IBM-Rational Merger Pays Off

IBM's year-old acquisition of Rational Software has paid off handsomely with the delivery of several integration projects and a unified development platform to each company's customer base.

IBMs year-old acquisition of Rational Software Corp. has paid off handsomely with the delivery of several integration projects and a unified development platform to each companys customer base.

Steve Mills, IBMs senior vice president and group executive in charge of the IBM Software Group, said IBMs $2.1 billion investment in Rational in February 2003 has paid off "tremendously."

"We brought Rational back to growing in the marketplace," said Mills in Somers, N.Y. "The previous two years, Rational had been struggling with growth in the market. We had double-digit growth with Rational software last year, and the Rational business grew at double-digit. This was a very powerful acquisition from the perspective of near-term marketplace success. And from a strategic standpoint, it reinforced that bringing together the Rational tools with the IBM tools and focusing on a more complete solution was going to be valuable to customers long term."

/zimages/5/28571.gifOn-demand computing is a key element of IBMs strategy for transformation. Click here to read more.

Rationals revenue grew by 28 percent in the fourth quarter of last year, as opposed to losses of 5 percent for the same quarter the year before and 21 percent for the same quarter the year before that, according to Rational earnings reports.

"Before the acquisition, we had some down—flat to declining—periods," said Mike Devlin, former CEO of Rational Software and now general manager of IBMs Rational division, in Lexington, Mass. "[Now,] Rational is the hand that drives the overall software development strategy."

Mills said he attributes the early success to the long-standing relationship IBM already had with Rational. "We all knew each other," he said. "So were not getting to know each other after the acquisition. And the Rational culture is very much aligned with the IBM culture. Theres a great combination of technology as well as culture.

"On the businesses side, we moved very quickly," Mills said. "Literally on the day we closed, we immediately moved to integrate. We were bringing in over 3,000 people into the software group. We were able to complete the integration work within six months."

On the product side, IBM has been aligning the portfolios. Mills transferred to Devlin IBMs WebSphere application development environment mission and Lee Nackman, leader of that mission, along with his 300-employee team.

"What were trying to achieve is an environment in which the design environment, the XDE [Extended Development Environment] environment, can drive out an ever-larger percent of executable code," Mills said. "The customers would love to go from design through the coding steps very quickly and on into tests. That requires that the tools be aware of the pattern of business youre trying to implement and the run-time environment that youre targeting the execution to. So we have more things to add into XDE as a design tool in order to further speed up the development process and increase customer efficiency.

"So you begin to think of application life cycle as being broader than just the development process but also the complete life cycle of the application in production," Mills said. "And so were driving more linkages not just into the WebSphere infrastructure but also with the Tivoli monitoring and management tools."

/zimages/5/28571.gifClick here to read a new eWEEK interview with Linda Sanford, who is leading IBMs strategy shift.

Devlin said IBMs Rational division is working to "Eclipsize" Rational tools. Nackman, now vice president of desktop development tools and chief technology officer of the Rational division, said, "The key to our integration strategy is to build on Eclipse," the open-source, integrated development environment.

Modeling software expert and IBM Fellow Grady Booch, one of the most well-known "heritage Rational" people at IBM, said, "Im having more fun than you should dream. Im like a kid in a candy store."

/zimages/5/28571.gifCheck out eWEEKs Developer & Web Services Center at for the latest news, reviews and analysis in programming environments and developer tools. Be sure to add our developer and Web services news feed to your RSS newsreader or My Yahoo page: /zimages/5/19420.gif