The size and scope of the OpenText acquisition of Micro Focus makes the deal newsworthy, and industry pundits have generally greeted the news with optimism. The strategic value for OpenText spans a range of market opportunities, as evidenced by the recent assessments of three analysts who cover the tech market. This blog takes a closer look at what is being said.
In a deal that closed on February 1st, OpenText, a $3.5 billion provider of information management software and services, acquired software vendor Micro Focus, which generated $2.7 billion in revenues in FY2022, for $5.8 billion. The acquisition nearly doubles the size of OpenText, and according to one source, ranks 13th among the largest M&A deals to date in 2023.
In the view of most industry observers, the deal is largely accretive, with very little overlap in the two companies’ portfolios. Yet experts’ perspectives on just which aspects of the deal deliver the highest value vary significantly, as can be seen in three recent pieces of analyst content.
Deep Analysis is a research and advisory firm that specializes in providing insights and analysis on emerging technologies such as artificial intelligence, robotic process automation and intelligent automation. The firm’s founder and principal analyst, Alan Pelz-Sharpe, published his firm’s take on the acquisition in a blog posted in February, titled OpenText + Micro Focus: Our Analysis.
The blog begins with words of affirmation, with Pelz-Sharpe saying “it’s an acquisition that we previously noted makes a lot of sense.” The deal, he points out, brings tens of thousands of customers, more than 7,500 partners, and Micro Focus’ extensive technology portfolio to OpenText.
Pelz-Sharpe then turns his focus to three high-value elements he argues have been overlooked or misunderstood: Micro Focus’ COBOL, Vertica data analytics, and cybersecurity businesses.
COBOL, Pelz-Sharpe notes, has been around since 1959 and is still in widespread use today in such mission-critical sectors as financial services, telecom, energy and others. He advises that the process of rejuvenation, expansion, enhancement and migration of COBOL systems to the cloud stands to fuel significant future growth for OpenText.
Pelz-Sharpe then turns to Vertica, and its ability to manage the performance of vast query-intensive data warehouses among enterprises in the finance, healthcare, energy and advertising sectors. He believes Vertica (and particularly the AWS-based Vertica Accelerator) can fuel significant growth as data volumes and complexity continue to expand rapidly.
The Deep Analysis founder proceeds to list Micro Focus’ security products acquired as part of the deal, including ArcSight, Voltage, Fortify Insight and NetIQ, observing that the acquisition makes OpenText, “one of the fastest-growing players in the high-growth cybersecurity market.”
The article summarizes that the deal potentially brings more value than the sum of its parts by expanding OpenText’s total addressable market, adding AI and DevOps technologies that can enhance OpenText’s core offerings, and deepen the latter’s penetration into faster-growth markets and geographies.
Omdia is a global technology research and consulting firm that provides insights, analysis and strategic guidance to help clients navigate the complex, rapidly evolving technology landscape.
The firm’s Sue Clarke, an associate senior analyst, published her take on the acquisition in an article titled Analyst Commentary: OpenText broadens its portfolio with Micro Focus acquisition.
Referencing enterprise customers’ reliance on heterogeneous IT environments and infrastructure, the article’s observations talk about the value of the OpenText’s expanded technology footprint bringing application delivery, modernization, data analytics and AIOps to the hands of its customers.
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Futurum Research is a research and analysis firm that focuses on digital innovation and disruptive technologies. Its CEO and chief analyst, Daniel Newman, interviewed OpenText CEO and CTO Mark Barrenechea on his Making Markets Podcast in February about the acquisition. Newman’s line of questioning reveals a few of his own views on the components he finds strategic in the deal.
One of these is the business model at the heart of OpenText, which Newman describes as “information management.” In response, Mark Barrenechea notes OpenText’s origins as a search company, which led to technologies for managing the content behind the search, and then expanding further over time to enable experience data, operational data, supply chain data and automation. Newman concurs, noting “with things like the rise of IoT and Edge and all the data that’s coming from sensors and environments, companies have a big challenge to say, ‘how do we utilize that data in our decision making?’”
Another value component cited by Newman is the expertise and experience to enable enterprises to manage their cloud resources effectively and efficiently. “It’s not just about which cloud,” he says about OpenText’s value proposition, “it’s about everything from mainframe to prem, private cloud to hybrid to public and having that whole spectrum…to help companies deal with it.” Doubling the size of OpenText, in Newman’s view, equips it to better support enterprises struggling with the complexity that comes from adding new workloads, no matter whether they manage them on-cloud, off-cloud, or any combination of the two.
Barrenechea agrees and elaborates: “How do you integrate all these systems? How do you keep identities consistent? How do you secure them? How do you bring the information together in a supply chain when you’re talking to 50 systems?” He continues, “We’re delighted to be a leader now in mainframe technologies, COBOL, EDI … the backbone of enterprises,” he says, “and we’ll surround them with more current internet technologies.”
The sentiment shared by all three analysts is one of qualified optimism. These analysts agree that enterprises from mid-sized to large will need a capable solution partner that can help them improve data management today, as well as efficiently migrate to new architectures for higher efficiency, reduced cost and more actionable insight.
From this vantage alone, the broadened solution portfolio that OpenText possesses provides an unprecedented opportunity for the organization to become significantly more valuable to its customers and partners. As Barrenechea put it, “by expanding our mission again in information management to digital operations management, doubling down on enterprise security, application automation, we can deliver a much bigger mission to our customers and continue to expand the definition of information management.”
Learn more about the OpenText acquisition of Micro Focus.
This post was first first published on Home | Micro Focus Blog website by OpenText. You can view it by clicking here