rules acquisitions. Recent examples of this include Trilogy/Versata buying Gensym and now, RuleBurst purchasing Haley Systems.
Another form this consolidation will take is application vendors or business process management suite vendors buying much-needed rule technology, as seen in SAP’s recently announced intention to purchase Yasu Technologies. In either case, rule technology will persist, but the vendors selling the technology will often be different.
I agree with Gartner, enterprise app and BPM vendors desperately need rules technology. I also agree with the following analysis from Forrester:[2]
SAP’s decision to purchase Hyderabad, India-based Yasu Technologies greatly improves its business rules management capabilities. Other large vendors would be wise to follow SAP’s lead in the business rules market. If you look at the big vendors, they’re all going to need this technology. SAP’s competitors are going to have to step up to these requirements also.
It’s encouraging that SAP bought Business Objects and is now buying Yasu. We’re seeing requirements to link business rules and business intelligence or analytics. SAP has told us they have seen these requests, and we’re encouraged that SAP is now acting.”
Unfortunately, Gartner’s concluding advice could have been more constructive:
Prospective BRE customers: Buyer beware – the rule engine market is a volatile sector. Choose your vendors carefully and be prepared to see more BRE acquisitions.
Consolidation is a sign of a maturing market. Gartner is responding to the same fear, uncertainty, and doubt that I first mentioned above. Forrester’s advice has been more specific and constructive:[3]
I’ve been waiting for consolidation to happen […] the customers need it.”
Two companies that are particularly appealing targets are Ilog and Corticon. Ilog is one of the market leaders in business rules functionality and market share, but it counts only about $125 million in yearly revenue.
Despite these comments, Gartner agrees that accessible rules technology is the critical ingredient needed for agility and in BPM:[4]
Business rule technologies are considered essential to BPM systems (BPMS) because they extend the flexibility and agility BPM brings to process management by making complex decisions in the processes transparent, and therefore manageable, to users. According to leading IT research firm, Gartner, in the report “A Business Rule Market Checkup,” November 6, 2007 by David McCoy and Eric Deitert, “By definition a BPMS must include rules technologies.”
Having recently talked directly with most of the potential acquirers in this space before merging with Ruleburst, I think the threat of further consolidation is exaggerated. The smaller vendors are already consumed and the lack of immediate synergies will inhibit eight, certainly nine figure acquisitions for the foreseeable future. Of reputable vendors, only Corticon or the Ruleburst/Haley combination seem viable targets in the short term. I expect most enterprise app and BPM vendors to stick with partnerships or join Oracle in acquiring inexpensive or open-source engines.
Indicators other than consolidation, such as available talent and standards adoption, are lagging in this market. Although I plan to address the inadequacy of emerging standards that I have covered elsewhere[5], my clients are more immediately concerned with the lack of fungible talent. Adopters too often engage recruiters only to find people with limited experience or consultants with specialty rates and limited availability.
A dearth of talent is a sign of a small or immature market, or both. However, IDC estimates that the business rules market software, excluding service providers, will continue double digit growth to $531M in 2001 from $227M in 2006, during which Fair Isaac grew revenues its by 19% to 24% of the market![6] The weak talent pool is due to certain immaturities in the market. Consolidation itself will not address these directly.
In order to motivate people to focus on developing skill and accumulating experience in this market, they have to believe that they will find more or more lucrative work. When the major consulting firms start accumulating and marketing business rules skills, this market will have arrived, whether or not consolidation has run to completion. Expect this to occur as Oracle and SAP roll out their rules capabilities. For Oracle, who is ahead by a year or two, expect this momentum to build out of the public sector.
I agree with Gartner that this will initially play out in Haley’s favor due to Siebel:
RuleBurst and Haley Systems have strong, strategic relationships with large ERP providers (SAP and Oracle/Siebel respectively). Their combined forces will bolster these lucrative partner channels.
Broader momentum will accumulate as Oracle matures rules within Fusion and SAP introduces Yasu to NetWeaver, but then the channel conflicts will play against Ruleburst, as Forrester points out:
SAP already has OEM relationships with two other business rules vendors — ILog and Ruleburst. Likewise, Yasu has OEM relationships with Sun Microsystems, Versata. and Savvion. Customers will have to watch to see what becomes of those relationships.
Expect large SIs to establish a talent draw to serve the Oracle and SAP markets that will develop the talent pool more aggressively by 2009.
Gartner and Forrester agree that the major vendors and customers are demanding this technology and IDC goes further in predicting:
Advances elsewhere in the application development and deployment markets are helping set the stage for even higher BRMS growth as the industry retools its approach to application development around deployment, support of standards, ease of construction, maintainability, and extensibility. Business rules engines are expected to become key development elements of the application infrastructure stack.
In the meantime, secure your consultants for 2008 early!
In addition to consolidation and talent concerns, adopters of business rules technology are (and should be) reasonably concerned with the stability not only of the tools but of the technology. This is also reflected in Gartner’s “volatile technology” comment above. It is also demonstrated in dialogue among knowledge bloggers.[7][8]
Customers of Haley or Yasu are obviously concerned with future support. These concerns are further exacerbated by comments from Gartner:
RuleBurst has indicated that it will support both products; however, we believe this is only logical as a short-term strategy and expect RuleBurst to move toward a single composite offering. RuleBurst wants and needs Haley Systems’ natural-language technology prowess and market presence, but we believe the most valuable opportunity of the combined entity will come from leveraging RuleBurst’s background in compliance and governance and seeking “can’t live without it” vertical domain relevance (for example, in financial services) through rule templates and frameworks.
RuleBurst remains in a consolidating market; it must quickly articulate a strategy for relevance that extends beyond rule technology.
And from Forrester:
SAP doesn’t sell software for .NET, so does that version go away?
Only SAP knows, but I doubt Yasu will survive in any standalone capacity. The stated objectives are aimed at embedding the technology in NetWeaver.[9]
Given the synergies already discussed between Haley and Ruleburst discussed elsewhere here and with colleagues[10], it is absolutely clear that their products will converge. Expect Haley to lag while advancing Ruleburst in 2008. This is also consistent with Gartner’s analysis and Ruleburst’s published comments emphasizing vertical solutions more than technical advances.
Gartner is justified in advising clients to choose their vendors carefully and to anticipate further turmoil. Rather than advise clients to beware high RO and strategic technology adoption, we encourage them to minimize vendor lock-in.
In my most recent post to this blog I suggested the most critical step in avoiding vendor lock-in:
Manage business rules as content that is as independent of implementation details as practical.
As business requirements, regulations and policies are reduced to the level of Yasu rules, for example, they become less portable and vendor or technical turmoil becomes more costly and painful. If you adopt a less knowledge-centric tool, you should at least examine the production rule representation standard[11]. Porting Yasu to Ilog may be your best – albeit more expensive – option.[12]
In addition to managing business knowledge not as rules but as content, consider third party technologies, especially standards concerning semantic ontologies[13] and business vocabularies[14].
For those using Haley, the management of rules as knowledge content and its separation from implementation details is fairly developed. Take a careful look at how content can be exported to XML[15]
For those using or considering other vendors, including Oracle’s Fusion, be sure to consider whether knowledge captured can be extracted as in something like KML or any standard, such as OWL, SBVR or, if nothing more, PRR (reference below).
[1] RuleBurst’s Haley buy will further consolidate BRE sector
[2] Is SAP-Yasu the start of business rules management consolidation?
[3] Ibid.
[4] as quoted in this Ilog press release
[5] Semantic Standards for Agility
[6] Worldwide Business Rules Management Systems 2007-2011 Forecast and 2006 Vendor Shares
[7] See comments to Consolidation Hits the Business Rules Market.
[8] See comments to More thoughts on RuleBurst and Haley.
[9] SAP buys BPM vendor to boost NetWeaver
[10] See comments to More thoughts on RuleBurst and Haley.
[11] Production Rule Representation (PRR) from OMG
[12] Implementing two business rule languages using Eclipse and Ilog’s support for PRR
[13] Web Ontology Language (OWL) from W3C
[14] Semantics of Business Vocabulary and Rules(SBVR) from OMG
[15] Knowledge Management Language (KML)