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September 8, 1997updated 03 Sep 2016 8:51pm


By CBR Staff Writer

From M&A Impact, a sister publication.

Rational Software has had a lot of explaining to do since its April acquisition of Pure Atria (CI No 3,135). The Pure Atria deal capped off 6 months of frenetic acquisition activity that also saw the addition of SQA, Requisite, and Performance Awareness. The Pure Atria deal caused share prices of both companies to plummet over 50% in a day, a level from which they have yet to fully recover. Yet, Wall Street’s disapproval does not appear to have spread to users. Today, 70% of Rational’s revenues continue to come from repeat business. Although not alone in basing its product strategy on component-based development, Rational is assembling a full portfolio of tools covering the entire component development life cycle, from requirements management to visual modeling, automated software quality, process automation, and configuration management.

By Kevin White

M&A Impact recently met with Rational’s top executives Mike Devlin, president, and Eric Schurr, vice president of commercial marketing, to examine Rational’s next act. Although neither Devlin or Schurr feel that the market is ready for a shrink- wrapped end-to-end solution (especially given that the end customer for each tool may be a different part of the development or database management organization), they are structuring deals to apply volume discounts over groups of Rational tools. Step one of its merged product strategy is to start developing integration at the user interface level. The company released such an interface within two months of completing the SQA and Requisite deals (leveraging a link already developed by SQA and Requisite). Today, the user of Requisite Pro, a package which defines project requirements, can click a menu item to export those requirements over to Rational Rose, with wizards to help assemble them into Use Case models. Similarly, the user could export those requirements to SQA Suite, which can be used for test case development, or between Rose and SQA Suite, for generating tests relating to application structures. In the next year, the goal is to extend menu-level integration to the bulk of Rational’s tools (excluding several Unix-oriented tools inherited from its legacy aerospace and telecommunications business).

NT look-and-feel

The company does not plan repository-level integration, outside of supporting whatever Microsoft develops. Instead, it is highlighting ClearCase, the configuration management tool that was the centerpiece of the Pure Atria deal. By dint of timing, the product added an NT look-and-feel just after the merger was announced (it previously supported NT, but with a dated Motif front-end reflecting its Unix heritage). Once the latest merger is completed, users can expect that Rational will release an NT version of ClearGuide, the Pure Atria project workflow tool. As reported previously, Rational plans to bulk up SQA Suite with load testing capabilities. Of the two load testing tools that arrived through acquisition, Rational is focusing on preVue, the network-oriented (‘wire recording’) tool from Performance Awareness. It will be ported to Windows NT and gain menu-level integration with SQA Suite by 3Q97. We expect that a future release, which will be integrated as the SQA load test module, will incorporate some of the API-level load test capabilities from Pure Atria’s Performix, which became the odd man out. Schurr insisted that Performix users would get a migration path to the future expanded SQA product set.

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Rational has bought companies before, but none as big – or as troubled – as Pure Atria. This was the rationale for Wall Street’s ire. The big question therefore is whether Rational can accomplish what Pure and Atria, themselves the product of previous merger, could not: merge the organizations and hammer out a sales strategy. The company that Rational bought had just suffered a disappointing quarter, lost much of its top sales staff, while continuing to operate as two separate companies. According to Devlin, one of Rational’s goals has been to develop acquisition as a core competence. The company’s modus operandi is to have a management, staffing, and product plan in place by the time an acquisition is consummated (something that Pure Atria failed to do). The SQA deal was an example of the strategy gone right. By the time the deal was consummated, the plans were in place. SQA retained its market identity, product focus, and development organization as part of the Rational team. In some cases, it seemed as if SQA took over Rational – at least where volume marketing strategy and organization was concerned. Of course, it helped that SQA was already a success story on its own, and was almost totally complementary to Rational. Rational’s plans are to install its own top management, while retaining the development and what’s left of Pure Atria’s sales staff. No one from Pure Atria will join Rational’s board of directors. Reed Hastings, the outgoing Pure Atria CEO, plans to return to Stanford once the deal is completed. In effect, Rational believes that it has inherited a company that already has its problems behind it, especially given the hemorrhaging of Pure Atria’s top ranks prior to Rational’s entry. Devlin concedes that Rational’s plate is pretty full when it comes to integrating products and organizations; it does not plan any major acquisitions in the foreseeable future – something which may come as a relief to its users. While the company has embarked on a strategy to provide one-stop shopping covering the application development life cycle, the obvious gap is data modeling. Rose currently has an interface to Logic Works’ ErWin, the industry’s leading tool. Depending on viewpoint, object modeling makes data modeling redundant, or complementary. Some vendors, such as Sterling Software, boast integrated object and data modeling as key strengths. Devlin concedes that Rational is still struggling with the idea of whether data modeling must be part of the product portfolio.

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