IBMs Rational Move Paying Off
IBMs Rational Move Paying Off
Mike Devlin, general manager of IBMs Rational division, will be top dog at the Rational Software Development User Conference this week in Dallas. When IBM finalized its $2.1 billion acquisition of Rational Corp. in February 2003, Devlin traded his CEO position for that of general manager of IBM Rational. Devlin talked with eWEEK Senior Writer Darryl K. Taft about competition, Rationals role in IBM and trends in the business of delivering software development tools.
What do you think of the Microsoft Visual Studio Team System announcement, with Microsoft [Corp.] now covering more facets of the software development lifecycle?
Microsofts planned entry into the enterprise lifecycle tooling space really validates what weve been doing for more than a decadeimproving the speed and quality of software development through industry-proven best practices, and automating that with tooling.
Do you think it will have an impact in the industry?
It will likely introduce lifecycle tooling to some smaller Microsoft-centric development teams who may not have had the resources to invest in tooling before, or who have worked mostly on smaller projects that havent necessarily required a more disciplined approach. We view this exposure as a good thing, as it potentially broadens the market we serve.
Do you expect it to impact Rational at all?
Most companies are heterogeneous in that they develop software using a mix to platforms and technologies, including both .Net and J2EE [Java 2 Enterprise Edition]. IBM Rational will continue to provide development solutions that span our customers platform and technology choices, and that really differentiates us from Microsoft. In fact, were really one of the few, if not the only company in a position to do that and do it well. Of course we fully intend to provide a very compelling development platform using our own Eclipsed-based technologies, but well continue to work with Microsoft to ensure that our solution supports the Microsoft platform and the needs of our customers.
Whats Rationals role in IBM now? How do you identify yourself?
Rational is the brand thats driving the overall software development strategy, which makes sense given thats our background. And what weve defined across IBM in total, and particularly across the Software Group, is something we call the Software Development Platform and we had an event last December to introduce our strategy there. Basically it integrates all of our various tools, basic WebSphere Studio, Eclipse technology; those groups have been moved into Rational and are part of our team now. Lee Nackman, who is the leader of developing the WebSphere Studio tool, is the Rational CTO and is heading up the development of our practitioner desktop tools and that includes modeling and testing and the core Java IDE and J2EE support. And, talking more broadly than that, it includes WBI, the WebSphere Business Integrator, as well as integrating with the various database tools from the DB2 team and so forth.
The way to think of it is the total IBM play is this complete end-to-end lifecycle solution that is integrated both within the tools themselves but also of course to the underlying runtime environments such as WebSphere and DB2, and to the systems management environment. In fact, were doing a bunch of cool stuff with the Tivoli guys, integrating a lot of what were doing in terms of testing, so that we can really be integrated into operational deployment. So for example if you find a problem you can monitor it using the Tivoli monitoring capabilities to detect problems with the operational system, get information back to the developer round trip and get it back out. Then you could update the operating system and monitor performance. So theres a lot of cool stuff going on on the Tivoli side, the business integration side, and with the core runtimes of DB2 and WebSphere.
Were continuing the Software Development Platform as an open platform on several dimensions. Open in the sense that we support multiple environments, not just IBM. So that includes [Microsoft] Visual Studio and Microsoft .Net of course, but also [BEAs] WebLogic, other alternative databases and so forth. But even more deeply, the way were making it open is that its all based on this core Eclipse infrastructure, which is a totally open-source environment. So Eclipse provides the basic common components, the user interface, the framework for tying everything together, and most importantly the underlying meta-model facility so that we can provide very deep integration between tools and to the runtime platform. And we have hundreds of ISVs and partners that are building other tools. So thats pretty exciting.
And the reaction from customers has been incredibly positive, both around the completeness of the solution and the open approach where were supporting all the open standards and the open-source capabilities means, particularly for our large, more technical customers, like Cisco and Ericsson, where they have very specific needs, they can go in and add those capabilities into the Eclipse environment and fully integrate them with all of our tools. That whole Software Development Platform is the message were really driving this year, and all of our tools offerings will be put in that context.
Next Page: Heard through the Grapevine.
So whats to be shown at the conference in Grapevine? What signal are you hoping to send?
The core message is on the Software Development Platform and fleshing out more meat on that. So well specifically be showing new product capabilities across the different modeling and testing areas and so forth. And well also be showing what were doing with partners and some customer successes.
How is the effort to "Eclipsize" all of Rationals products?
Even before the acquisition we were on that path and most of our tools are already there. All of our modeling and pretty much all of our testing products are in the Eclipse environment now. And we are leveraging that to get the last of our products in there and also use the EMF [Eclipse Modeling Framework] to integrate those tools deeply. The EMF allows deep semantic integration. So in our current tools we do requirements management, modeling, testing, etc. Theres a notion in requirements management for requirements, theres a notion in modeling for use cases, theres a notion in testing for test cases, and those are very related items and our tools provide integration among them. In the new generation of the Software Development Platform with the common EMF, they actually share a common meta-model so its not like theyre separate things. One type of requirement is one thats defined in terms of a use case, and so from all these different perspectives youre looking at the same underlying meta-model. So we arent passing data between tools, we dont have the consistency issues and so forth; its a common meta-model across all of our tools.
So "Eclipsizing" is a much bigger thing than what it sounds like. Were not just moving our tools into the Eclipse framework and adopting the user interface and so forth. In some sense were really evolving the whole next-generation wave of doing development, because we can get the integration that the industry has been striving for for many, many years. Now we can really achieve that. And its something Rational by itself quite frankly could never have done. But the combination of Rational and IBM, given our strength in the development market, allowed us to do this.
So the status?
We have products shipping, and we are introducing more complete versions of the tools that achieve the deeper semantic integration. Our modeling tools are integrated into Eclipse, but we havent fully implemented all of the meta-model integration. Well lay out the roadmap for that.
How does Rational play into IBMs effort to approach software sales according to vertical markets?
There are several dimensions there. First of all, our products themselves have attributes that apply in specific markets. For example our real-time testing tools are things that apply more in the embedded and real-time industry sector, with things like the industrial markets such as telecommunications equipment companies and aerospace companies. We have some industry-specific features in our product line.
And the good news is many of our products are common across industries, so there were working with the various IBM industry sectors. So we integrate our products to some of the other products out there that appeal to various industry sectors.
In the field organization our Rational sales force is part of the software development specialty, where there are different specialties in the field organization. But the main thing is working closely with the different IBM industrial sectors and with the efforts in Software Group, particularly around business integration.
Next Page: How Rational plays into IBMs on-demand strategy.
Also, how does Rational play into IBMs on-demand strategy?
Perfect. The key thing there is that software development is a core part of being on demand. The on-demand message is all about agility, the ability of a business to react to changes in the environment, either regulatory changes, or changes in the competitive environment or marketplace. That requires a development environment that allows you to react quickly. So it starts with our best practices, things like the Rational Unified Process, so all of our best practices map into the on-demand best practices. Weve always said you want to build a resilient architecture thats flexible in the face of changes. And that maps directly into the on-demand technology in that you want enterprise architectures and application architectures that are resilient in the face of changing environments.
So both our best practices and our tools are mapped into the on-demand environment. We show up in whats called the on-demand operating environment, which is the underlying technology infrastructure for building an on-demand technology enterprise. So thats been a core part of our marketing message.
Steve Mills [IBMs senior vice president and head of the IBM Software Group] has been quoted as saying that Rational has been the best software acquisition IBM has made in terms of integration. He also says youve exceeded IBM objectives. Why do you think he says this?
The best case is financial results. Even going back to a year ago December after we announced the acquisition on Dec. 6 , I think it was. And we were very concerned that that would cause a disruption with the December quarter a year ago. It didnt. We in fact made the Wall Street numbers, and when we reported our March numbers we were no longer a separate company; we were a part of IBM, and we exceeded the business case that IBM uses to track things and we exceeded the Wall Street estimates for Rational before the acquisition.
But weve exceeded the business case every quarter, and compared to the quarter a year ago we have reported significant year-over-year revenue growth.
Before the acquisition, revenue for Rational had been down or decreasing because of the downturn. So the amazing thing and I think the reason everybody views this as the most successful is that IBM executed a very fast integration, unlike Lotus and Tivoli, which were kept somewhat separate for a while; we were integrated very rapidly. We decided that to get the leverage of IBM we needed to integrate into their product development processes, integrate into their passport advantage IBM purchasing vehicles for customers, integrate into all of those things very quickly. And thats very disruptive for the team, but we figured wed get the pain out of the way; it would be better than stretching out over two to three years. And we were able to do that while taking a business that had been flat or declining and turning it around to have substantial revenue growth. Thats a pretty clear indication of success.
And I would give the credit to two things. One is our team. Everybody in the company had two jobs over the last year. One was to continue to drive the business every quarter in terms of results and customer success. Their second job was to execute all these complex integration tasks, which with an acquisition of this scale were pretty daunting. So the team did a great job; not just the Rational team but the IBM team.
But Ill give even more credit to our customers. And this even included customers who were large Rational customers but were IBM competitors, such as large systems integrators and other platform vendors. [They] were very positive and we continued to get substantial orders from them, even though there are parts of their business that compete with IBM they continue to rely on our products and be amongst our largest customers.
Next Page: Reaction of scientific customers.
I can see where the IT customers would be happy about it, but what about the scientific and technical companies?
That was my biggest concern when we announced this because a lot of our biggest customers are in the scientific and engineering area. And they were the customers I called first on the day of the announcement, and their initial reaction was quite positive. And one of the guys, the head of one of the top 100 companies in the U.S. that had been one of our largest customers, told me, "Oh, good, wed always wanted to keep two or three tools vendors in here even though Rational was our largest, just because we werent sure how well youd do in the market. But now that youre part of IBM well just standardize on you guys. Because we know were going be here 10 years from now. So, even those guys, the business guys at the senior levels, were very positive.
What about those at the lower levels?
At the technical level they look at the product. The first questions they asked were things like are you going to continue to support ClearCase on Solaris, which youd expect now that were part of IBMtheyd have questions about that. As soon as we reassured them on those issues they were all very supportive.
In fact what we were able to do is show them that as part of IBM we were able to increase our investment in the whole tools space. So its not that IBM just acquired Rational and spent $2.1 billion or whatever. IBM, when you look at the investment level in terms of our product development and you look at whats going on in IBM Researchbecause there was a lot of technology in Research that didnt have a way to get to market, but now with Rational that technology is appearing in our tools releases. Theres some really cool technology in a number of areas from Research that were bringing to market. So thats what the technical guys like. And IBM is spending more on tools than anybody else in the world. I think were spending more on tools than most of the revenues of all our competitors in the tools space. Its pretty amazing the total R&D muscle that we have. That I think is exciting for the technical guys.
OK, weve talked about product integration, but what of the cultural integration? Ive known Rational for a while and from my perspective Rationals culture and IBMs culture seemed to be pretty distinct.
Well, there were differences and there were similarities. The core parts of the Rational culture were focused on customer success as the top-level objective and the traditional things around integrity and a very team-oriented environment.
So IBM drove this culture and defining core values initiative that they called a Culture Jam this year where they had all the employees involved. And having 300,000 people involved in defining what the core values are you might think is a little messy but this was actually very successful. And I talk to Sam Palmisano [IBMs CEO] about it, and he said the Rational people commented more than any other group. And if you look at the IBM three core values, they actually map to Rational core values. No. 1 is client success, which exactly maps to Rationals customer success. No. 2 is innovation that matters to our customers and to the world. And Rational has always been a technology leader. And the last one is around trust and building a high trust environment. And all of our relations with each other and with our customers and business partners are based on trust. So those core values map very well with Rationals, and I think the cultural integration from that standpoint has been very effective.
The part that that youre probably referring to is Rational as a small company was very quick with a lot of empowerment to the frontline team, whereas IBM is a much larger organization and one might say its a little more control-oriented. And that sometimes has been an issue. But the good news is that where weve seen something you might view as high overhead or bureaucratic weve been able to go to Steve Mills or Sam Palmisano and fix those. There were examples that, because IBM was used to doing larger deals, added overhead to some of our deals. And we were able to go to Steve and get support so we were able to streamline those processes. So I think IBM is benefiting in a way that we hadnt anticipated and the Rational team is able to drive some changes in the business processes that make IBM a better company from that point.
So obviously there are differences between a big company and a small company, and that does affect some people. But overall the core cultural items and our customer success are consistent.
Next Page: How acquisition affected Rationals momentum.
You think Rationals momentum has been affected by the acquisition? Because youve had to take a lot of time to focus on the integration, etc.
Our momentum has been accelerated. From a revenue growth point of view and a market share point of view, weve gained two years in the marketplace probably.
OK, but Im talking about innovation.
From an innovation point of view, weve also accelerated because of access to all this technology, the Eclipse technology and the research technology. So in terms of product release schedules weve stayed on track. We released Rational Suite 2003 on schedule; were going to be able to deliver a lot more this year than we could as an independent company.
Whats been the reaction of the top-level Rational team? Have they adapted? I know you lost some top-level people like Eric Shurr [former VP of marketing] and Burton Goldfield [former VP of worldwide sales].
Yeah, even if you look at Eric and Burton as great examples, both of them would tell you that this was the right thing for Rational, the right thing for Rationals customers and they think what IBM Rational is doingbut more importantly what IBM is doingis just the right thing and that IBM is clearly going to own this space. But there were personal issues. In Burtons case hes on the West Coast and was doing a little too much traveling for his tastes. So there are things like that; in any change of this magnitude youre going to have a few of those.
But if you look at the people we have running the different parts of the business we all would agree that that [the acquisition] was the right thing for Rational and the right thing for our customers. But our attrition rates were lower than I expected and lower than what IBM expected going into this.
I did a story last year about there being a segment of IBM Rationals modeling gang that left for Microsoft, and I wanted to know how that could happen given the importance of modeling to Rational.
Yes, modeling is an A-level issue for us and weve increased the investment, as I said, relative to what we could do as an independent company by quite a bit, actually. Weve substantially increased our investment here. We knew we would be targeted by Microsoft and that they would be incredibly aggressive because they had been depending on Rational for modeling and they were going to have an issue. We expected a certain amount of that, and less actually occurred than I expected or IBM overall expected going into this.
Has IBM committed to adopting RUP, the Rational Unified Process?
Were using RUP as IBMs lead product for all the IBM customers. IGS [IBM Global Services] is using it on their key projects internally, and within IBM development were rolling both our tools and the process. So its an incremental thing. But, yes, were adopting it internally and externally its being promoted as one of the core products.