Event Summary
Vitria (NASDAQ: VITR), one of the top ten vendors in the application integration server space, has announced that the company has entered into a definitive agreement to acquire XMLSolutions Corporation.
XMLSolutions has developed XML transformation maps for over 3,100 of the world's most frequently used EDI document formats. EDI is the most prevalent standard for business-to-business collaboration, with over 300,000 companies using EDI in the US alone. XML is the emerging standard for Internet-based collaboration. XMLSolutions' technology bridges the gap between the old and the new. Using this transformation technology, companies can exchange business documents (i.e., purchase orders, invoices, and shipment notices) with any trading partner or exchange without worrying about the specific EDI and XML format requirements.
According to JoMei Chang, president and CEO of Vitria, "The combination of XMLSolutions' collaboration technology and Vitria's EAI, B2Bi, and Business Process Management solution will help us to define the platform upon which the next generation of e-Business - value chain collaboration - will be conducted. The acquisition of XMLSolutions will also provide us with a talented group of employees who will help us to quickly bring this enhanced solution to heavy EDI users across multiple industries, including aerospace, automotive, retail, and transportation."
The total purchase price for the transaction will be approximately $15 million, and will be accounted for as a purchase. The transaction is expected to be completed in early April.
Market Impact
Vitria believes that there is a substantial market opportunity for this type of integration solution. According to the vendor, estimates are that 95% of Fortune 500 companies use EDI, 80% of all B2B transactions between Fortune 500 companies use EDI, and that approximately $3 trillion worth of business will be transacted via EDI by 2003. However, given the complexity and cost of EDI software, most companies only use EDI to communicate with the top 15-20% of their trading partners (Ed: use it when they have to). The remaining 80-85% of trading partners need a simpler, less expensive solution that leverages the emerging XML standard for information exchange over the Internet.
TEC agrees that the market is ripe for all types of translation capabilities between EDI and XML formats. Many enterprises, particularly large, well-established ones, are not willing to abandon the significant investments they have made in EDI technologies, often dating back to the late 1980's. Besides, when it comes to time-tested and successful EDI connections, "if it ain't broke". In addition, companies are unwilling to hand-code the translation mappings of potentially hundreds of document formats. In this case, a true "out of box" solution will have a compelling attraction to the market. Other vendors, such as IONA Software, have been making similar moves, but few have shown the prescience to concentrate on users of EDI.
User Recommendations
Customers evaluating application integration solutions involving EDI transactions should include Vitria BusinessWare (with the integration of the XMLSolutions technology) on a long list of vendors for software selection. Some other vendors who may be considered during the evaluation phase include GXS (General Electric Global Exchange Services), and IBM.
One criticism of Vitria in the past has been their strong focus on the Telecom industry, which some believed detracted from their efforts in other areas. According to Malcolm Lewis, Vice President of Communications for Vitria, "Vitria is in this for the long haul. The company will continue to expand its presence across multiple verticals, including telco/wireless, financial services, manufacturing, business services, and energy/utility." Customers in other vertical markets beyond those already addressed by the vendor should attempt to negotiate with Vitria to trade their vertical market expertise for a reduction in product price. Many vendors have been successful in these types of vertical integration partnerships, and Vitria may be eager to tackle additional ones.