Wednesday, February 3, 2010

SAIC's acquisition of Forterra: latest step in industry consolidation

You probably heard the news that Science Applications International Corporation (SAIC) bought Forterra Systems, maker of the OLIVE virtual world. We shared our thoughts on Forterra's unfortunate demise back in December, when rumors were swirling about the company shedding 60 percent of its workforce.

Now it's official. Forterra is no more. My take is this was probably in a fire sale, since terms of the purchase were not disclosed. It's likely SAIC was attracted to Forterra's government simulation business, which is where the company was strongest.

The acquisition might also have been mission critical to some government contract SAIC was running to purchase the technology. (i.e., Some government organization with a mission critical commitment to Forterra technology got weak knees when they realized the company was caving.)

Twelve Forterra staffers joined SAIC. I interpret this to mean they'll continue some development focused around government projects/simulations. If they were merely after the core technology, they wouldn't have needed twelve bodies.

Ultimately, this deal is in line with my conviction that the virtual worlds market will consolidate along four lines:
  • Collaboration products and services for business
  • Training and learning services for education
  • Simulation products and services for government
  • Consumer entertainment and gaming products
Where do we fall? In general, bullet No. 1: collaboration products and services for business. As is pretty clear from what we write about here on our blog, we're focusing on addressing the primary pain points our customers are expressing to us. Those largely surround business applications such as global scientific research, data visualization and workflow collaborations within product development, marketing, sales, and overall business process optimization.


      Ron Edwards said...

      Or perhaps SAIC bought Forterra because they recongnize OLIVE is by far the most advanced truly interoperable enterprise platform.
      There is now a $10 billion dollar company further developing OLIVE. I anticipate the chasm between Proton and OLIVE in terms of user experience, capabilities and interoperability to grow as a result.

      Reggie Best said...

      Ron, are you the same Ron Edwards with Ambient Performance in the U.K.? In either case, pleased to meet you here, and thanks for the comment.

      I agree Forterra was a fine company with strong technology. They were an admirable competitor, which we pointed out in an earlier post when the news of their layoffs broke.

      The point of my original post was not to dance on Forterra’s grave. It was to articulate that “virtual worlds” as a technology platform is not a one-size-fits-all proposition, and that Forterra’s troubles and their subsequent fire sale (and it was a fire sale by any measure) does not indicate a fundamental weakness in the potential for 3-D virtual worlds in general, or as enterprise collaboration platforms in specific.

      Rather, I believe this is simply the latest signal that the industry is consolidating around the multiple markets and applications I mentioned. And I also wanted to point out to our readers where our ProtoSphere platform fits, and where we are investing our resources.

      You and I agree on this point: The chasm between OLIVE and ProtoSphere will only widen. Given that Forterra’s strength was simulations, their sales were largely through government contracts, and SAIC is squarely focused on government, it’s obvious SAIC will drive OLIVE deeper into the government and simulation markets.

      Note the following from the “About SAIC” portion of their Forterra acquisition press release (I’m quoting verbatim): “The company's [SAIC] approximately 45,000 employees serve customers in the U.S. Department of Defense, the intelligence community, the U.S. Department of Homeland Security, other U.S. Government civil agencies ...”

      Simulations are far removed from enterprise collaboration, where ProtonMedia is focused. Indeed, our focus will remain on improving enterprise collaboration, with a strong emphasis on life sciences (where we are the leader) and energy.

      Thanks again for the comment.

      Ron Edwards said...

      Yes, Reggie, I am the same Ron Edwards leading Ambient Performance in the UK, where we are European distributors and service providers of OLIVE.

      It does seem a bit like 'dancing on the grave' as you say and your guesses are wrong, but that's what blogs are for - opinion.

      I wouldn't paint OLIVE into a box 'for simulations only' It has mostly the same collaboration features as other enterprise platforms and a few key features that others don't - and the user experience and avatar technology is still superior today.

      That same press release describes the importance of interpersonal interaction and collaboration - "We look forward to working with current and future OLIVE license holders to support and extend the platform," said Bev Seay, SAIC senior vice president and business unit general manager. "We see virtual worlds as the direction of the future in modeling and simulation – emphasis on interpersonal interaction and collaboration enables us to take our products in new directions, and to new markets."

      In other words, simulation and collaboration are not always separate. There is real value in simulating the real world for collaborative working and learning.

      With your continued and admirable success you are proving there is also a growing market in collaboration-only platforms. Kudos and best wishes for continued success.

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