Venture capital investors sell their shares of AlterPoint to Versata, and AlterPoint executives say the move will help it further develop technology, sell products and cater to customer needs during tough economic times.
The terms of the deal remain undisclosed, but the transaction involved three existing venture capital investors selling their shares of AlterPoint to Versata. AlterPoint had been seeking further investment from Austin Ventures, JK&B Capital and Palomar Ventures when the opportunity to partner with Versata emerged, says Scott Harmon, AlterPoint CEO.
"We were looking to put more cash into AlterPoint in the next year or two, and the venture capitalists preferred to sell their shares to another investor that could put more into our company," Harmon explains. "This economy could be tough for a year or more longer, and the Versata strategy just made more sense for us as a business."
As part of Versata, AlterPoint will operate as a stand-alone entity with a dedicated customer service and product team. Versata will oversee AlterPoint's teams, but Harmon expects to experience business as usual at his company. He also sees the opportunity for greater integration with companies such as compliance management vendor Ecora, which was also acquired by Versata in September 2008.
"We see some synergies with Ecora and expect to be able to leverage Versata's large offshoring organization to further product development. The company is very advanced in that area, and it is a new area for us so we will try to develop our product more with the offshore model," Harmon says.
The share sell-out doesn't shock industry watchers, who say venture investors tend to put their cash in small upstarts or larger established players. AlterPoint falls in the middle and could benefit from the stable investment strategy, says Jim Frey, senior analyst at Enterprise Management Associates.
"I don't see this acquisition as making a huge difference for AlterPoint. It wasn't a fire-sale situation," Frey says. "If I were in AlterPoint's shoes, it might seem better to deal with one investor rather than three in this economy."
AlterPoint was among a handful of vendors that tackled network change and configuration management. While AlterPoint will continue on its own, others have gone the route of acquisition to become part of larger management suites. For instance, EMC acquired Voyence in 2007, and BMC also that year acquired Emprisa Networks. HP in its 2007 acquisition of Opsware picked up Rendition Networks, which provided the technology for Opsware's Network Automation System. And Intelliden acquired Gold Wire Technology in 2004.
Despite the obvious churn, management vendors in general saw positive results in the fourth quarter of 2008, Frey says, and he expects to see the market for management software remain flat or grow slightly in the current quarter.
"There is more good news than bad news out there for management vendors right now," he says. "Compliance doesn't stop or go away; that is a stay-of-out-of-jail issue and many people are spending on these types of products that can deliver a quick ROI, help them stay compliant and invest less in capital expenditures."
AlterPoint's Harmon says he is seeing the slowdown in investment across customers, but still finds in many cases that management projects are among the handful getting approval.
"Customers are slowing down with the procurement cycles and sorting through what they really need to buy among their top priorities," Harmon says. "We focus on the markets that are a top priority for the coming year."