Analyze This, Rationalize That!

Friday Dec 13th 2002 by Clint Boulton
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FEATURE: IBM may be beaming about its prospective purchase of Rational Software, but what do the other software players think?

When IBM recently moved to acquire Rational Software , it touched off a frenzy of speculation in the software industry.

While the deal had been pegged as all but a foregone conclusion for the last several years, the debate roiled among analysts and other software vendors, many of whom took different tacks in discussing the nuances of the deal. One true consensus that has yet to be challenged is that the deal is a fine play for Big Blue, who hadn't made such a hefty software-centric purchase since it nabbed Lotus Networks in 1995.

What the new purchase did was cause analysts to wonder how this affects the market for software tools. Rational offers integrated lifecycle tools in the requirements & analysis, visual modeling, testing, software configuration management, project management and process categories. Rational is the leading maker of modeling tools, which let developers collaborate on their programs before they build them, and competes head-to-head with Borland in infrastructure; however, both compete with tool initiatives from Microsoft's Developer's Network and the IBM-led Eclipse. Now IBM has bid to buy Rational, whom it has enjoyed a long-term relationship with, and wants to fold it into its software division as its fifth unit ostensibly filling a gap in the Eclipse framework.

IBM's impetus for the purchase was no doubt sparked by the tendency toward design-driven development, in which design models need to be synchronized with code changes so that they stay up to date. Developers or business analysts want the choice of working at either the code layer, or graphically through the design layer, depending on what is most appropriate for the task. Diagram changes need to become visible in the code immediately, and vice versa. Project managers want to see all the tools put together in the same package - modeling, coding, testing, performance management, version control, installation, bug tracking and documentation. Once they are bundled with the application server they can be integrated with other systems or published as Web services.

All of this is fine and dandy, right? Well, no, not exactly. The problem is: Rational enjoys partnerships with a number of software makers, including BEA , Oracle , Sun and Microsoft , for which it has XDE Professional v2002, an integrated development environment (IDE) tool for both .NET and J2EE. Rational also sells its Rose modeling tool alongside Microsoft's Visual Studio tools. IBM competes with the former three on many levels.

Forrester Analyst Ted Schadler said he has questions about how the other systems vendors will maintain "developer mindshare" now that Rational appears about to become part of IBM.

"Microsoft's value to IBM is clear, but you have to ask how the Sun's Oracle's and BEA's will maintain developer mindshare," Schadler said. "Rational's value to IBM is high. We've been [stressing] integration for years. The developer and runtime environments have to come together -- you can't develop an application in isolation and just throw it over the wall. In a multi-tiered application environment, you need to have a good relationship between the developer tools and the middleware."

While IBM shares strong partnerships and ideologies with Microsoft in the Web services realm (IBM runs Windows on its WebSphere platforms), some analysts wonder whether Microsoft will be keen on the idea that IBM will be able to make Eclipse that much more influential for developers.

Jason Bloomberg, senior analyst of XML and Web services research firm ZapThink, doesn't see Microsoft making a big deal about the issue, noting that IBM and Microsoft support each other in many ways.

"IBM will clearly take full advantage of XDE for WebSphere, while XDE for .NET's future is somewhat up in the air," Bloomberg said. "My prediction is that IBM will continue to fully support it -- after all, many IBM customers also have .NET, and IBM is committed to interoperability in heterogeneous environments."

Folks at Sun Microsystems seem to think Microsoft might be a little on edge, however. Mark Herring, senior director of Sun's Java, Web Services & Tools Business, said although the deal is par for the course in the software industry, Microsoft might not take to kindly to IBM's reach.

"If there are any losers in this, I would think it would be the .NET developers," Herring said. "I can't see IBM allowing Rational to continue to focus on MSFT technologies. I can see the .NET developer saying, 'Oh no, what am I going to do?'"

As it stands, Herring conceded Sun, fresh from its own legal skirmishes with the Redmond, Wash. software giant, is a spectator in this one. Herring noted that Rational "isn't abandoning the Java developer" and said if Microsoft had acquired Rational it might be a different story.

Uh oh.

Microsoft declined to comment for this story, but reports have burbled out of some outlets, such as Reuters, which said Microsoft is contemplating its own bid for Rational to stymie IBM. If that fails, the report said, Microsoft might then go after Borland to counter IBM. The former route could tender some nasty legal battles between Big Redmond and Big Blue.

So how have other software players taken to the would-be blockbuster deal? Find out more on Page 2

The Others
Maybe this is all speculation, fodder for water cooler talk. But how have other software players taken to the would-be blockbuster deal?

One of the few remaining standalone software tools vendors is Borland, which purchased rival TogetherSoft in October. Borland, in fact, would love being the only standalone tool developer left, partly because they feel they are unique and partly because they are confident they can compete.

"For Borland customers, the choice is clearer than ever: best-of-breed, stack independent, cross-platform, standards-compliant products with superior user experience and ROI versus an "all things IBM" alternative and all that this stands for," said a Borland spokesperson. "One example of how the "new" Rational will behave as part of IBM, is that Rational has officially decided not to continue to support a Borland/Rational bundle. Borland is the only company the customer can depend on to support all choices - IBM, Sun, Microsoft, Apple."

John Abbott, managing analyst of research firm The451 agreed with Borland's sentiments.

"I think Borland's position is interesting. It agreed to acquire TogetherSoft at the end of October, so it has the same basic idea as IBM - integrating higher-level modeling and analysis tools into its language-based IDEs. Borland now claims it's the only significant independent vendor of tools - as opposed to the systems vendors who, in Borland's words are "highly biased toward their own infrastructures. Until now, Rational has made a point of not competing in the IDE space, but instead has tried to embed its tools within other IDEs as seamlessly as possible. Now IBM will have the advantage over any of the others. It made a point of saying how it would be closely embedding the Rational tools with its WebSphere application server and other middleware."

Abbott continued: "Borland has its own application server, but can't compete with IBM and Rational on the breadth of middleware and software development life cycle management. What it might do is partner more closely with BEA in reaction. BEA, which also has a partnership with Rational, is likely to lose out if Rational is integrated more closely with WebSphere. It's already done some close integration work with TogetherSoft, so it's likely to start pushing that as an alternative for WebLogic app server users. That's good news for Borland."

Zapthink's Bloomberg has a different perspective: "I've seen other analysts predict that BEA will buy them. Well, that's possible, but I don't see that being in character for BEA -- their acquisitions have typically been to augment their core WebLogic platform, rather than to spread out their product line into new areas. And everybody would accuse them of copying IBM, where they want to be recognized as leading, while IBM does the following."

Bloomberg continued: "Instead, the folks at Borland are probably arguing over whether the Rational division of IBM will be a tougher competitor than an independent Rational -- and that argument could go either way. IBM shops will be happy about the acquisition, and thus will be harder for Borland to penetrate. However, non-IBM shops, whether they be smaller companies, Microsoft shops, or companies that have avoided IBM for some other reason, might be less likely to go with the new Rational than the old. The deciding factor will probably be what IBM decides to do with the product line."

As for the others, Bloomberg said there are many competitors who offer products that the BEAs and Oracles of the world can take advantage of if they don't want to work with IBM.

Abbott differs on this score. He thinks Oracle might see IBM's move as something of a threat and concurred that the buy could lead to a dicey situation between Microsoft and IBM: "Microsoft's likely to stick with Rational in the short term, because of the work it's done with Rational on .NET. But in the longer term the two are likely to drift apart if IBM pushes the Java/WebSphere combination."

BEA, who has seen its name added to the mix of potential Borland acquirers, refused comment on the topic, but Oracle was cool as a cucumber, if not a little snarky.

John Magee, vice president of Oracle 9i application server marketing, said he didn't think it was "rational for IBM to pay what it did for Rational [Software]." Acerbic wit aside, Magee said Oracle isn't breaking a sweat.

"At the big level, this is just more online consolidation in the software industry," Magee said. "It's tough to make a viable business out of tools standalone with Microsoft and IBM as the main players, so it was inevitable. From our perspective our Oracle 9i JDeveloper already includes functionality and modeling, so it's not a big impact on us. Oracle's strategy is to deliver these tools in an integrated solution. This deal means Rational adds 12 or so products to the 70 products IBM already has and it's up to users to pick which ones they want. We think this is a flawed approach."

Magee argued all the different code bases hurts productivity. JDeveloper, he said, integrates UML modeling, profiling, Web services, to make them all work together.

How will this play out if IBM succeeds in its acquisition bid? Giga Information Group said it believes the deal will challenge the ability for independent tool makers to remain viable because major systems vendors are embracing integrated software tool lifecycles. While the Borland's and Oracle's should be safe for now, Giga warns that if they don't move toward better product integration they will lose market share.

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