I just saw that IBM is buying Swedish development vendor Telelogic for $745 million, greasing the skids for the race of big software vendors to go even deeper on verticals and specialization.
Just as IBM sidestepped the issue at their Innovate conference last month of whether they are getting into the applications business, this further opens the question: What is an application these days? Isn't an embedded system an application? Selling applications and the means to make them at this level blurs the distinction.
Seems to me the ability to make the applications at the granular level that Telelogic does is just about being in the applications business.
IBM's movement to providing more granular professional services, around compositing vertical business services, also bumps up close to the concept of being in the applications business. No, they don't sell a box of CDs to run your HR department, they won't sell the logic per se, but they are selling the ability to bring services together to run your agile business processes. It's the future, while packaged applications is the past.
And with Telelogic, IBM will help you design new embedded and enterprise systems that make cars stop and airplanes bank to the correct coordinates. Are those services, applications, processes, methodologies, business services? Yes, yes, and all yes.
So IBM can say otherwise, but I see IBM as in the applications business of the future, top to bottom. ISVs don't necessarily have to quake in their boots, but the enterprises and end users that need solutions, regardless of the code approach, should expect to see IBM and its close partners showing up in a lot of new places ... living rooms, cars, planes, tanks, missiles ... and in new ways ... consulting, compositing, architectural methods, tools, systems development, and -- increasingly -- killer libraries of highly targeted solutions.
Tony Baer has some good thoughts.
And now, as Paul Harvey used to say, the rest of the story. ...
After attending an analyst conference call this noontime with IBM Rational General Manager Danny Sabbah, there's more to the proposed Telelogic deal than meets the eye initially. The move signals a renewed interest by IBM in embedded development and device systems, which may spur a rapid consolidation in the embedded tools and platforms space.
Now that IBM has an interest in the "end-to-end" synergies that are being energized by convergence and Internet media, the Telelogic acquisition may be a bellwether for other IBM acquisitions as well to bolster its role in embedded systems development and deployment. This also augers well for IBM's silicon business, because Power and Cell platforms can be used to optimize and customize software solutions for embedded applications. Hardware and software are very integrated on the embedded level, and tools and test platforms may as well be parts of the stack itself.
Other vendors showing renewed interest in this end-to-end benefit include none other than Microsoft and HP. And IBM is becoming a bit more curious about how a powerful role in the device end of things can propel further use and adoption of the back-end stuff. Sun had the vision with end-to-end Java. Microsoft has had the vision with Windows Everywhere. Remember HP's smart house initiatives under Frankenberg? Yet no one has cemented an end-to-end architectural dominance, try as they may. And this in the era of the iPhone, no less.
Could we be seeing the stirrings of a new tiger on the prowl? IBM needs to move beyond the enterprise, vertical by vertical, device by device. In the "systems of systems" world, it's better to be a provider for all the systems, no?
The Telelogic bid provides even more attractions. While there is considerable overlap in what Rational offers and what Telelogic provides (portfolio management, requirements management, enterprise architecture, testing, modeling, configuration/change management, and quality assurance), there is very little overlap in terms of markets, said Sabbah. IBM has just not operated at that level of the industries and 8,000 customers that Telelogic sells to.
The synergeries are wide and deep. For WebSphere, there is the BPM and SOA benefits of the Telelogic enterprise architecture offerings. For Rational, there's all of the above. For Hardware, there's the silicon and platforms to run all the-to-end processing. For professional services, there's new depth in vertical industries to plumb. Sales gets a new force in an area it has not been in much, the OEMs for device manufacturing. All upside, and for $745 million (in a day when an online ad broker goes for $6 billion).
The deal will: "accelerate the development of complex systems," "acquires a focus on new markets," "provides global reach," "preserves the clients' investments in Telelogic and IBM," and is "historic for Rational," said Sabbah.
IBM also like the idea of getting more deeply in the healthcare market, from the devices on up and on out to the cloud.
Disclosure: Wind River Systems and HP are or have been a sponsor of BriefingsDirect B2B podcasts.