IBM sent shockwaves through the software modeling market when it announced its intention to acquire Rational Software for $2.1 billion. The Rational product line, pricing, and positioning make perfect sense for IBM.

But many Microsoft shops—and perhaps even Microsoft itself—have to figure out what this means for them going forward. Let’s look at the issues surrounding the Rational acquisition, how it will potentially affect different constituencies, and whether, in the end, it really matters.

Why it makes sense for IBM
As IBM attempts to grow its Global Services business, it needs ways to differentiate its consultants from the pack. There’s significant potential growth in helping customers develop system development lifecycles and then assisting them in configuring systems to support new development paradigms.

With many large corporations looking at the Model Driven Architecture (MDA) as the basis for building new applications based on a new Service Oriented Architecture (SOA), they’re looking for consultants, trainers, and software companies to help them create new development environments to support these initiatives.

I had a meeting with employees of a large state government agency this past December to discuss these exact issues. They see the push toward SOA as a prime opportunity to redefine the way they create applications and support their constituency. Their biggest problem is finding a company that can help them both architect solutions and create a design and development platform that helps them deliver it.

The IBM/Rational merger allows them to choose a single company that has the resources to help them build an enterprise-wide framework and the design and development platform on which to build it.

But there’s no free lunch here. In fact, the pricing for Rational products and IBM Services is anything but free. The knock against Rational has always been that it’s the Cadillac of the software design industry yet the “operator’s” manual is six inches thick. To get any significant benefit from the products (after plunking down $5000 or more per developer seat!), you need significant training and an almost fascist developer discipline. In the end, however, most large companies developing enterprise-scale applications probably need this type of tool and the consulting and training services that go along with it in order to build and support large, enterprise applications.

How the acquisition affects Microsoft
The acquisition has put Microsoft in an awkward position. In the fall of 2002, Microsoft and Rational delivered a national road show designed to help corporations move toward adopting the Rational product suite and development methodology for applications developed on the .NET Platform.

I spoke to companies involved in delivering the seminars and some of the attendees about the success of the road show. Neither group was particularly pleased. The displeasure wasn’t with the integration of the Rational products and Visual Studio .NET, but with the learning curve imposed by Rational’s tools as compared to the simplicity with which developers could create new applications with Visual Studio .NET.

Attendees also balked at the price of the .NET developer seat, composed of both the Visual Studio .NET Architect Edition and a base set of Rational tools. With a seat price well over $6000 and a shaky economy, the corporate planners I’ve spoken with aren’t showing a lot of interest.

In fact, most have decided that the tools included in the Visual Studio .NET Enterprise Architect or Enterprise Developer edition are sufficient right now. Of course, they recognize that without proper training and a clearly defined and articulated software design life cycle, they may succeed in getting applications developed on a new platform, but five years from now they’ll be at the same place with the same problems.

Rational customers who use predominantly Microsoft development tools are in a quandary. They would like to hear Microsoft say that it will continue working with Rational to integrate the Rational Suite with current and future releases of Visual Studio. Given that Microsoft is in final beta with the next version of Visual Studio, and has been working closely with Rational during the development cycle, they’re assured of a compelling integration story for at least the lifetime of this release, i.e., the next three to five years.

The impact on customers
For CIOs involved in the selection and implementation of procedures and tools, it’s important to understand the ramifications of the vendor and tool choices. You’re likely to be in one of three groups.

The first group includes companies that never used Rational’s tools anyway and don’t use tools from Microsoft or IBM. There are many fine software design life cycle tools. Borland has been making a comeback by acquiring design tools that complement its development tools. It’s put together a very nice suite of development tools that can be used to create applications on either the .NET or J2EE platform. If you’re in this group, this acquisition promises little impact.

The second group includes companies that use IBM development tools and platforms (like WebSphere). This is great news for this group because it means that as IBM works toward tighter integration with the Rational tools, customers will have more opportunities to use design tools to generate and potentially even maintain software through the design interface. The only potential downside is if IBM begins either favoring Rational’s tools or not supporting tools from other competitors on its development platforms. If this happens, and you don’t want to pay the premium imposed by the Rational per seat pricing, you may not be able to get affordable, well integrated tools for your development environment.

The third group includes development companies that design and develop software on Microsoft platforms. If you’re already using Rational’s tools, you’ll probably continue to use them throughout the current Visual Studio .NET product lifetime (current meaning the new release coming out in 2003). If you’re not, it makes more sense to build the software design life cycle environment using the tools from Microsoft in its Visual Studio Enterprise Architect release, and complement them with other Microsoft and third-party (non-Rational) products. If Microsoft perceives this to be a glaring hole in its enterprise strategy, it’ll move to fill it with either another acquisition or a new product development initiative.