International Business Machines Corporation acquired Rational Software for $2.1 billion on Friday of last week, in a move that I.B.M hopes will move it away from the computer hardware market and into the software and related services market. The Rational acquisition will reportedly help IBM retain its position as the leading platform provider for Java-based applications. Rational's software tools are used in building technical software, commercial software products and software for embedded devices and real-time systems, such as pagers, cell phones, medical devices, air traffic control systems and government defense systems. Rational's software will reportedly integrate well with IBM's Websphere software product. Of the Fortune 100 companies, 98 of these use Rational's tools and services, and Rational estimates that more than 600,000 software developers use its software tools. IBM reportedly will merge Rational's business operations and employees into IBM as a new division and a "fifth brand" of IBM The Rational acquisition should also reinforce IBM's commitment to open industry standards.
According to Steve Mills, Senior Vice President and Group Executive of IBM's Software Group, "The software industry, business customers and developers are increasingly demanding software that is based on open industry standards and enables integration - integration of business applications across the enterprise and the value chain of customers and suppliers. This is an important aspect of IBM's 'On Demand' strategy. Rational supports what IBM does best, which is provide infrastructure software and software tools to help our customers create a complete software development environment. This deal extends IBM's ability to help customers into the 'on demand' future with tools built on industry standards to develop, integrate and manage their business processes." Rational's C.E.O. and co-founder of Rational Software, Michael Devlin, will become the General Manager of the 'to-be' merged Rational IBM division, reporting to Steve Mills. IBM has been a customer of Rational since 1985. "Rational helps software developers around the world write software faster, with less risk and can help produce a higher return on investment," said Michael Devlin. "The combination of Rational and IBM is a logical extension to what has been a very beneficial, 20-year relationship and will significantly extend our progress in key markets and customer segments."