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Thursday, June 09, 2005

CA's acquisition of Niku (NIKU) - Good Deal

CA's acquisition of Niku is a great deal for both companies. I know a lot about this space (Project & Portfolio Management or IT Governance) from previous experience. This is a hot market need. Sarbanes is forcing pubcos to account and control for internal operations and finance. One area of internal expenditures which has become a large part of G&A for companies is IT. However, the rise of this organization has not been accompanied with standard management and control activities, which makes it very difficult to sign off on the internal auditing requirements now required by public companies. So, that's the bad news.
The good news is that companies are now trying to prioritize spending within IT and align it with business objectives. A lot of companies are trying to ensure that the money spent on IT delivers the intended objectives and moves the business forward. A very difficult task to do when IT people show up and spout gibberish about needing X dollars or the whole system will blow up. PPM systems allow for accountability in IT spending.
That's where Niku comes in. Niku provides a platform for PPM control by tracking spending and resulting delivery of business deliverables. Their platform also allows for a way to wholistically look at IT spending and prioritize spending on those activities which are strategically important -- you know, the whole "Important But Not Urgent" quadrant that we all pay lip service too.
So, how does this make sense to CA? Well, CA sells a lot of software management to large companies. Niku as a stand-alone company was too isolated. It was a good little yacht in an IT world that has a lot of aircraft carriers. CA is big enough to resolve the size issue.
The price? Well, it's pricey, but there is a lot of forward opportunity in this sector. Besides, they didn't pay nearly as much as Mercury Interactive did for Kintana.
The one caveat on this story is that I'm not sure that this makes for a tight integration with CA's other acquisition, Cornerstone. I don't think PPM's first integration is with network management; at least not yet. I don't think it will hurt, but I'd rather see Niku's technology develop deep integrations with other BPMs and/or ERP systems. This will provide linkages needed to provide the full dashboard for IT management and governance.


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