Update: IBM to buy Rational Software

IDG News Service - IBM has agreed to acquire Rational Software Corp. for $2.1 billion, the companies said in a joint statement today.
Cupertino, Calif.-based Rational provides software tools and services for developing business applications and other products, such as embedded software for cell phones, medical systems and other devices, the companies said.
The acquisition will allow IBM to provide a software development environment for companies that want to integrate their business processes and software infrastructure across their operations, including suppliers and customers, the companies said.
Ninety-eight of the Fortune 100 companies, including IBM, use Rational's tools, according to the statement.
IBM already offers close integration with a wide variety of Rational's software products. The IBM WebSphere tools, built on the Eclipse open-source platform, provide a single portal-like interface that gives software developers access to a wide range of tools from other software vendors, including those made by Rational.

The Eclipse project, launched last year (see story), is managed by a consortium of vendors that includes Borland Software Corp., Fujitsu Software Corp., Red Hat Inc. and Sybase Inc., in addition to Rational.
"This will provide IBM with the end-to-end application development process integration that we hear customers telling us they want," said Steve Mills, an IBM senior vice president and group executive of the Software Group, during a conference call this afternoon.

"There's a shift in focus among medium- and large-size businesses to integrate horizontally, to create an on-demand environment, to focus on process integration, not function automation. They need tools that provide design capability, and a platform for integrating team development," Mills said.

Responding to news of the acquisition, Hewlett-Packard Co. said in a statement that it will continue to have a strong business relationship with Rational, including joint activities as part of the Eclipse.org industry group. HP said it would continue to work with IBM/Rational and Microsoft Corp. and sees the future of application development in interoperability between the Java and Microsoft .Net platforms.

Industry experts said the acquisition doesn't come as a surprise.

"I think it's something we had somewhat expected in that there's been over the past year a movement to where you can see the providers of integrated development environments expanding their tool kits such that they become integrated life-cycle environments," said Thomas Murphy, senior program director at Meta Group Inc. in Stamford, Conn.

Whereas integrated development environments have been focused on providing tools for editing, compiling and debugging code, they increasingly need to support so-called life-cycle management functions such as modeling, testing and version control, Murphy said.

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