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February 1, 2003

In this Issue:

Rational Decision

Open Door Policy

The Self-Managing Library

Rational Decision

Is IBM committed to Rational's neutrality?

Industry News

High-level intelligence at a glance

Gold Watch for Wang. Computer Associates (CA) chairman Charles Wang, who built his company into a $3 billion operation over a 20-year period, has resigned for what CA characterized as personal reasons. Wang presided over a long period of growth largely fueled by acquisitions, but since 2000, his tenure has been marred by controversies associated with corporate governance and an attempted board takeover. Although Wang's departure coincides with the November issuance of federal grand jury subpoenas to CA employees and customers, the company denies any connection. CEO Sanjay Kumar succeeds Wang as chairman.

Race to the Middle. Oracle has released a new version of its enterprise applications targeted specifically at midsized European customers. Analysts view E-Business Suite Special Edition as a response to recent SAP and Microsoft forays into the same area.

Open Pocketbook. Research outfit Input estimates that the newly created U.S. Department of Homeland Security will spend more than $2 billion on IT this fiscal year. According to Input, data mining and geospatial information systems are likely candidates for funding.

Go Team. SAS has acquired real-time behavior analysis outfit Verbind. It plans to integrate Verbind's LifeTime technology into SAS Interaction Management.

Despite signs of rampant market consolidation in the past few months, IBM's $2.1 billion acquisition of Rational Software Corp. (subject to regulatory approval), which was announced in December 2002, came as a surprise to many industry veterans.

Steve Mills, IBM's software group senior vice president, calls the acquisition "an important aspect of IBM's on-demand strategy" for e-business - the new agenda outlined by IBM CEO Sam Palmisano last October - and IBM is already referring to Rational as the "fifth jewel" in its software crown, complementing Lotus, Tivoli, WebSphere, and DB2. But how will the union affect Rational's customers?

Whereas most developers favor either .Net or Java as development frameworks, Rational's design and development automation tools are popular among both camps, with 98 of the Fortune 100, including IBM, using Rational tools and services. But despite assurances by both IBM and Rational regarding a continued commitment to heterogeneity and open standards, some industry observers are skeptical.

Tom Spitzer, a principal at ECWise Inc. and an Intelligent Enterprise contributor, believes IBM's move is "very much about customer lock-in. It's a period of consolidation, and large vendors are increasingly promoting single-vendor solutions as a way to reduce total cost of ownership." Consequently, this acquisition should force big IT and tools vendors to reevaluate Rational's reputation as a "neutral" solutions provider, which Spitzer believes will have an impact on its role in standardization efforts.

He also raises questions about IBM's commitment to heterogeneity: "How will this deal affect Rational support for products besides IBM's? Microsoft and Oracle both license Rational technology and package it with their development tools. Will that continue, or will support for other app servers and IDEs [integrated development environments] lag support for WebSphere and VisualAge? Will Rational continue to successfully straddle the Java vs. .Net fence?"

Even so, IBM's acquisition of Rational puts it in a comfortable position in the enterprise software development marketplace. Spitzer says, "IBM competes most directly with Oracle, BEA Systems Inc., and Microsoft as far as software infrastructure is concerned. This acquisition gives it leverage in that competition." (Indeed, rumors have circulated that Microsoft's interest in Rational may have forced IBM's hand.)

— Michelle M. Young

In this Issue:

Rational Decision

Open Door Policy

The Self-Managing Library