NEON Systems Moves Further into Enterprise Application Integration

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Event Summary

"SUGAR LAND, TX -- NEON Systems, Inc. (Nasdaq: NESY), a leading provider of Enterprise Access and Integration software products, today announced it has signed an agreement for the development and worldwide distribution rights to Sterling Software, Inc.'s (NYSE: SSW) SOLVE:Diplomat product. Terms of the agreement included a $3.5 million payment by NEON Systems. NEON Systems has the option to acquire full ownership of the intellectual property rights associated with the product for an additional payment. Historically, Diplomat was utilized to integrate disparate Customer Relationship Management (CRM) and Call Center systems. NEON Systems intends to increase the scope of the Diplomat product, which will evolve it into a single, unified EAI product line encompassing major computing platforms and applications. This key expansion of the NEON Systems product family will provide a comprehensive EAI solution. In addition to the distribution rights, NEON has been granted a source code license and has hired the Cary, North Carolina-based software development lab dedicated to the Diplomat product.

"Diplomat was first deployed at a customer site in 1993. The technology has developed into a proven and established product that is highly complementary to our System/390 Enterprise Access and Integration products. The extensible software base, along with the key development talent, will allow NEON Systems to extend mission critical access and integration solutions to UNIX and Windows platforms to support front-office CRM, ERP, Call Center, and other high-value EAI initiatives," said Joe Backer, president and CEO, NEON Systems. "We plan to provide excellent support for existing Diplomat customers and continue, without interruption, the ongoing sale of the product. In the future, we will extend the product with intelligent adapters for a variety of applications. Our superior support of the System/390 platform will make NEON Systems EAI products the clear choice for customers who are looking for true enterprise-class business integration."

Diplomat offers bi-directional sharing of customer information across multiple systems with different interfaces, databases, and data models, creating synergy among dissimilar environments. By providing legacy, client/server, and enterprise management platform integration, without the cost of replacing existing applications or re-training personnel, Diplomat enhances communication between different business units to deliver better service to the customer."

Market Impact

The market for EAI products is getting very hot, with vendors such as Active Software, BEA Systems, CrossWorlds Software, Extricity, IBM, NEON (New Era of Networks), Oberon Software, Tempest Software, Tibco, and Tempest Software vying for market share. Given that this market is still nascent, customers will have a difficult time separating the wheat from the chaff, and the full impact of this announcement will not be known for some time. We believe that EAI will have a strong influence on Information Technology in the next two to three years, but the technology will need to mature before it's full impact can be known. NEON's proven expertise in Extract/Transform/Load tools (specifically gateways) should make their transition to an EAI vendor much easier. However, NEON's lack of proven expertise in message oriented middleware (necessary to allow applications to communicate with each other and far more complicated than data movement) and business process modeling will be a challenge for them. These types of integration strategies are integral to EAI.

User Recommendations

Customers evaluating Enterprise Application Integration products should be very careful in determining the vendor's actual expertise in this area. They must be mindful of the fact that there is no pure "out of box" solution. Consulting and programming assistance will be necessary to truly integrate the various data sources, and the vendor should be questioned about the experience of their consulting staff, unless the customer is choosing to do the integration themselves. Until the market and products are more mature, potential customers should be very careful about committing to a solution. In addition, until NEON has fully absorbed the code base for the SOLVE:Diplomat product and trained their consulting force, caution is recommended.

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