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It is make or break time for Mercator. Once a leading vendor of enterprise application integration tools, the past four years have seen the company stumble financially and strategically. Now armed with a fresh suite of products and a brand new management team, the company must prove to investors and customers that it can regain its former glory.

Mercator's woes are the result of two key failings by the company's management team. First, and unlike more fleet-footed competitors such as WebMethods, it was slow to recognise emerging demand for tools that enable customers to integrate not only their own applications, but also connect them to the applications running at their key trading partners. Second, it failed to effectively integrate technology from its 1999 acquisitions of UK-based financial services integration specialist, Braid, and web application integrator, Novera – two companies that ended up being next to worthless for Mercator in the long-run, according to Neil Ward-Dutton, a research director for application integration at analyst company Ovum.

The process of acquiring, assimilating and then disposing of the excess assets of these companies increased Mercator's operating expenses by six-fold between 1998 and 2000, he says. As a result, the company has not been able to expand beyond its key strengths: the integration of discrete applications with the SAP enterprise resource planning (ERP) suite, and licensing its highly praised data integration technology to rival integration tools vendors such as CrossWorlds, Software AG, and Tibco.

A management overhaul came at the beginning of 2001, when the company's long-time CEO, Connie Galley, stepped aside to be replaced by Roy King, an ex-IBM Europe Integration services head. In March, David Linthicum, a respected figure in the integration industry, and formerly CTO of integration vendor SAGA, was appointed as Mercator's new CTO. New chief marketing and finance officers were also appointed.

Since then, the new team have attempted to address Mercator's earlier failings. In June 2001, the company announced that it was licensing Java-based process integration software from Versata, to integrate into its own integration broker. The resulting Business Process Management (BPM) product has catapulted Mercator into the modern integration market, which now focuses more on business-process-level integration rather than the 'low-level' integration of system components. Analysts comment that the launch of the BPM module (albeit using another company's technology) is a step forward for Mercator.

Other changes at Mercator include the re-alignment of the company along four industry groups: Financial Services, Healthcare, Manufacturing, Retail and Distribution, and Telecommunications, Energy and Utilities. Another key hurdle overcome was the creation of a centralised product marketing team, a unit that the old Mercator sorely lacked, according to CTO David Linthicum.

Nevertheless, some of Mercator's most recent customer wins suggest that the company is still only notching up significant contract wins in its historic areas of strength – which have transparently failed to engender significant sales growth at the company in recent years. In November 2001, for example, United Biscuits signed up Mercator to integrate its disparate warehouse management applications with its SAP R/3 ERP suite, and in January 2002, Japanese conglomerate Mitsui, chose Mercator to integrate around 100 of its affiliates and partners into its R/3 system. As a result, sales for the full financial year to 31 December 2001, are expected to reach around $127 million – around 8% down on 2000 revenues of $138 million.

Real growth and long-term success at Mercator will rely on new products that at least match the capabilities of its competitors – a challenge it has consistently failed to meet in many key areas. With this in mind, Linthicum says that the company is focusing more on web services technologies, with the first product to come out during 2002. However, it is still unclear how these technologies can be used in combination with Mercator's message broker technology.

In all, Mercator has begun down the road to rehabilitation with a competent product set that now includes business process software, as well as its products for both B2B and business-to-consumer web site integration. However, the company now has a very short time to execute and deliver on these strategies in a very tough market, before it is clear of all the dark clouds.