Canadian software giant OpenText last week announced its intention to purchase Micro Focus in a deal valued at roughly $6 billion.
To give an idea of the scale of the combined company, the statement announcing the acquisition listed the combined company’s totally addressable market to be $170 billion. Of that, Micro Focus’s most recent annual revenue was $2.7 billion, while OpenText’s revenue was approximately $3.5 billion.
The difference between revenue and addressable market presents an idea of why the companies see the potential for growth to come out of the combination.
Growth by Acquisition
Both Micro Focus and OpenText have spent recent years growing by acquisition. Micro Focus added SIEM/SOAR vendor ArcSight into its fold, along with NetIQ, Fortify, Voltage, and other products, thanks to its 2017 spinout-merger with Hewlett Packard Enterprise’s software division. OpenText has added a resilience company like Carbonite to a portfolio that includes a variety of thread detection, investigation, and response (TDIR) products and services, as well as insider threat mitigation, and an array of forensics products.
So, what does the combination mean for customers and potential customers? For one thing, it dramatically increases the likelihood that any given midsize or large enterprise is already a customer of the new company. OpenText lists more than 120,000 customers in 110 countries around the world, while Micro Focus claims revenue in 180 different countries. Together, the companies have remarkable penetration in the large enterprise segment internationally.
The cybersecurity market, and the broader IT industry, has seen company strategies flow between a focus on single, “best of breed” solutions and a push toward multisolution conglomerates. OpenText and Micro Focus are obviously practitioners of the latter. For customers that look to their solution providers for broad security suites, the combination should make OpenText a more compelling potential provider by way of a considerably broader set of solutions. The combination may be even more compelling for customers trying to make decisions regarding security for hybrid- or multicloud architectures.
And while they’ve received little credit for it in the marketplace, both organizations have quietly been fostering notable innovations. Micro Focus earlier this year launched its Galaxy threat research platform, the latest initiative in a multiyear effort to position ArcSight at the center of a differentiated, cutting-edge security operations center (SOC) platform. Meanwhile, OpenText has built its own security management platform with Security Cloud, positioning the offering as an end-to-end cloud security solution for the large, distributed enterprise.
It’s important to remember that for both OpenText and Micro Focus, security is just one focus area amid a broad set of overall business offerings. While the security offerings of the two companies will certainly complement one another, the most significant corporate benefits may be the additive strengths the product and service solutions deliver. Micro Focus, for example, has significant product offerings in the COBOL space, suggesting that running applications in hybrid mainframe-cloud architectures could be easier with the combined products from the two organizations.
OpenText began life as a university-based project to bring the world’s most comprehensive dictionary to word-nerds around the globe. It has, since the mid-1990s, grown by acquisitions of ever-greater size and scope. While the Micro Focus purchase is OpenText’s largest deal yet, there’s no reason for customers or investors to believe it is the last.