SAIC/Forterra acquisition: what it means for the enterprise immersive software market
by Erica Driver and Sam Driver.
On February 1, 2010, Science Applications International Corp. (SAIC) announced that it had acquired the OLIVE product line from Forterra Systems. Terms of the deal were not disclosed. SAIC had been working with Forterra on and off for the past six years and SAIC had been working with OLIVE internally for the past year and a half. Moving forward, the company plans to offer OLIVE solutions to customers, as well as to use it internally.
On February 4th, we spoke with executives at SAIC about the acquisition. Our takeaways are:
- SAIC’s industry focus for OLIVE will be government, energy, health, and other commercial markets. SAIC’s focus on these industries closely mirrors the industry focus Forterra had — so we don’t expect the OLIVE customer mix to change much in 2010. SAIC also says it will continue to work with channel partners with whom Forterra had relationships. Forterra had regional resellers in Europe, the Middle East, and Asia, as well as associations with companies like ACS Learning Services, Lockheed Martin, and Carahsoft.
- The primary internal and external use cases will be training and business activity rehearsal. SAIC has a long history in modeling and simulation, going back two decades. The company’s primary customer, the US government, has been putting increasing training emphasis on the interpersonal realm. OLIVE fills a gap in SAIC’s existing modeling and simulation offerings: strong support for interpersonal interaction. OLIVE gives SAIC a collaborative, multiuser 3D immersive environment. SAIC has already integrated OLIVE with systems like the US Army’s OneSAFTM (One Semi Automated Forces) simulation solution. The company is likely to integrate OLIVE with additional systems moving forward.
What it means for business decision makers
As we have detailed in the past here and here, the enterprise immersive software market is still emerging and 2010 will be a year of churn. We see the acquisition of Forterra Systems by SAIC as a positive step in the maturation of the market. While it is difficult for those who are personally involved, the industry will benefit from having a smaller number of stable, well-capitalized technology providers.
- OLIVE just gained momentum in government and military and has promise in health and energy. Now offered by SAIC, a Fortune 500 company, OLIVE has a better shot than ever of penetrating the government and military sectors. If SAIC chooses to fully develop market opportunities in the energy and health sectors, OLIVE will remain a formidable competitor to products like American Research Institute’s PowerU, Linden Lab’s Second Life Enterprise, Teleplace’s Teleplace, and ProtonMedia’s ProtoSphere
- As with any acquisition, change is inevitable. Given that the acquisition just closed this week, many open questions remain. Existing and prospective OLIVE customers should keep an eye out for changes to product pricing, packaging, and status (e.g., Meeting Labs was a new hosted offering from Forterra and its future is unclear), as well as SAIC’s relationships with Forterra’s channel partners (some of which compete directly with SAIC).
© 2010 ThinkBalm. All rights reserved.
Subscribe via RSS
Erica – let’s be real about “OLIVE just gained momentum…” My experience with IT mergers (n=50+) says that 80% of the time, the acquirer screws up the acquisition and the little company never gets to market or scale.
In a successful scenario, what usually happens is that the smaller company’s momentum stalls for at least a year, as it gets mired down in the politics and slow-moving processes. But, if that acquisition gets executive sponsorship, things start moving in the right direction.
Regarding the value of Forterra’s channel partnerships – the value is next to zero at this point, and is one major reason why the company had to be sold. This market is new, and as such, it is fueled by mercenary salesmanship. The companies that will get to scale faster than others will be the ones who have passionate execs who can sell. Anyone who is telling you that they are selling through channel relationships should be viewed with a great deal of suspicion. It takes forever to build a worthwhile channel relationship and train their force to sell. Remember, this is software, not a network filer.
Kent: You make fair points. A lot can go wrong in an acquisition. We will be staying in touch with the SAIC team and keeping a close eye on how things progress.
Do you think it’s possible that this will slow immersive Internet down? Afterall, this is commodity simulation compared to the very expensive platforms. Time will certainly tell the outcome.
Sandy — No, I don’t think the acquisition of Forterra OLIVE by SAIC will slow down the Immersive Internet.
I think consolidation is necessary and inevitable in this emerging market. There is no way a $50M USD software market can sustain two dozen vendors. It can support a few vendors — not two dozen. All the vendors in this market are small (or are large vendors with a very small investment in immersive technology) so this type of change is to be expected. In 2010, we expect to see implementations break out of the experiment-and-pilot ghetto; a wave of products move from alpha and beta to general release; and new alliances form, thereby creating new value. (See the Jan. 13, 2010 ThinkBalm blog post, “Enterprise immersive software trends for 2010″ at http://www.thinkbalm.com/2010/01/13/enterprise-immersive-software-trends-for-2010-2/.