Tibco sets out vision for the future

Tibco's chief executive, Vivek Ranadive, outlined his vision for the integration software specialist's future at its first European user conference last week.

Only 15 months after its initial public offering, Tibco believes it is on track to achieve a market capitalisation of $500bn at some unspecified time in the future. "That's my goal, and I want to do it faster than anyone else on the planet," Ranadive said. Today, Tibco is valued at about $16bn.

And as part of its bid to boost sales, the supplier is trying to widen its net. Although it has traditionally sold its messaging-based middleware into the financial services and telecommunications space, it is now also starting to pick up significant contracts in the oil, gas and utilities markets.

"A year ago, we had no more than a handful of customers. Today, it is in the 60 to 70 range," Ranadive claimed. European users include Powergen, Mobil, Shell and Centrica.

And while it is still early days, the supplier also hopes to expand into online exchanges and marketplaces, and the logistics and transportation sectors.

When Tibco floated on the Nasdaq, it was heavily dependent on sales to Reuters, which still holds a majority stake in the firm. But today, the sales mix is very different. For its third fiscal quarter to 31 August 2000, Tibco's revenue from so-called "related parties" was just over 12 per cent compared with 60 per cent in the same period of 1999.

More importantly, its overall turnover for the three months rose by 180 per cent to $67.2m, with licence sales increasing by a monumental 269 per cent to $48.5m.

This means, according to Ranadive, that the company now has an annual revenue run rate of around $300m, but that does not mean to say it is out of the woods yet.

Brian Skiba, research director at Lehman Brothers, warned: "It's interesting to see how software companies overcome the $200 to $300 million revenue hurdle. Many fail or stumble."

Next stop - a cool billion
But Ranadive insisted that Tibco was ready to take the next step and hit the $1bn sales mark. "We have a lot of depth on the [management] bench," he claimed.

Mike Gilpin, an analyst at Giga Information Systems, was also optimistic over the supplier's prospects. "The most significant increase in market share amongst [integration] vendors will be Tibco, which is getting a lot of traction from various ebusiness and other front office related integration," he said.

But others were not quite so positive. "Too often when Tibco presents, it brings out the technology first without explaining the benefits," said one potential customer who asked not to be named.

Ranadive tacitly agrees. He believes the company has solid product lines, but accepts that: "We're a technology company first, and yes, I agree, we haven't done the best marketing job."

He also makes no apology for describing the business as "boring", which, he claims, can have its advantages: "Boring is in at the moment. I like boring - and so do the analysts that follow us," he said.

The power of positioning
And therein lies Tibco's biggest problem. There is no doubting Ranadive's ambition, but to become a technology giant requires a lot more than clever software that appeals to a market need.

Positioning is crucial and the company runs the risk of being pigeonholed in the messaging market, even though it competes directly with other integration software players such as IBM, webMethods and Vitria.

On the plus side, however, Tibco's sales strategy does appear to have been a successful one to date. It selects an industry segment and then tries to sell into what Ranadive calls the "dream customer". "Once you've got the best customer in that market, you have an excellent reference point for the future," he said.

On the technology front, Tibco has also won over a raft of big name hardware vendors to its cause. At the conference, for example, it announced plans to bundle Nokia's WAP (wireless application protocol) Server with its ActivePortal suite to create Tibco MobileConnect. The aim is to enable businesses to exchange information with their partners and customers, and undertake ecommerce using wireless devices.

Gerhard Romen, Nokia's vice president of strategic software, said: "Customers want mobile applications to give them information here and now. Tibco's approach fits our style. We see strategic partnerships as essential to make mobile commerce happen, and we are committed to the long term and are talking about joint research and development."

But Tibco is also trying to overcome the perception that its products are only relevant to very large enterprises. "People don't see this too easily, but we scale down as well as up," Ranadive said.

This means that the firm's integration software can enable small as well as large companies to deliver highly focused, real-time information to their users, he explained.

John Willcutts, general manager of Tibco partner Yahoo's enterprise services division, agreed: "Knowing you've got an infrastructure that can deliver to very large organisations means we can go down the scale with ease. Tibco doesn't prevent us from doing this. It's surprisingly light in weight."

Financial results will reveal all
But the real question is whether Tibco can capitalise on what it believes is a match-winning strategy. Ranadive at least is confident. "We're doing the heavy lifting that makes collaboration between companies a reality. That is where the important activity takes place. Enterprises may not see our software, but I like that. If it is doing what they need and is unobtrusive, then we're doing our job," he said.

In reality, however, it will be the supplier's financial results over the next few quarters that determine whether his boast is based in reality or otherwise.