Vitria Looks Like the Pick of the Litter
By Mark Veverka
Got Infrastructure? As readers of our Technology Forum last week can tell
you, everybody's talking Internet infrastructure. And why not? Judging by our
esteemed panel of pros, that's where a good chunk of the smart money is
flowing in tenuous Techland. All of which brings to mind Vitria Technology, a
software company we started tracking a couple of months prior to its
successful initial public offering -- which was exactly a year ago on Sunday
(Plugged In, July 5, 1999).
Time flies when you're a fledgling Internet software maker. Vitria is emerging
as the pick of the litter among enterprise application integrators -- software
developers that knit together different big computer systems so they can talk
to each other seamlessly. But the folks at the Sunnyvale, California, outfit tend
to cringe when their company is singularly identified solely as an EAI
developer. Indeed, Malcolm Lewis, Vitria's director of marketing, argues that
his company has gone beyond EAI.
In addition to getting the human resources software system to talk to the shop
floor's software, Vitria can go beyond the firewall of that internal network and
link up with hundreds of enterprise systems outside that protective barrier via
the World Wide Web.
This back-end solution enables companies to conduct business-to-business
transactions over the Internet. Of course, B2B category-killers Ariba and
Commerce One are the big boys on that particular block. But the combination
of EAI capability knitted with B2B Internet solutions makes Vitria more
formidable, and for that matter, more practical, Lewis argues.
That one-two punch was powerful enough to persuade EAI rival, Active
Software, to run to the arms of webMethods, a Fairfax, Virginia, maker of
back-end B2B software. As we wrote last summer, Active and Vitria were
two shining stars in the complex, geeky world of software application
integration. As it turned out, both scaled the stock market heights earlier this
year, soaring as high as 139 and 100, respectively, from their offering prices
of 11 and 4. Vitria closed Friday at 49.25.
Yet after the Y2K bug proved a nonevent, grizzled Old Economy
corporations began to get religion about this Internet thing and began to worry
less about integrating their internal solutions and sweat significantly more about
getting linked to outside exchanges. Consequently, the back-end boys started
getting much of the attention -- not to mention higher valuations, thus
compelling webMethods to buy Active for $1.3 billion last month.
Not surprisingly, Vitria's Lewis contends that the WebMethods-Active
marriage still doesn't bring the combined company on par with Vitria. That's
because Vitria has a third leg to its software development stool: process
automation.
Lewis claims that Vitria's proprietary process automation systems are the
secret sauce that separates his company from the rest of the integrator pack.
Process automation is sort of a software master control that allows companies
to link internal systems with each other as well as with those outside its
firewall, all with the click of a mouse. Prior to this breakthrough, high-priced
Big Five consultants would send in armies of software engineers to rewrite
reams of new computer code to make the connections.
"You want to make your applications, and those of your suppliers and
partners, to be plug-and-play. And that's what this does," Lewis says. "You
have end-to-end systems."
It appears that Vitria's sales pitch for linking the Old Economy to the Web is
beginning to resonate. Early this week, BP is expected to announce it has
chosen Vitria software for managing the global supply-chain of its four largest
divisions. The deal should enable BP's existing enterprises to work with each
other as well as with the company's some 1,000 partners, vendors and
suppliers around the world via the Internet.
With big oil under intense pressure to squeeze efficiency and fatten margins,
BP hopes Vitria's integration software and secret sauce will transform the
energy behemoth into a digital business.
Vitria's Lewis wouldn't reveal the value of the software deal, except that it
was the six-year-old company's largest contract to date, exceeding $15
million. The BP contract should contribute more than 10% of Vitria's top line
this year, which is projected to be about $130 million. More impressive,
perhaps, is the fact that Vitria turned profitable in the second quarter of this
year, one year earlier than management projected.
The BP deal will be a big win in more ways than one. To date, Vitria has
concentrated largely on major telecommunications customers, such as Sprint
and BellSouth. For that reason, the Street tends to paint Vitria as mostly a
telco vendor. But the BP contract may prove otherwise, showing that Vitria is
capable of competing in other diverse international verticals, such as energy,
which until now has been dominated by rival Tibco Software -- where Vitria
Chief Executive and cofounder JoMei Chang once toiled.
For its first year as a public company, Vitria's strategy has been to focus on
one vertical sector of the economy at a time. But with the BP deal in its
pocket, the software maker now has its eye on financial services too.
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