In-Depth

Seeking An Edge

Fears abounded that IT was on a path toward the buy side of the build vs. buy question. The fears were somewhat unfounded — installing and implementing packaged ERP systems was far more complex and expensive than IT executives projected, and once the year 2000 threat passed, internal application development and application integration became fundamental again.

Now that these mostly proprietary applications are safe, IT developers are in the midst of efforts to link them with the new world of the Internet — a task that requires sophisticated tools that can support old and new technologies. At the same time, IT organizations are refocused on consolidating corporate information in data warehouse systems.

Periodic industry shakeouts and supplier consolidation has been a trend since the independent software supplier world was born 30-plus years ago. As the key platform vendors maintain strength in supplying tools to corporate IT shops, independent suppliers constantly search for an edge. In this story, we examine the development tool strategies of Computer Associates (CA) International Inc., Islandia, N.Y., Compuware Corp., Farmington Hills, Mich., and Rational Software Corp., Cupertino, Calif., arguably the largest of the independent suppliers of development software.

Each of these vendors has been acquiring tools at varying rates and now aims to offer IT development managers one-stop shopping for multiple platforms, providing an open systems alternative to buying tools from platform vendors like IBM, Microsoft Corp., Sun Microsystems Inc. and others.

Rational Software spent the last half of the 1990s transforming itself from a small supplier of Ada tools into a $500 million supplier of an amalgam of acquired tools that have been integrated into the Rational Suite.

Acquired tools and Jasmine key to CA development plan

Computer Associates and Compuware are still in the process of integrating acquired tools into a coherent whole, according to observers. While each firm has a strong shot at success, they both have to overcome many of the issues that Rational faced.

Computer Associates (CA) International Inc., long a top maker of systems management tools, is gaining the attention of IT developers with a slew of tools garnered from its acquisitions of Sterling Software and Platinum Technology over the past 18 months. According to CA officials, the development technologies from the former Platinum and Sterling operations, along with the CA-created Jasmine ii integrated platform, are keying the firm’s move into the new world of e-business.

“There has been some method to the madness,” said Yogesh Gupta, senior vice president of e-business strategy at Islandia, N.Y.-based Computer Associates. “It’s not all been pre-planned, some has been opportunistic. Still, the vision has been to deliver a complete solution.”

At the giant CA World user conference held this spring in New Orleans, company executives talked almost incessantly to the 25,000-plus attendees about the firm’s e-business strategy. However, little was said about the firm’s flagship Unicenter offering, the major driver in CA’s path toward an expected $8 billion in revenue this year. Analysts say the strategy makes sense, though the road will be a difficult one.

“There’s no one product yet that’s so superior to anything else on the market,” said Damian Rinaldi, an analyst with FAC Equities, a division of First Albany Corp., Albany, N.Y. “That makes it hard to keep CA top of mind for development.” Yet Rinaldi applauded CA’s decision to bolster its development offerings as IT organizations search for ways to enter the e-business fray.

It is plainly important for CA to evolve quickly into new markets as the mainframe business slows more rapidly than expected even six months ago, clearly affecting business. Early last month, executives said Q1/2001 revenue and earnings would not meet expectations primarily due to slowing mainframe sales. Competitors BMC Software and Compuware Corp. issued similar warnings for the same reasons.

“If you look at CA on a grand scale, it’s a $7 billion company built on the concept of management — databases, applications and systems,” said Vice President Carl Hartman. “To become a $10 billion to $15 billion company we have to go to the information management space. A lot of that is application development.”

As the company moves quickly into new markets, executives are doing all they can to change the view that CA is not a major supplier of development technologies, said Hartman. “We’ve never focused on the guys that write the code. We’ve always focused on the CIO, the CEO and the business users. Now we have the opportunity to go after the guys that are writing the stuff. We’re not asking them to give up the tools they know, but we can help them to be better at what they do.”

The firm’s Gupta added that CA will start shipping new versions of Sterling and Platinum tools (“some of these products haven’t seen new releases in years”) over the next couple of months. “This is a brand new market for CA,” said Gupta. “We’ve toyed with various little development tools, but we never could supply tools for the whole market. The whole goal [for firms] at this point is to figure out how to create e-business systems, and how to integrate and deploy e-business systems. We have a tremendous advantage because the technologies are working, and we have a large customer base that’s getting into the Web.”

Gupta said CA executives began a search for a variety of tools as the Jasmine ii middleware platform — which includes an application server, messaging server, ORB and publish-and-subscribe technologies, security, encryption and cache management, as well as XML, Java and Enterprise JavaBean technologies — reached the beta testing stage about a year ago. “The Platinum acquisition bolstered Jasmine ii with modeling tools, design tools and so on, and with the repository technology we have integrated the Platinum Repository with Jasmine. We saw those tools as the next step in the vision. Now we’re integrating the Sterling portal technology with Jasmine ii,” explained Gupta.

Even before the acquisitions, CA’s services unit convinced London-based Charles Tyrwhitt Shirts to turn to the Platinum and Sterling tools to build its second-generation Web site, said James Stewart, vice president of U.S. marketing and sales and until last March manager of Web development for the $20 million shirt maker. “For the first site, we used Microsoft standard tools, the Commerce Web Server and SQL Server. It was a good site but inflexible. As a traditional mail-order company we wanted to present different offers and promotions to our Web customers and couldn’t do it.”

Charles Tyrwhitt Shirts hired CA’s services group in December 1998 to fix the problem and that unit brought in CA’s Jasmine object-oriented database, as well as the Paradigm Plus and Cool:Biz business modeling tools, Stewart said. Since then, the project has utilized CA’s Neugent neural networking technologies and the e-trust security software, Stewart said. CA completed work on the new Web site in July 1999, and added a significant new version in May with another slated to be completed in September.

CA’s Gupta said he expects firms to use more CA technologies to build e-business systems as CA shows the cohesiveness of the toolsets and servers, and corporate development projects become more and more difficult. “We see tremendous synergies in these products,” Gupta said. “In the application development space we now have everything from business-process modeling tools to databases, to entity relationship modeling. Implementation can be done by writing code in 4GL Cool:Gen or in Java using Cool:Joe. We can manage the life cycle using Endevor and Harvest [configuration management tools]. We see what we have as an extremely complete, well integrated solution.”

With the unexpected decline in mainframe software sales, the new tools strategy could be emerging at the right time for CA.

Added CA’s Hartman: “What is unique to CA is our ability to integrate new [acquired] products into the fabric of what we do. Now we have multiple families of tools for developers that are tied together with an integration platform [Jasmine ii], four levels of services, bottom-level data integration, relational and non-relational databases, and powerful language bindings.”

Compuware restructures its developer focus

Compuware Corp., Farmington Hills, Mich., thrived through the late 1990s fixing so-called year 2000 “bugs” for many of the world’s largest corporations. At the same time, a bevy of its 1990s acquisitions — including Uniface, Ecosystems, NuMega Software and several smaller firms — remained mostly independent with separate development and marketing groups. The company’s revenue passed the $2 billion mark by the turn of the century.

However, some observers say the success of the services group’s Y2K business hid some problems on the product side, problems that the company now acknowledges and is facing head on.

With the Y2K crisis past, executives say Compuware is moving to assimilate its myriad software product operations in an effort to provide corporate IT departments with one-stop shopping. “Compuware has spent a lot of years building a stable of wonderful technologies and solutions,” contends Doug Turner, recently named VP of product management and the person charged with developing a strategy for consolidating the product lines. Over the past six months or so, Turner has overseen an effort to “make sense of it all; to wrap everything together and make the products and technologies more cohesive and integrated,” he said. Compuware engineers are “literally in the midst of bundling the components [of the various product lines] together,” said Turner. “There is a lot of integration work underway.

Ultimately, we want to offer a variety [of product bundles] in a box, on a single CD that can be installed and worked right away.” While several observers applaud the suite effort, others maintain that the strategy will be difficult to implement for a variety of reasons. Some observers believe that persuading long-independent organizations to work closely with others will be difficult. The Compuware units have different business philosophies that will be difficult to merge, experts say. “The Compuware offerings are extremely fragmented,” noted Damian Rinaldi, an analyst with FAC Equities, a division of First Albany Corp., Albany, N.Y. Linking disparate products is an extremely difficult task that is made even more difficult for a company whose customers forged through a major business change from mainframe-based systems to distributed environments, he noted.

Nevertheless, Compuware executives express confidence in their strategy to combine products from various units into suites with tools for the various stages of the development process, believing it can spur a return to the financial heights. Profits hit a snag during the last two financial periods — Q4/2000 and Q1/2001, which ended March 31 and June 30, respectively — falling far below year-earlier numbers and well below analyst expectations. The company blamed the Q4 decline on setbacks in its services unit and then blamed poor product sales, mostly from the flagging Uniface development tool unit, for the first quarter difficulties. “The main problem now is mainframe software license sales,” said Compuware President and COO Joseph Nathan in a conference call with analysts to discuss the first quarter results.

Last spring, the company realigned its services unit and the operation is said to have stabilized in the latest period. The company is now hoping that a revamping of the struggling pieces of the software business can have a similar outcome.

Turner said Compuware this year moved to separate its product lines into four categories — development and integration, QA, product readiness and performance management — that now overlap the formerly separate operations. For example, the QA systems include offerings from the former NuMega operation in Nashua, N.H., and the firm’s traditional mainframe testing tool operation based at its headquarters, while the development and integration offerings include products from NuMega and The Netherlands-based Uniface operation.

This spring, Compuware brought out its first suites that combine testing and analysis tools from the NuMega and QA units. Turner said users could expand to broader combinations that include tools from the Uniface and Ecosystems operations. “We can take the QA Center tools and link them up with Ecotools and the Ecoprofiler to diagnose and monitor what’s going on at each phase of a test,” Turner said. “There is already low-level technology integration between NuMega and Ecotools to measure response time, CPU utilization, memory utilization, database statistics and Web server statistics. Now we are bundling those components together so we can sell a combined solution for a single price.”

Some analysts have wondered whether the Uniface tools can be added to the mix any time soon. Compuware’s Nathan conceded that the Uniface contribution to company revenue has declined over the past year. “The Uniface numbers are a drag,” said Rinaldi at First Boston. “I’m not so sure why. It’s an organization that’s historically mainframe-oriented and has never had to do a tremendous amount of marketing. If you stack up [Uniface] with its competitors, the market’s awareness of Uniface is extremely low.”

Compuware’s Turner said the long-term plan also calls for bundling services with the tools, a strategy that has worked well for Guild.com, a seller of fine art over the Internet. Nathan Harper, CIO at Madison, Wisc.-based Guild.com, said he contracted with Compuware’s services unit in mid-1999 to convert Guild.com’s original Web site, which utilized Perl-based tools and the Empress database management system, to a more powerful one using Java and the Oracle 8i DBMS. Tests of the original Web site, built by a local ISV, found that up to 75% of attempted transactions failed.

“We recruited a bunch of good technical people, and quickly built up a team. But we needed QA help quickly, so we brought in 12 Compuware consultants,” Harper said. Guild.com bought more than $100,000 of Compuware load-testing tools, which played a key role in the completion of the Web site in time for the 1999 Christmas season. Harper said the success of the Web site during the past holiday season has convinced venture capitalists to continue investing in the firm, even during the sharp summer downturn in the stock values of Internet retailers. Harper said Guild.com continues to use some of the Compuware tools, even following the end of the consulting project. However, some of the QA work must be done by hand by a team of Guild.com engineers because of the complexities in testing the constant changes required in a Web site.

Rinaldi at First Albany said he expects Compuware to continue using the services organization to sell development tools, though in some cases the services link could hurt efforts to build new sales channels. “Compuware’s services organization is positive in terms of delivering solutions, but it becomes a liability when it comes to trying to attract third-party support among other integrators,” Rinaldi said.

Clearly, Compuware is hoping its so-called suite strategy will convince large corporate IT groups to closely examine its offerings. And the breadth of products — QA tools, applications management software, development tools, performance management systems and others — is indeed impressive. Now, it is up to the company to do the work.

Rational finds IT ‘suite’ spot

Rational Software Corp., Cupertino, Calif., has clearly become a leader in providing tools, services and so-called “best practices” for corporate software development. With nearly $600 million in sales for the year ended March 31, and continued boosts in profitability as key rivals report disappointing financial results, Rational has captured the minds of corporate developers and financial analysts.

“Rational has taken a collection of best-of-breed products, both built internally and acquired, and combined them into suites,” said Damian Rinaldi, an analyst with FAC Equities, a division of First Albany Corp., Albany, N.Y. “The net effect of that process is to make them a very competitive company on both sides of the equation — the one focused on best of breed and the one that was previously seen as sacrificing the power and performance of individual tools for integration. Rational is for all intents and purposes a leader on the best-of-breed side, so there is no sacrifice to using their suites.”

But the path to leadership in the market did not come without some significant and somewhat risky moves by the firm, which spent its first 10-plus years as a privately held maker of development tools for an important but small market that served mostly military and government organizations. In the mid-1990s, Rational executives began an effort to move beyond the traditional Ada tool market that had served them well since the company’s founding in 1981. Soon after its 1994 merger with Verdix Corp. brought the company into the public markets, Rational officials maintained to sometimes skeptical IT organizations that its tools could provide value far beyond its traditional military and aerospace customer base to the much larger corporate world.

Rational made several moves following the Verdix merger that ultimately made some skeptics in the analyst community believe the firm could find success in corporate IT development organizations. Analysts give the firm high marks for its successful effort to create a standard next-generation development method, the Unified Modeling Language (UML), and for its ability to continue to generate significant revenue and profit growth through several major acquisitions. At the same time, observers note that Rational has continually upgraded its offerings to maintain competitiveness with best-of-breed rivals.

The company also began an acquisition spree several months after the March 1994 merger. First, at year-end 1994, Rational bought Palladio Software Corp., then acquired Objectory AB for stock and Requisite Inc. for cash. In the meantime, Rational bought the low-end, widely distributed Visual Test toolset from Microsoft Corp.

Those relatively minor acquisitions marked the beginning of Rational’s new acquisition strategy, overseen by Rational founders and top executives Paul Levy and Michael Devlin. In February 1997, the company bought high-flying Windows testing tool developer SQA Inc., and three months later acquired Pure Atria Corp. Pure Atria had been created less than a year earlier by the merger of Pure Software, a maker of QA tools, and Atria Inc., developer of the ClearCase configuration management system. Rational bought the organization in the midst of its struggle to merge two companies with vastly different corporate cultures. In between the SQA and Pure Atria acquisitions, Rational purchased SoftLab AB and Performance Awareness Corp. After these acquisitions, the company concentrated on creating a single development philosophy and on integrating the various product sets.

After a shaky start, Rational is garnering generally high marks for integrating these small- and mid-sized firms into its organization and for overcoming some of the serious obstacles that have faced many other companies that tried to grow quickly by acquisition, such as the former Legent Corp. and Platinum Technology, as well as several others. Legent and Platinum were both acquired by Computer Associates International Inc., Islandia, N.Y., another of today’s few successful software acquirers.

Today, few can argue that Rational has not been successful in its effort to expand its business. Its Rose product has become a de facto standard modeling tool. UML, created by gurus Grady Booch, Ivar Jacobson and James Rumbaugh, evolved into an industry standard overseen by the Object Management Group, Needham, Mass., and is supported by all of the key industry players, including IBM and Microsoft. Booch, Jacobson and Rumbaugh, dubbed the “Three Amigos” for their UML work, were all separately creating object-oriented methodologies when they were convinced to join forces by Rational executives.

Less than two years after the acquisition spree, Rational unveiled a line of product suite offerings that in some way incorporated 12 of its acquired and internally built tools. Each suite targeted developers who focused on different parts of the development life cycle; different adaptations could therefore include different tools. Only the ClearCase configuration management toolset was left out of the suite, due to fears voiced by Rational executives at the time that it would add too much to the price tag.

Rational’s ability to provide tools for much of the software development life cycle was the key factor in Merrill Lynch’s decision to utilize the firm’s products throughout the IT organization, said Kumar Vadaparty, vice president of order management and chief architect at the New York City-based financial services firm. He said Merrill Lynch turned to Rational about two years ago, following a search for “a set of tools that could cover the spectrum of the software development life cycle — analysis and design, implementation, version control, testing and issue tracking.” Vadaparty said he evaluated best-of-breed tools from Computer Associates, Platinum Technology and others, but none offered the breadth of offerings available from Rational.

The Rational tools replaced a flow chart developed internally using the Visio toolset and a variety of other tools built by the Merrill Lynch IT unit, Vadaparty said. The organization is currently migrating from the PVCS configuration management tool from Merant plc, Rockville, Md., to ClearCase, he said. The move to ClearCase is primarily due to “financial incentives to go to a Rational enterprise license,” as the PVCS toolset offers the required capabilities, Vadaparty said.

ClearCase is also missing from the latest iteration of the Rational Suite, unveiled in May, though executives say that some of its capabilities are included and that the full offering will likely be included in future versions.

“We have been integrating the suite with configuration management capabilities more and more,” said Eric Schurr, vice president of marketing and Rational suite products. Schurr maintains that “when we first delivered the suite, people’s understanding of the importance of configuration management was not as well understood in the market. But as more [IT organizations] do team development, people are better understanding the need for configuration management.” Schurr declined to specify when the ClearCase toolset would be added to the suites.

The latest version of the suite does add data modeling capabilities to the initial product, capabilities that have been well received by analysts that follow the market. However, Rational Software cannot rest on its laurels quite yet. Some very large competitors — including Compuware Corp. and Computer Associates International Inc. — have clearly set their sights on offering alternatives to IT developers. In addition to integrating myriad development tools, both Computer Associates and Compuware are outlining plans to include systems management and some middleware technologies in future suite offerings, according to officials at those firms. 1

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