Software AG Buying In-Memory Management Supplier Terracotta

Software AG is buying Terracotta Inc., a young company that has helped pioneer in-memory management for Java systems. The deal is expected to be completed in the next week, Terracotta CEO Amit Pandey said in an interview.

No direct dollar figure was put on the agreement, but Darmstadt, Germany-based Software AG said it was in "the midrange of double-digit millions of euros." That reference could be translated into a figure that is somewhere near--probably below--the equivalent of $76 million. Pandey said the vagueness of the figure is typical of acquirers who refuse to disclose a purchase price, and it was "not being obfuscated because the price wasn't attractive to Terracotta," he said.

Terracotta is a venture-funded company that has gone through three rounds of funding, without disclosing the amounts. Investors in the third round in January 2008 included Accel Partners, Benchmark Capital, Goldman Sachs, and DAG Ventures.

Terracotta will be operated as an independent business unit inside Software AG, and Pandey said he will retain his title as Terracotta CEO.

Pandey said the market for in-memory systems has heated up over the last two years and Terracotta was ready to be acquired in order to play on a larger field. "We have a total of six sales people. Software AG has 1,000. We wanted to move our natural acceleration to the next level," he said.

The space that Terracotta and others have pioneered, pulling both a Java application and the data it uses into the pooled memories of a server cluster, fits the needs of big website applications that may face a need for rapid scale up. "The in-memory market is hot and it ends up being a bit of a land grab--who's got the people to put in front of customers. Even when we get leads, we don't have the time and people to follow up on them," Pandey added.

When both application modules and data are available in memory, they can perform up to 1,000 times faster than if they must be retrieved from disk, said Steve McGuire, VP of engineering at Software AG. The capability makes Software AG's application integration and messaging product line more broadly useful to large websites and other cluster users.

McQuire said Terracotta's Ehcache is a de facto standard for in-memory use by programmers of enterprise Java systems. In addition, Terracotta has broadened its reach by incorporating two open source communities into its operations and product line, the original Ehcache system and the Quartz application scheduling system. He estimated that there are more than a million Ehcache-using programmers and an equal number of Quartz users.

Terracotta's main commercial product, Ehcache Enterprise, converts Ehcache from a single server into a multiserver product, allowing a programmer's application to take advantage of pooled server memories to scale to meet demand.

In addition, McQuire cited Terracotta's ability to add a second product, Big Memory, to a Java application, which makes up to a terabyte of cache memory available for the application, application server, and related middleware. Java applications more typically are limited to 1 to 2 GBs of memory before their need to perform garbage collection becomes a constraint on their use of more memory.

Terracotta started out as a proprietary company in 2003 and switched to an open source model of offering its core product for free download, with enterprise editions and technical support offered at a price. The San Francisco company has 55 employees. It expanded its customer base by combining its core product with the widely used open source Ehcache, which it purchased in 2009.

Software AG spokesmen made it clear the Terracotta-supported open source communities were part of the attractiveness of the deal. The company "is committed to fully supporting Terracotta's open source communities in further developing this next-generation in-memory technology," CTO Wolfram Jost said in the announcement.

Software AG is the original supplier of the Adabas database system and Natural fourth generation language. It acquired WebMethods in 2007 and expanded into application integration and business process management. It will add Terracotta's in-memory management system to many of its existing products by the end of 2011 and use it also to launch a "cloud enablement" platform in 2012, said McGuire. "We'll fit all our code in cache. We'll put everything in memory," he predicted.

Pandey said the two companies have large banking and retail customers in common who had urged them to combine their product lines.

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