Softek rides IBM mainframe wave, plans acquisition

Data migration software provider Softek is planning to acquire Enigma to boost its mainframe storage software business.

IBM's not the only company seeing a healthy run in mainframe revenue these days. Softek Storage Solutions Corp., which sells data migration software for open systems and mainframe shops, has signed an agreement with European mainframe software developer Enigma Data Solutions to buy the company within the next year if it does an agreed volume of business. The details of the potential purchase were not disclosed.

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"It's an earnout buyout process," said Steve Murphy, president and CEO of Softek. He added that Enigma and Softek have worked on several joint deals in Europe to assist storage managers in automating data movement across systems, initially in z/OS environments. Joint product offerings from two companies are planned for introduction in early 2007 under the Softek brand.

Enigma specializes in developing storage software that simplifies day-to-day management of mainframe-attached storage arrays and tape libraries, according to the company's marketing collateral. Founded in 1993 and headquartered in Kiel, Germany, Enigma's products are used by companies worldwide as centralized storage management for maintaining large Sysplex and Geographically Dispersed Parallel Sysplex (GDPS) implementations. Enigma has about 80 mainframe customers in Germany.

"We've seen them replacing CA-Vantage in some major accounts …We'd like to add them to our mainframe business," Murphy said. CA's mainframe monitoring product BrightStor CA-Vantage reports on the success or failure of migration and backup jobs in z/OS environments. He noted that the majority of Softek's new business is in open systems, "but we have a healthy maintenance business in mainframe," he said.

Softek's mainframe revenues are no surprise given IBM's recent earnings results. After dropping nearly 8% in 2005, IBM's mainframe revenue is up 10% this year. That includes a 25% gain in the most recent quarter. IBM does not release precise figures, but analysts estimate mainframe revenue at roughly $2.3 billion in the first nine months of 2006. While that is a small chunk of the company's overall sales of $65 billion so far this year, mainframe revenue is especially precious because these machines drive huge software and maintenance deals, making them IBM's most profitable line of hardware.

"IBM is working very hard to maintain its footprint in this market by positioning the mainframe in the open source movement," according to John Webster, principle analyst at Illuminata Inc. Users can run Linux on the mainframe, which "gives the mainframer's an argument, and it keeps the mainframe in touch with the application environment that's moving forward," he said.

Softek has close to 800 customers in total and over a dozen resellers, including EMC Corp., Fujitsu Ltd., HP, IBM Global Services and Siemens Business Services among others. Its most popular product, Transparent Data Migration Facility (TDMF), was the company's launch pad for its spinout from Fujitsu Ltd. in April, 2004 and continues to bring in the bulk of Softek's revenues.

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