IBM Completes Rational Acquisition

The $2.1 billion deal makes Rational the fifth brand in the IBM Software Group, next to WebSphere, DB2, Lotus and Tivoli.

IBM announced the completion of its $2.1 billion acquisition of Rational Software Corp. Friday, making Rational an IBM brand.

The deal, made official at the close of the market Thursday and announced before the market opened Friday, makes Rational the fifth brand in the IBM Software Group, next to WebSphere, DB2, Lotus and Tivoli, the company said.

IBM and Rational initially announced the acquisition on Dec. 6, 2002. Rational shareholders approved the deal in January, and government approval came earlier this week.

Rational sells a variety of tools that support software development throughout the application lifecycle, from design and modeling to testing to quality assurance to software configuration management and maintenance. The company is known as a pioneer in the area of modeling and promoting the Unified Modeling Language (UML).

Bill Hoffman, president of the Object Management Group (OMG), the Needham, Mass.-based standards body that created and manages the UML specification, said IBMs acquisition of Rational "certainly creates more visibility and further validates the importance of modeling."

Brian Lyons, chief technology officer and co-founder of Number Six Software Inc., an Arlington, Va., software development company and Rational partner, said: "As a company that is a recognized expert in Rational tools, processes and techniques, were excited about this move. Were excited about anything that puts those tools, processes and techniques into the mainstream." Number Six is a gold-level member of the Rational Business Alliance Program.

Zohar Gilad, vice president of products at Mercury Interactive Corp., in Sunnyvale, Calif., which competes with Rational in the testing tools space, said he does not expect IBMs acquisition of the company to mean very much in the testing arena.

"My experience is that whenever a competitor was acquired, it was to our benefit; it usually diverts the focus. It will probably have no impact on us," Gilad said of the IBM/Rational deal. "IBM bought Rational not for testing tools, but for application development tools to compete with Microsoft."

But analysts say competing with Microsoft might not be so easy without delivering tools that are easy to use.

"The greatest challenge facing IBMs tools strategy is ease of use," said Jason Bloomberg, an analyst with ZapThink LLC, a Cambridge, Mass., market research firm.

"Visual Basic .Net is winning the usability battle, actually attracting Java developers to .Net. IBMs WSAD [WebSphere Studio Application Developer], on the other hand, is a difficult tool to use, and Rationals tools, including the XKE and ClearCase, are also a challenge to learn and use. IBM now has a comprehensive tools offering, but they will continue to lose ground to Microsoft if they dont improve usability."

Rational has customers in 89 countries and more than 3,400 employees and more than 600,000 developers using its tools, IBM officials said.

Rationals former CEO, Mike Devlin, will serve as general manager of IBMs Rational division, and he will report to Steve Mills, senior vice president and group executive of IBM Software.