The case against break-up: by Jason Stamper
There’s always a shareholder who believes he can do a better job than the company’s management and board, and they’re often right. But Mr Coates’ calls for Borland to be broken up look little more than opportunistic.
Following the resignation of Dale Fuller, the CEO of the application development tools and methodologies company, under the cloud of a profit warning that came on July 7, the company appointed its former COO as interim CEO while it conducts a search for a new chief.
Seeing a power vacuum at the top, Mr Coates weighed in by saying he is formulating a plan that he hopes to firm up by mid-August, but which he has already said would include the jettisoning of what he sees as a number of legacy products.
Curious that Mr Coates should begin to formulate a plan now, while there is no CEO at the helm.
Mr Coates believes that Borland should focus exclusively on its application lifecycle management products, which is one of three major lines at Borland. The other product lines include IDEs – integrated development environments – where the company built its reputation, and middleware, which stemmed from the 1998 acquisition of CORBA broker provider Visigenic.
These calls may come as something of a surprise to Borland, however, since the company’s own take on ALM, which it calls Software Delivery Optimization, has been its primary focus for some time. Besides, the whole point of full application lifecycle management is that it takes in the development, deployment and subsequent optimization of applications, which in fact means that IDEs and middleware form a core component of any real ALM suite.
Mr Coates says focusing exclusively on ALM would enable Borland to compete directly with IBM’s Rational software products, but perhaps Mr Coates has missed the fact that IBM has been busily working on tighter and tighter integration between its own Rational ALM products and its WebSphere line of development tools and integration software, and its Tivoli line of applications tuning and management.
Perhaps Mr Coates also missed the fact that IBM acquired Rational’s ALM precisely because both IBM and Rational believed ALM tools need to be integrated into a broader integration, development and optimization portfolio, in order that development teams have a one-stop, integrated platform on which to base their service oriented architecture (SOA) strategies?
If Borland were to jettison its IDE and middleware lines, it would go from having a good selection of SOA products to being a niche modeling vendor. Niche modeling vendors like Rational and Popkin have already been acquired because they found life just a little too niche, and fellow modeling player Telelogic has been rapidly broadening its portfolio in order to avoid the same trap. History does not support the notion that it is best to concentrate exclusively on modeling – even if you choose to call it ALM.
Where Mr Coates may have a point is in his assertion that the sales force is at times confused by the broad portfolio at Borland, and that this has not helped matters very much. To this end, it would be good to see Borland try to harmonize the branding of its different products, and thus begin to position them as a set of development, modeling and optimization tools that really do come together to act as an integrated platform. Specifically, a platform to underpin SOA.
Most of the other vendors have already moved in this direction, and Borland’s Software Delivery Optimization strategy speaks to that goal, but we’re yet to see the tight integration between the three major product lines that would really help to crystallize that strategy in the minds of its own sales force and its prospects and existing customers.
If Borland could effectively harmonize its product branding to clearly match the requirements for a SOA platform, and also bring in the development quality and methodologies expertise from its recent TeraQuest Metrics acquisition, it would have a far more compelling proposition for today’s enterprise IT department, and certainly a far more compelling proposition than simply focusing on ALM to the exclusion of other vital disciplines.
The case for break-up: by Tony Baer
Mr Coates is on the mark. Borland says it’s a lifecycle company but it executes as if it were still selling only to developers. Standalone modeling companies – actually standalone anything – are not viable in today’s software market.
However, the logical pairing for Borland’s ALM products are not IDEs because they are a dime a dozen these days anyway (and free if you use open source). Actually, the logical pairing for Borland would not be IDE but IT governance and optimization – exactly the area where Mercury Interactive is focusing.
A slimmed down Borland shorn of legacy baggage might make them a great fit for Mercury, which is more effective at the enterprise sell.
The result of Mr Coates’ proposed paring would make Borland a more attractive acquisition target that would provide value for shareholders (which is the rationale behind the scheme that Mr Coates is devising).
As for Rational, recent product introductions are working only around the edges. ClearCASE and RequisitePro still use the same monolithic decade-old engines and scissors-and-tape integration dating back from Rational Suite.
Since Borland acquired the ALM tools in 2002, the fact that they are more modern and potentially integratable could have proven a major competitive advantage against Rational.
Furthermore, as the weakest of IBM’s software brands (as borne by the latest quarterly results), Rational is currently distracted. Internally, the scuttlebutt at Rational is not whether but when the brand will be effectively absorbed into WebSphere. Actually, the brand name will survive, but with Danny Sabbah succeeding Mike Devlin, it’s clear that WebSphere is driving the agenda.
A slimmed down Borland may not be able to wage battle against Rational/IBM alone, but in paring off nonproductive assets, it could make a good target for acquisition by an entity better equipped for the enterprise sell.
