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A Merger That Makes Sense

Overshadowed by Monday's ginormous $41 billion merger of pharmaceutical companies Merck and Schering-Plough, two companies in the small and often overlooked field of complex event processing (CEP) software announced that they have joined forces with the twin goals of expanding the reach and increasing the speed of innovation of real-time event processing technology.

Niche CEP vendors Aleri and Coral8 said they will create a new company -- called Aleri -- that will offer the combined product set of both companies. Aleri has a high-end CEP engine geared toward the capital markets, while Coral8 has a low-cost, developer-friendly, and downloadable product that can be used by several industries. Aleri CEO Don DeLoach will head the combined company, while Coral8 CEO Terry Cunningham will become chairman of Aleri's board. The companies did not disclose financial terms of the deal.

CEP is an emerging software technology that enables applications to monitor multiple streams of event data, analyze them in terms of key performance indicators that are expressed as event rules, and act upon opportunities and threats in real time. For example, an on-board automobile navigation system might employ a CEP application to monitor real-time event feeds of traffic flows, accidents, and weather, constantly analyzing and looking for conditions that provoke specific actions, such as proposing an alternate route.

Aleri CEO DeLoach told InformationWeek that the new company won't immediately raise prices on the Coral8 CEP engine, which is $20,000 per core, compared with about $30,000 for Aleri's. After next year when the two codebases are merged with forward compatibility, he said it's likely that Aleri will offer several levels of packaging, ranging from low end to ultra-high end, "with the aim of supplying the right solution for the right use at the right price."

John Morrell, former VP of marketing at Coral8 who will have the same position with Aleri, elaborated. "We expect to merge the two CEP engines into a unified product set and offer developers a choice of development/authoring environments -- a developer-oriented studio, heavy on language-level programming tools and utilities, and a visual data flow studio, focused on rapid visual modeling and development."

DeLoach said that Aleri/Coral8 has two new planned offerings that ought to be especially useful to the financial sector during the economic crisis. One is for liquidity risk management (LRM) that will help banks meet the dramatic increase in regulatory requirements regarding liquidity stress testing and more robust and frequent liquidity risk monitoring. The second is an application framework that will provide real-time, multidimensional views of settlement risk, limit control, counterparty risk, and especially risk concentration analysis. The first LRM module has already been announced but the second framework is still on the drawing boards, DeLoach said.

Aleri and Coral8 are among a handful of pure-play CEP vendors such Progress Apama, StreamBase, and Kx Systems, many of whom first made names for themselves in the financial industry but are now trying to provide solutions to companies outside of capital markets. Much of the technology isn't yet mature, and major software vendors such as Tibco, IBM (which recently acquired InfoDyne and AptSoft), and Oracle (through its purchase of BEA) are beefing up their CEP offerings through in-house development and acquisitions.

Although he believes the Aleri/Coral8 merger makes sense, Adam Honoré, a senior analyst at Aite Group who specializes in brokerage and financial services technology, said that he didn't believe the merger was about trying to make the combined companies into the clear CEP market leader. "I think it's much more about making sure the stone is in the sling when the Goliaths come to market," Honoré said.

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