OpenText CEO: Micro Focus buy is an enterprise portfolio play

Climbing the software stack, new owner sees IBM and ServiceNow as rivals

Interview It is nearly three years since Micro Focus recorded a $1bn plus loss, owing to COVID-19 disruption and the fall-out from the $8.8bn acquisition of HP Software in 2017. None of this stopped content management and enterprise integration vendor OpenText from paying $6 billion for the company in August 2022.

Speaking to The Register during Canadian software company’s OpenText World conference last week, CEO Mark Barrenechea was upbeat.

“They had a very wide portfolio of cybersecurity, IT operations management, developer support and development operations, advanced technology with Idol and Vertica, and their heritage with COBOL and mainframe technology. We love the entire portfolio and we see this as an extension of information management. The $5.8 billion that we spent was roughly 2.2 times revenue, and that is one of our lowest multiples of any acquisition,” he said.

It's true that with the price tag came a smorgasbord of technologies which Micro Focus has acquired the UK company’s 47-year history. Founded in 1976, Micro Focus had become one of the nation's leading tech businesses, specializing initially in bringing COBOL to non-mainframe environments. It floated on the London Stock Exchange in 2005, spreading its tentacles into enterprise software management and application integration.

In 2009, Micro Focus acquired Borland, a developer of application lifecycle management tools, while in 2014, the company bought The Attachmate Group for $2.3 billion in shares. The latter move brought Novell, the once-dominant network operating system vendor and Linux distro hawker SUSE. In 2017, it announced plans to merge with Hewlett Packard Enterprise's much larger software business.

Bringing the two firms together will allow the combined company to compete with IBM, at least in addressing the enterprise software management and integration needs of the 10,000 largest companies in the world, according to Barrenechea.

“Despite its arguable woes, IBM is still a very large company,” Barrenechea said. “IBM is pretty fragmented across the business network [technology], content and other things. We're going to compete at this suite level. If you're looking for an integrated set of enterprise processes on a global basis, and you want information at the centre of what you're doing, then it's us.”

The merger does not come without a certain amount of pain though. In February, OpenText confirmed the acquisition’s official closure with plans to shed 8 percent of the combined workforce, equating to circa 2,000 people.

“From the perspective of an acquisitions of this scale, that's about less than 10 percent of our total expenditure in the company. It's sort of the low end, actually. We did that because we're investing in returning Micro Focus to organic growth, where we're taking the expenses out that are in redundant roles,” Barrenechea said.

OpenText's purchase of Micro Focus would follow a long-held philosophy to “integrate, rapidly innovate and invest” in targeted companies, he said. This meant creating one team of each of the engineering, sales, and marketing organisations, for example.

However, UK offices would stay open, he promised. These include Newbury and Thames Valley Park. “In addition to that, we do some great engineering in the UK, especially in application modernization and connectivity. We also do our global API development work here, our mid market, Business Network work and we have a great relationship with the University of Cambridge for algorithms,” he said.

At OpenText World, the company demo’d data integration across Salesforce, SAP and Google Workspaces. “We're going to accelerate their roadmap into private cloud and into public SaaS,”

He highlighted Micro Focus technologies, including Vertica, Voltage, and NetIQ, which would help the mission.

A stand-out product Barrenechea wanted to bring to the fore during the interview was IT operations management — in competition with workflow specialist ServiceNow.

In the context of multi-cloud environments, it could help IT organisations manage, secure, simplify their portfolio, he said. ®