The Ovum View: IBM-Rational - a threat to the industry?

Most industry watchers know IBM is ending the year with a multibillion dollar acquisition of a software company. Fewer know what to make of the move. Ovum analyst Bola Rotibi explains what the deal will mean...

News of IBM's acquisition of Rational ricocheted around the software industry earlier this month. Now the dust has settled it is clear that even though the participants may have come as a surprise, the move is logical and on the surface good for both parties.

Looking at IBM's portfolio of tools we can clearly see two key components are missing - design and testing. For most, partnership would solve this problem and this option has been good enough for IBM up until recently.

However, the acquisition tells us two things about the future of the industry. First, that the development platform is crucial. Many organisations who manage development have come to realise that it is less about the 'killer application' and more about the 'killer development environment'.

Second, that while 'best of breed' may be a flexibility choice, the reality is that the 'one-stop-shop' is a more compelling hook with which to acquire and retain customers.

IBM could have made deals with any number of companies who would have provided this capability separately but the Rational deal kills many birds with a single stone.

Rational offers a reasonably good fit for IBM - both are enterprise players and in many instances they share the same customer base. While Rational's flagship modelling environment, Rose, is a standalone product that runs in its own integrated development environment (IDE), the company's next generation modelling tool XDE is based on IBM's Eclipse open tools integration framework. So XDE plugs directly into the IBM WebSphere tool products so it operates within IBM's IDE, offering a single platform for design and code construction.

Coupled with Rational's well-integrated portfolio of testing, configuration management and analysis facilities IBM will get the integrated one-stop shop it desires. But this requires more focus than the bonds of partnership permit.

It is clear Rational may have become too strategic a company to be left to its own devices, especially if those devices lead it directly into the Microsoft camp. Rational and Microsoft have strong historical links with the former having provided the code for Microsoft's early visual modelling tool.

While IBM and Microsoft are capable of working well together (both driving the core web services specifications), a scenario with Rational's product portfolio under the Microsoft banner with IBM playing second fiddle would have been too much for Big Blue to bear.

Clearly the acquisition presents a more strategic move for IBM and in many ways Rational is a better fit than for the guys from the Redmond campus. For instance, take Rational's recent acquisition of NeuVis with its technology to automate and make easy the complex J2EE development process. Such a capability - one that can only serve to drive J2EE adoption - doesn't really sit well with Microsoft's current plans.

Many will see this acquisition as a counter to Borland's recent buy of TogetherSoft. However, the IBM-Rational deal should not trouble Borland as its tools are in as many places as Rational's and in many cases possess closer associations with Rational than IBM.

Granted, it will be a fight to see if each camp can replace the other with their respective integrated platforms. However, Borland, one of the last remaining independent tools providers and darling of the Java development community, faces bigger trouble from Eclipse as the open tools integration platform. The growing popularity of Eclipse and the value proposition it offers will force Borland to consider its own future platform strategy. Ultimately it may be an acquisition that will save the company's own tool brands.

The IBM and Rational deal is a more direct threat to Compuware. Compuware plays in many of the same markets and has a model driven development environment, OptimalJ, that simplifies the J2EE development.

To Compuware's advantage, OptimalJ is a solid, robust and well put together product that has a sound architecture for the use of patterns and a clear strategy for process management. Where it suffers is in OptimalJ's low exposure in the development arena.

Rational on the other hand will benefit from IBM's own Pattern technology and will have advantageous access to IBM's own customers and its global services division.

Rational will join the long line of other major IBM acquisitions - Crossworlds, Lotus, Tivoli - all of which operate as distinct components within the greater IBM structure.

While the Rational brand will be maintained along with its tools, it is still too early to obtain any details on price changes. But if past experiences are anything to go by, the opportunity for more flexible deals featuring a combination of tools from the increased product portfolio that covers design, analysis, embedded and real time facilities can only be expected and welcomed.

For more information email info@ovum.com or visit www.ovum.com/research