Why BMC+Compuware Is a Textbook Acquisition Case

eWEEK ANALYSIS: Five years ago, Compuware was fading out of existence. The company's products were stodgy; its leadership was questionable; its revenues declining. Then new CEO Chris O’Malley intervened, changing the way the company did business.

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Houston-based BMC Software, a $2 billion maker of distributed, cloud and mainframe software, announced this week that it will acquire Detroit-based Compuware, a $600 million-plus maker of mainframe software, at a price tag of $2 billion. With this acquisition, BMC will significantly increase its mainframe software revenue; add new mainframe development/operations products (DevOps); and acquire experienced, motivated, creative mainframe marketing and development resources.

A Closer Look at Compuware

Five years ago, Compuware was fading out of existence. The company’s products were stodgy; its leadership was questionable; its revenues declining. And then Chris O’Malley intervened; when O’Malley became the CEO, he changed how the company did business in three important ways:

  1. The company expanded its product portfolio by structuring cooperative development agreements with other vendors (including competitors);
  2. it committed to delivering new and valuable software functionality every quarter (unheard of in the mainframe software industry); and
  3. O’Malley greatly improved morale—articulating a corporate vision, mission and core values that everyone in the company could buy into—creating a new sense of pride in being a Compuware employee.

That enthusiasm reached the company’s customers, who voted with their pocketbooks, steadily growing Compuware revenues in excess of $600 million. Compuware’s growth has come from organic (internal) development, with research and product engineers bringing new, innovative solutions and ideas to market, combined with several strategic acquisitions.

In January 2016, Compuware purchased ISPW (an agile mainframe source code management/build/deploy automation solution that works seamlessly with Jenkins, XebiaLabs and REST APIs within a DevOps toolchain). The ISPW acquisition was followed by the acquisitions of Itgrations, Standardware, MVS Solutions, XATester and INNOVATION Data Processing in January 2020. (For a complete view of Compuware’s products and strategies, see this Clabby Analytics August 2018 report in PDF format.)

A Closer Look at BMC Software

BMC provides software solutions for multi-cloud management, cognitive service management, digital business automation, systems management using artificial intelligence/machine learning/predictive analytics, cybersecurity and mainframe modernization.

A look back at BMC’s history shows a company that, like Compuware, has also grown through organic development and software acquisition. In 1994, BMC acquired Patrol Software; then over successive years the company purchased a gaggle of companies: Datetools, Boole & Babbage, BGS Systems, New Dimension Software, Optisystems, Remedy, IT Masters, Marimba, Identify Software, Service Management Partners, ProactiveNet, RealOps, Emprisa Networks, BladeLogic, MQ Software, Tideway Systems, Phurnace Software, GridApp, Coradiant, StreamStep, Numara Software and now Compuware. BMC acquires companies that bring new functionality to its series of product offerings—and then uses its development resources to integrate those offerings with other products in its portfolio.

In the mainframe world, BMC currently offers automated mainframe intelligence (AMI) based on artificial intelligence/machine learning/predictive analytics technologies, including BMC AMI for Security and BMC AMI DevOps for IBM Db2. The company’s MainView Systems Management optimizes mainframe systems to improve overall performance and increase availability—helping to detect and solve problems quickly. BMC’s Mainframe MLC Cost Management can help BMC customers reduce their monthly license charges (MLCs) by up to 30%. The company also offers two data management products (one for the DB2 database, the other for IMS) that help reduce data management costs.

Summary Observations

With the acquisition of Compuware, BMC is adding a sophisticated mainframe DevOps (development/operations) environment, build and deploy tools and utilities, additional data management, measurement and operations softwareas well as additional compliance/security software. The acquisition expands BMC’s reach into mainframe DevOps. Plus, it adds a highly integrated workbench/program analysis/management/test/process flow environment (Compuware’s Topaz product suite) to BMC’s mainframe portfolio.

There is very little product overlap in this acquisition, since the two companies have largely focused on different aspects of mainframe computing (except with regard to operations management, where the two companies’ products do compete). Accordingly, BMC will now have a broader, deeper portfolio, enabling it to compete with other vendors in different disciplines of mainframe development and management—making way for an even large revenue share of the mainframe software marketplace.

From the perspective of Compuware, this deal is also a textbook example of how to rebuild a company and up its market value to the point that it becomes highly valuable as an acquisition target. Over the past five years, O’Malley and the rest of the company’s management revitalized Compuware’s staff—and excited its customers. A move to agile development practices enabled the company to bring innovative product solutions to market faster than ever before. A willingness to work with other software vendors—including competitors—enabled Compuware to bring greater value to its customers beyond what it could have delivered using only its own resources.

We hope to see, as this acquisition takes place, a similar transfer of energy and enthusiasm at BMC. We hope that Compuware’s culture of innovation is not lost in the assimilation process. We hope that BMC retains most of the Compuware’s inventive, high energy organization—and gives that organization some free rein to continue to analyze the market and build new products and solutions for mainframe developers and managers.

BMC Software has shown that it well understands the mainframe market (see this survey, this study and this survey). The acquisition of Compuware will provide BMC with even deeper insights. With these two companies blended, BMC Software will become an even more formidable competitor in the mainframe marketplace.

Joe Clabby of Clabby Analytics is a longtime IT market analyst and writer. © 2020 Clabby Analytics. All rights reserved. Clabby Analytics specializes in teaching readers how to build information systems that can ultimately support the transparent flow of business processes.