CRN Interview: Mike Devlin, General Manager, IBM Rational Software

CRN:: Solution providers have said that since Rational became a part of IBM, its tools don't support Microsoft products as much as they support the J2EE platform. What's the story there?

Devlin: [I'd tell them to] use the products. It's either [an inaccurate] perception or [that] there are differences [between the tools and the products]. The J2EE platform is different than the .Net platform. So there are some capabilities in one and not the other that reflect the platform.

CRN:: I'll be specific. Say you're going forward with the Rational Rose XDE product. Are you saying things don't come out at the same time? So in a reasonable amount of time you'll have the Java version and then the .Net version?

Devlin: We're going to move both products forward full-speed ahead. There are unique things that will only be in one or the other usually driven by the platform or .Net customers just want something different than Java customers. There will be some of those differences. We're continuing to make a major investment down both paths.

Now, there may be an appearance over time that some things appear on the Java side earlier because they are leveraging a bunch of IBM technologies. So it's not like we're slowing down .Net development in any way. We're leveraging a bunch of IBM technology. On the other side, Microsoft is making more technology available to us every day, and we'll leverage that. What [solution providers] may be seeing may more be a statement about the platforms than what Microsoft is doing or what IBM is doing. We're leveraging all the capabilities of the platforms as quick as we can.

CRN:: You mentioned that going forward analysts think companies will use Java and .Net about equally--50 percent to 50 percent. Could you break out your business by platform and address the trends there?

Devlin: The problem is, if you buy [for instance] a [Rational] Rose license, it works on either [Java or .Net]. So as for [what] the customer is using, we can't really tell. We see both [being used widely], and I don't think that's going to change over the next couple of years.

CRN:: How about the sales of your products that go direct vs. through the channel?

Devlin: The vast majority of our products are sold directly. They are direct, face-to-face sales teams or telesales, so they're by our direct salespeople.

CRN:: Do you see that changing going forward? IBM is talking about the small-business market and the way to reach that business is through the channel. Rational tools are more geared toward the enterprise, but I'm assuming that small businesses will be a target for you guys going forward.

Devlin: Small businesses are a big part of our business already as far as the way IBM defines them. We have a lot of customers there. We still deal with them directly.

Developers are a little different than the rest of the market. Developers are somewhat less inclined to work through an intermediary or a reseller or something. They'll go to MSDN [Microsoft's developer Web site] for Microsoft. They'll go direct to developerWorks [IBM's developer Web site] or direct to our salespeople. It's a different purchase. But business partners help us a couple of different ways. Business partners build add-on products. We have technology partners that do a special [software product] that interfaces between SAP and the Rational toolset or something like that, or a new metrics capability for a particular market. There are also system integrators, either very small ones or very large ones, that develop considerable expertise in both the Rational Unified Process and our tools. So they're able to go to their customers and say, 'Look, we can deliver projects faster because we know the Rational process and we know the Rational tools, so we can deliver higher productivity.'

We like the systems integrators using our tools--the small consulting companies and the big guys [like] Cap Gemini Ernst & Young and Deloitte and Touche. All those guys are customers and partners in the sense that they use our technology with their [services].

CRN:: As far as I know, Rational hasn't offered any kind of Express version of its products the way IBM has for the SMB market. I'm assuming that going forward that there will be a branding of Rational Express for smaller companies, or no?

Devlin: We're evaluating that. Again, our market's a little different in that for a database, a small business has 100 transactions a day, whereas a big bank has a million, or whatever the number is. There's a different [database] product. If you have a developer team in a small business, it will be a smaller team and there are some differences, which we support already. Most of [the development] you need to do [in a large business or a small business] is similar; it's just a smaller team. Some of our most sophisticated and demanding users are small businesses. They just have a smaller team and they want more for the tools. We're still working through what Express means for the developers and asking our customers.

CRN:: Maybe it means changing the pricing?

Devlin: It's ironic to see how things are with the economy [now], but a lot of our growth in the '97, '98 and '99 was from startups in Silicon Valley where time-to-market was critical. It was hard to hire developers and it was a competitive market, so [people thought] we were going to equip them with the best possible environment. I felt no pressure to lower the price for small companies.

CRN:: You're talking about the boom, though, right?

Devlin: We still see that today. In a small company in some sense a developer is a more scarce resource. So you need to equip them. It's a capital labor tradeoff. For a semiconductor design engineer, there are hundreds of thousands of dollars of investment for high-end CAD equipment, but it's worth it because you're leveraging that engineer. Software culture isn't as heavily invested, but the more development is important to you, the more you're willing to invest to accelerate that development.

CRN:: So you're immune to the pressures.

Devlin: Well, we still feel pressures from everybody. I feel as much price pressure from the big guys as the little guys, in both directions. The core business case, if you want to think about it, is an engineer costs a certain amount of money and if you can increase their productivity over the numbers, like 27 percent or something like that, that's a huge savings. So you'd be willing to spend some part of that with the tools to do that automation, particularly if in addition to the productivity improvement you were getting higher quality.

Think about it. What's the cost of eBay if their site goes down? What's the price of Ford Motor Company if their anti-lock breaks don't work and they get sued, particularly with the settlements as they've been lately?

CRN:: How will the deliverables change as you further integrate Rational with other IBM tools. I've heard that IBM has so many tools that it wouldn't hurt them to get rid of some and combine some. Do you think there will be consolidation?

Devlin: Absolutely. Over time, we'll consolidate products on this common architecture.

CRN:: That architecture being the Eclipse framework?

Devlin: For the desktop tools--Rational Purify, Rose, XDE, Robot--[the common framework will be] Eclipse. As opposed to a team product, like ClearCase, which has a server element and supports team interconnection, we'll also use Eclipse for the client side, but Eclipse is not a server-side platform. That's the direction we're going. So as we move to common architectures, the question you're getting at is whether we'll, in some cases, [if] there's redundancy and overlapping in some of the tools, eliminate those redundancies? Absolutely. Will that cause us to change the packaging to simplify it? Of course. Do we know today what that's going to be? No. We're getting a lot of input from our customers and analysts, and if you have any ideas we'd love to have them.

The feedback we get from customers is that we need to simplify the product line over time on a couple of dimensions, making them easier to use and having a common user interface and making it easier to deploy to workstations to all the developers around the world. We're building those capabilities into our products, the packaging and pricing issues. Once we have the technical integration, we have lots of options, because the reality is that some customers really want to buy just a piece [of functionality]. So we're going to have packages to address that. Some are going to want the integrated solution, and some of it is just optimizing for different industries and markets.

CRN:: And that goes along with IBM Software's vertical focus?

Devlin: Yes.

CRN:: How long will it take before we see some of this?

Devlin: We did some repackaging as we went into Passport Advantage [IBM's volume sales channel]. We didn't want to have to train the IBM sales force on every product, so we have a set of product offerings and packages that make sense. We're learning how to leverage a different sales force.

CRN:: Would you say what's happening with you guys and the WebSphere Studio Team is the same thing that happened when Lotus became the center of collaborative stuff for IBM?

Devlin: Yes, absolutely.

CRN:: Will some of the Lotus-specific tools be coming over to your division as well?

Devlin: Not all tools will move into our team. But the framework and the architecture and the direction and the core tools will be what we're responsible for. But there will be many groups,in fact, we want to encourage not just other parts of IBM but business partners and everybody else to build tools on that framework. We don't want to be responsible for every tool that has to be built. So my guess is that some of the technologies will move in, but the Lotus team will continue to build tools, the DB2 team will continue to build tools and our business partners will build a ton of tools.

CRN:: Can you talk about how becoming a part of IBM and having the resource of a huge consulting business, IBM Global Services, has changed your business?

Devlin: IBM Global Services was actually one of our best customers before the deal. We'd already been working with them. So there's a number of areas where we're working with them today. One is they're using our technology and best practices for a number of engagements and that's obviously becoming more widespread now within Global Services. Secondly, they also capture a lot of best practices, so we're trying to learn things from them and incorporate them into the Rational process over time. They've driven a lot of the things around [processes] like IBM's E-Commerce Patterns, so we're trying to work with them to capture those and make sure our tools support those patterns, and then syndicate those to all IBM customers.

CRN:: IBM Global Services always said they remain agnostic when pitching technologies to third parties. They can't be seen as IBM totally. Does it hurt you being part of IBM now? Is it a net gain or a net loss or just a wash?

Devlin: I think it's a wash. But I'm not sure I understand. Relative to revenue?

CRN:: Have you seen more product sales with the addition of this huge consulting arm or is it the same because they have to be agnostic?

Devlin: Our product sales have definitely improved. Now I don't know if I can break it down enough to say how much of that is IGS, because some of it is because we have the whole IBM sales force, which sells IGS services and our tools. So how much of the credit goes to the strength of the IBM customer relationship and sales versus IGS I couldn't say. I don't know.

CRN:: Does IGS recommend Rational if someone needs a developer tool across their enterprise?

Devlin: Yeah. If the customer dictates something they'll go with whatever the customer dictates. If the customer asks for a recommendation, [they'll go with us]. That doesn't just apply to Rational, it applies to WebSphere and the rest of the software.

CRN:: Who would you say in terms of direct competition for enterprise-class tools?

Devlin: I'd prefer not to talk about our competitors. Let me say it this way. There are some companies that define their strategy by reacting to what other companies are doing. We introduced Rational Suite and a complete solution seven years ago, something like that. So other companies define their strategy by reacting to and copying as opposed to building up their product portfolio by acquiring or building market-leading products. They can only afford to have products that don't have the same market share and momentum.

Our strategy is not to look so much to what our competitors are doing to decide our strategy. Our goal is to set the agenda for our industry so while our competitors might be trying to implement the strategy we were on seven years ago, we've moved well beyond that.

This calendar year competition has not been a primary issue for us in driving the business. What's been an issue is figuring out how to leverage the IBM sales force, and in a very difficult economic environment making sure our team can articulate the business value and return on investment of our solution, which is the place where IBM has helped us. Some of us, and you heard it this morning, tend to do better talking to the technical people at the customer and don't always fully articulate the business value of our solution. Being part of IBM has really helped us focus more on the business solution and the ROI, which is what customers care about.

CRN:: But if you go into an account, nobody is going to spend a gazillion dollars on tools without evaluating some competitors. If you're going into a customer like Lockheed Martin, who is on the short list besides you guys, for example, against Rational Rose?

Devlin: The Gartner data is available [as far as competition in this space]. In modeling rules [we] probably [have] three times the market share of the next one. Oracle and CA are in there. If you look across the product line, Oracle and CA have products in this space, Borland has products in this space, Microsoft has products. It's not as much of a feature fight as I think you're portraying it. 'Oh, I'm buying this one or that one.' It's more, 'Am I going to reengineer my development process, move from a waterfall model to an iterative development process, put in place an enterprise architecture?'

We're replacing the whole business process, and we're really the only partner they can do that with. IGS and everybody helps with that. So from that point of view, IGS does help. If you want to do the business transformation and all of that, IGS is invaluable.

CRN:: Plus I'm sure you can compete with an entire platform from someone like BEA, or Oracle, or Sun Microsystems.

Devlin: It could be part of that kind of a competition particularly because of the IBM sales force, but our tools are fine on Sun or BEA. I know of customers, system integrators, that every weekend, whatever they build on WebSphere, they build on WebLogic, just to make sure. Their customer may demand the installation has to be one or the other. We support the Oracle [database], [Microsoft] SQL Server and [IBM] DB2. You have to. Customers require that. Fortunately, there's SQL and ODBC and standards that make it possible for us to do that.

CRN:: What do you see as far as macro trends in corporate spending right now toward the end of the year? We keep hearing about a recovery but there doesn't seem to be a lot of evidence to support it.

Devlin: In terms of the market, I look at it in terms of our business, which is driven by of course the overall investment environment, but it's driven by some other trends. So in pharmaceuticals and medical instruments, we're seeing new FDA requirements for the certification of software. People like the FAA, the Federal Aviation Administration, had the same requirements forever. But now that the FDA is requiring it, all of the pharmaceutical companies are more interested in putting in a process and tools and so forth, because it's hard to get certified if you don't have that. So that's a trend that we're seeing. Similar in the financial services market, with Sarbanes-Oxley and the increased financial scrutiny by all the regulatory agencies. There's a lot more pressure to have best practices and real, automated process, which helps us.

CRN:: Basically, wherever there's new government regulation, there seems to be new opportunities.

Devlin: More government regulation or, playing off a comment Grady [Booch] made, where the software is invisible everywhere,where there's business risk and liability. So systems like antilock break systems, flight-control systems in the airplane. Tthere was an article in the Wall Street Journal where the Plaintiff's Bar of the American Bar Association identified software for the Plaintiff's Bar. Now I'm very negative in general on litigation and lawsuits. But what it does do is forces you to be aware of the best practices in your industry [and whether you] can defend what you're doing relative to that. If everybody else has automated testing of their software and you don't, that's a fine business decision, but you need to be aware you made that decision before you're standing in the court! The lawyers unfortunately are going to make a lot of money on software failures in the next decade.

CRN: Any other trends people should be watching out for?

Devlin: Well, I think this notion of asset-based development. Let me use systems integrators [as an example]. Systems integrators are under incredible pressure right now to be cost-competitive. We see two trends in the way they're trying to compete on cost. One set is saying, 'I'm going to compete on labor rates, try to have the cheapest labor rates. I'm going to leverage the cheapest developers in the cheapest location and just have the lowest billing rate per hour.' There's another set of systems integrators that are saying, 'I don't want to play that commodity game. I'm going to do that, of course I'll leverage cheap labor rates in India or China or whatever, but I'm not going to try to differentiate myself based on commodity pricing. Instead, I'm going to take a technology solution.'

Unisys is a great example of this. They announced what they called Business Blueprints. What it is is for the five industries they are focused on they've built up a set of business patterns and technology patterns and the associated component architectures and requirements, tasks and everything, so that now when they have new engagements in those, they're not starting at ground zero. They can come in--it's like a giant template. They know if you're doing a banking system, there's this whole bunch of common stuff. We don't have to go back and build it again. We've got everything all packaged up and ready to go.

CRN: It sounds like component reuse.

Devlin: It's component-based development extended and automated, and it's a different business process because they've decided they're going to invest in building up these assets, and keeping a library of them and capturing them as they build new capabilities and maintaining them going forward. That's just what we're seeing in the system integration market. This is old news in some markets. It's making component reuse work from a business point of view, and the tools and process to support them.