Rational
Exuberance: IBM’s
Expanding SW Portfolio
IBM
has been on a spending spree in the software market, adding depth
and breadth to its middleware portfolio. It’s a great time
for a company with deep pockets to add additional products at very
attractive prices, as a tough IT market and a tougher venture
capital community have made normal mid-life funding prospects for
many software companies glum.
IBM’s software kingpin, senior vice president and group executive,
Software Group, Steve Mills, has added many pieces to the IBM game
plan, ranging from pure middleware plays like Crossworlds (process
integration) and Holosofx (business process modeling and monitoring
tools) to database vendor Informix, Tarian Software (electronic
records
management), Trellisoft (storage resources management software), and
Access360 (identity management).
The latest acquisition rings a louder bell – it’s bigger and
it’s already successful and well known.
Rational Software is a very well respected source for software
development tools.
It provides open, industry standard tools, best practices and
services
for developing business applications, software products and systems,
including embedded software for devices such as cell phones and
medical
systems. The acquisition will permit IBM to provide a complete
software
development environment for companies that want to integrate their
business processes and software infrastructure across their
companies,
with suppliers, customers and employees. This requires the
integration
of data management, systems management, collaboration, transaction
and business process integration middleware and software
development. The acquisition of Rational will strengthen IBM’s
leadership in each of
these segments, including software development, and reinforces IBM's
commitment to open industry standards.
IBM will spend $2.1 billion in cash to acquire Rational.
While rumors have floated in the wake of the announcement that
Microsoft
might try to buy Rational itself with a competing bid –- or
perhaps buy
toolmaker Borland, Rational has long had close ties to IBM (more
than
twenty years) and its software is very well-suited to the enterprise
environment that IBM is noted for serving. Borland may indeed
be for
sale – and Microsoft may indeed make that – or other –
acquisitions, but
we’d doubt that they will enter into this one.
In announcing the IBM acquisition of Rational, IBM noted that 98 of
the
Fortune 100 (the Big Company playground that IBM considers its best
customers) use Rational. Those 98, by the way, include IBM.
The
software application development market is growing fast and IBM
figures
that Rational will provide complementary function and additional
opportunities for growth, with a focus on supporting e-business on
demand.
Rational brings customers in 89 countries. More than 600,000
software
developers use its tools.
Rational will become a new division of the IBM Software Group, as a
fifth brand, joining WebSphere, Lotus, Tivoli and DB2. Mike
Devlin of
Rationale will become the general manager of the new division,
reporting
to Steve Mills. Rational software will be sold worldwide by
the Rational sales force, integrated into the IBM sales force.
Rational products will be integrated with IBM software products and
investment in Rational technologies will continue.
IBM will leverage its own products into the Rational customer set,
especially in strong Rational markets such as the federal
government,
process manufacturing, engineering, and aerospace. It will
also sell
Rational more broadly into the international market.
The deal is expected to close in the first quarter of 2003.
Yet to be determined is the possible effect on future revenue and
industry relationships of Rational’s becoming an IBM division.
Many of
IBM’s competitors depended on Rational for software tools, notably
Microsoft for its .NET strategy. IBM and Rational, of course,
intend to
continue to support the .NET platform, but one wonders if, in the
mid-range to longer time period some of these competitors may seek
other partners. Of course, they might find themselves
hard-pressed to replace so desirable a supplier.
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