SteelTrace a Likely Acquisition Target?

It’s not always easy to guess which companies might be bought and which will soldier on independently, but my current top pick as a likely takeover candidate is SteelTrace.

The company launched version 4.0 of its requirements capture and project definition tool yesterday, but the real news was just how well it seems to be doing. It said that it saw a 50% quarter on quarter jump in sales, and is seeing its average deal size steadily growing too – while sales were up 50% quarter on quarter, the number of projects were up just 25%.

SteelTrace has an attractive customer base to boot: key clients include ADP, Boeing, GE, Intel, LogicaCMG, National Australia Bank, Raytheon and Sprint.

All of the companies that SteelTrace integrates with could be suitors – and they are Compuware, Borland, IBM and Mercury Interactive. The most likely of those I believe to be Borland, as former CEO there Dale Fuller told me that requirements capture was high on its wish-list, and acquisitions are still very much part of the strategy.

Compuware may also look at the company, as there is integration already between SteelTrace and Compuware’s OptimalJ and QACenter products. That said, SteelTrace also has integrations with Borland, Mercury Interactive and IBM Rational.

Mercury Interactive, though currently facing a few issues of its own (a stock options scandal that saw its top three executives shown the door, but that’s another story) is a potential suitor as it has bundles of cash in the bank and told me only last week that acquisitions remain on the agenda.

Having said all of that, a company without pre-built integration into SteelTrace could buy the company and build one. In that scenario, I would suggest Telelogic is the most likely to swoop. Telelogic’s going great guns, with particular expertise in modeling, especially enterprise architecture modeling thanks to its acquisition of Popkin. But I digress.

SteelTrace is firmly in the requirements management space, which is just one subset of what we now call the application development lifecycle, a discipline increasingly served by full application lifecycle management (ALM) suites. Since companies in ALM like Telelogic, Borland, CA, Compuware, IBM, Oracle, Microsoft and BEA have all been acquiring in order to flesh out their suites, it’s debatable how long a company in what has become a niche can remain independent.

But for the time being it is business as usual, and yesterday SteelTrace said that version 4.0 of its requirements capture and project definition tool brings “unprecedented project requirements capture and management capability to all IT project stakeholders”.

The latest version is said to feature full baseline support with merge-forward and merge-back capability, advanced data querying and filtering of SteelTrace Projects, automatic generation of suspect links and change notification via email for review cycles.

The company said it is, “well placed to continue its rapid expansion, focusing on delivering business and IT alignment for companies around the world”. It is venture capital funded, with investors including Trinity Venture Capital and netdecisions.

SteelTrace’s proposition is that its software can help to capture the business requirements of a particular project, and enable constant collaboration between the business and IT throughout the project. It also automates documentation and test case generation, and taken together this is said to make it more likely for the project to be successful.

Bernadette Cullinan, SteelTrace CEO, said: “It is vital for all managers to ensure that IT investment is aligned with corporate goals and that it delivers real value. SteelTrace boosts the potential of corporate IT spend, reducing risk and improving project success rates.”

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