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Cloud Software Group explained, with TIBCO and Citrix still very much in enterprise line of sight

Martin Banks Profile picture for user mbanks June 15, 2023
Summary:
After well over a year of breath-holding and speculation, the Cloud Software Group and its two main components, TIBCO and Citrix, is now out in the open, and those that expected major transformations may be (pleasantly) disappointed.

Cloud

The Cloud Software Group broke cover last week at a select gathering of TIBCO customers in Munich. For those not up to speed, the Group is now the holding company of two major enterprise tech names  – TIBCO and Citrix. 

Each has spent the last few years held by different equity management companies - TIBCO by Vista,  Citrix by Evergreen. Last year however the pair came together with the objective of building a new conglomerate to hold both vendors.

This led to a fair degree of speculation that the two businesses would be merged, welded together in some way to create a potentially compelling soup-to-nuts, one-stop-shop that could hit the sweet spot of providing 80% of the needs of 80%  of the world’s biggest enterprise users. 

Though it was a story that would have written itself, the vendors involved remained staunchly reluctant to confirm the suggestions. And now I can see why – it was a significant distance from the truth, and that truth may prove to be something of an eye-opener to both the vendor and customer communities.

I was not least at speculating, though I would venture to suggest I was nearer the final outcome than some.

What’s the skinny?

The Munich gathering was TIBCO Next, a conference targeting some 150 senior execs from European customers. That event model – very different from the n-thousand attendee events the user community has got used to - is itself part of the wider story of the Group’s new direction. The crucial presentation came from Hector Lima, in charge of all field and Channel Sales for the combined Cloud Software Group.

So what is Cloud Software Group? While being a conglomerate, the parent company of both TIBCO and Citrix, it's more than that. Many of the major product groups within those two – such as TIBCO’s Spotfire and NetScaler from Citrix, are now developed into distinct business units, of which there are now eight in total. Lima explained: 

They are really semi-independent businesses within this parent Cloud Software Group. Each has their own General Manager, their own product management, engineering, support, and product marketing. So the entire silo of these products exist within their business. They also own the P&L across the business unit. In addition, there are now cross-functional teams that cut horizontally across all of the business units.

To deal with the equally important question of what the Group is not, it is not a vehicle to join TIBCO and Citrix together at a technology level. Lima indicated they had spent many hours looking at where that might be sensible and, bottom line, drew a blank: 

In fact, the common thread across what we do is not in the technology, but actually in the markets that we serve. Both companies deliver mission critical workloads to some of the biggest and most important companies in the world. And that is really where we meet, at the customer. From a technology standpoint, we're not going to force it. If there's something there that makes sense where we can have some adjacencies with our technologies, we'll do it. But I'm here to tell you we're not here trying to force technology together.

There is one important difference about the Group that is worth noting, and it marks a significant shift in direction from just about every other IT vendor in the known universe. The normal goal is to launch a drive for more marketshare, either by organic growth from new customers coming along (though I very much doubt they will be shown the door if they do), or by the common tactic of buying marketshare through acquisitions (though some acquisitions are quite likely to be made).

Instead the goal is to grow through doing the best possible job for its existing customers, and this is where a measure of the expectation of some join between TIBCO and Citrix can be seen. Both companies have long and deep relationships with most of the largest global enterprises going. It is an area where that current marketing tactic of referring to customers as 'partners' has a genuine meaning.

In addition, these are customers that have long track records themselves, and a good chance of continued life well into the future. With each side, common customers and the two vendors, the level of mutual embeddedness can equal continued growth for both. Lima said: 

What I've seen over the last six to nine months is a great increase in our customer base, specifically within our typical business unit, of increased unlimited deployment and unlimited platform licences.

It has to be said that, in a world of increasing instability there are many opportunities for this approach to lead to a stumble and fall. But if the risks are less then the stumbles may be smaller, and more manageable than may be the case of a large, but maybe over-leveraged, vendor. 

TIBCO was acquired for $4.3 billion and taken private some nine years ago, while Citrix was taken private last year, for $16.5 billion. This gives Cloud Software Group a mid-$20 billion start-point, with an established customer base well-committed to continued relations with the two main protagonists. So the prospect of continued, steady, if unspectacular growth, and without the predictable fear, loathing, angst, cost and time wasted in protracted attempts at welding two incompatible, but reasonably complementary companies together as the next 'savior’ of the IT industry and user community, should be achievable.

The other aspect of note is that the plan calls for all customers to switch to a subscription payment model. There could still be some resistance to this from some well-established customers but seems an inevitable move that should be made. It is, in addition, a move with some irony for TIBCO, which was to some extent fell into the arms of Vista Equity Partners after its shares were bombed on the US stock market by stock analysts with little or no knowledge of subscription-based 'annuity’ business models.  

DIY roadmap building

What Lima expects to see in terms of customer benefits will come from a growth in targeted innovation that comes from a much closer connection between the customers and the technology through the Group. As he told the delegates at the TIBCO conference they, quite literally, now own the Group’s development roadmap:

By focusing on those existing customers, it puts the power in your hands, what the roadmap looks like, what the requests for enhancements look like and, candidly, maybe even the M&A activity that we do. Some of the targets that we may go after will be all in your hands.

This will be backed up by what he called an integrated support experience. The intention of focussing on existing customers means the marketing Dollars spent on finding new ones can be re-directed out of events such as huge, globally directed annual conferences and reinvested into engineering and support. Events will still occur, but they will be much smaller and more targeted, according to Lima: 

The reason is to make sure that we had the escalation engineers as close as possible to the folks that actually pulled the product. So that gives you a quicker speed of return in terms of issue resolution and root cause analysis.

Last but not least, the group is also extending and enriching its partnership with the major public cloud service providers – an extension of its relationship with AWS being just the latest step in providing customers with what Lima expects to be a rich ecosystem of services and support:

We talk about meeting you where you are and being able to move workloads across all of our portfolio. Well, this is only possible by extending our alliances in the ecosystem, without those partnerships that integration would not be possible.

My take

This is an 'only-time-will-tell’ point in the history of two long-standing names from the IT vendor community. It might be seen as an act of timidity, avoiding opportunities to leap forward and challenge new markets in new ways. It can also be seen as an act of acceptance that the Group could spend $billions on R&D, new engineering and hype generation and still not move forward. The pair are broadly complementary in a marketplace that is steady, slow even, but big and bound to get bigger. And both are already major, accepted contributors to that continuing to happen. 

In some ways it is going to be one hell of an experiment, but on the other hand the risks seem definable, understandable, and I speculate that the Group already has the experience to make it work. 

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