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Quest recently acquired Imceda for $61M. What affect will this have on the market?
From a Red Gate perspective, the most immediate impact is in the market for SQL Server backup tools. It creates uncertainty for Imceda's SQL Server backup customers in four areas: cost, support, commitment to the full user base, and future development directions.
Let's start with cost. If you've just paid $61M for something, you are going to need to get that money back somehow. We don't know how Quest plans to do that, but you can be sure they aren't ruling out price increases. That is what happened last time LiteSpeed changed hands.
Next is support. With this acquisition, LiteSpeed will have changed hands twice within a short period of time. All the upheaval you get from acquisitions is going to hit customers and staff. It's inevitable that processes and verification systems will be disrupted and people will leave the company, including those who really know the product and the answers to customers' questions. No matter the company, this kind of instability almost always has an adverse effect on customer service.
Commitment to the current user base is another issue. Quest is very focused on "The Enterprise" (terabyte-type production systems). With this acquisition, I'd expect Quest to concentrate on LiteSpeed's valuable enterprise customers; other customers might become either low-priority or expendable. In particular, existing users with only a few licenses might find themselves left out in the cold.
As for future product direction, I imagine that Quest will try to appeal to enterprise customers by integrating LiteSpeed with its other multi-platform offerings. But, if your overall strategy is provide a backup solution to Oracle, Exchange, MySQL and SQL Server, then it is inevitable that you'll have to compromise on something. I suspect that the customers who just want to back up their SQL Server database might suffer from the compromise.
Is this acquisition evidence of an industry shakeout?
Yes, I think it is a symptom of something that was already happening. The market for tools is maturing, which is leading to two trends. Firstly, there is consolidation – the number of companies in the tools space will continue to decrease, but their offerings will increasingly compete directly. We'll see bigger companies that have the capability to deliver value to large numbers of customers; smaller companies will have to find niches or struggle. It makes sense for customers to buy from a company that will still be around in a year or two. This is the same stage of consolidation that other high-tech markets have gone through.
Secondly, there has been a split in the market between companies selling high-cost software and those selling at more mass-market prices. Right now the real competition is for the Enterprise. Embarcadero, Quest, Idera, and Lumigent are busy chasing the top part of the market – very large companies spending $100,000s. There isn’t much serious competition for customers that don't have those big budgets. Red Gate’s strategy is to continue to serve this much bigger by volume (if potentially smaller by value) part of the market. We want to sell to every professional working with SQL Server; if that isn’t quite as valuable commercially for us, so be it.
How will the Imceda acquisition affect Red Gate?
We think it is good news. We’re in this market for the long haul. It's been proven that VC-funded firms out to make a quick buck are bad for their customers. We believe that if we keep on producing quality products at prices people can afford we will continue to prosper.
