Review of 2009 for Software Development: Many Acquisitions and a Funeral

Last year has certainly been busy for the software development tools industry. We have seen many companies merging together and also the funeral of one of the oldest brand in the software development industry.

Bye, Bye Borland

After the sale of its development tools division to Embarcadero in 2008, Borland kept only the tools dealing with requirements management and software testing. This didn’t improve its financial situation and finally Borland sold itself to MicroFocus. This was a sad end for a brand that accompanied software developer for more than 25 years. Software requirements have always been a secondary topic in the software development tools world and the trend towards agility hasn’t improved this. Now you can manage user stories with paper cards and a board. Approaches like UML are declining and you will find few items dealing with them in today’s programmers waterhole like dzone.com or stackoverflow.com, The end of Borland is just the symptom that this world is difficult for requirements tools vendors.

Oracle Buys Sun, WMware Buys Spring and You Buy Software

With a little bit of irony, just one year after having bought MySQL, Sun was acquired by Oracle. It is difficult to judge a deal that is not completed yet as the European Commission is still examining the merger. I am however afraid that the business and financial objectives of Oracle will largely lead to the reduction or the end of most of the Sun open source efforts and a serious slowdown in MySQL evolution.

Just after the future of Java becomes a topic of discussion after the deal between Oracle and Sun, WMware decided to acquire SpringSource and to give to this entity a stronger platform to promote the Java language. Since then, SpringSource has launched its Tomcat server version, Enterprise Java Cloud and Spring Roo. Previously it had acquired G2One at the end of 2008 and thus the control of the Groovy and Grails products. It is now surely the most important active player for Java software development tools.

Google is (also) a Software Development Tools Company

Google domination in the search engine world is well known, but as far as developers are concerned, it is amazing how Google is quietly occupying more and more space. Here are some of the software development initiatives of Google:
* Google App Engine
* Google Web Toolkit GWT
* Go Language
* Google open source projects forge
* Google I/O Conference

Google seems to have understood that besides the content, it should also be active in the plumbing that runs the Web. This is why software developers should be interested in what Google does in this area. You could do this following some blogs like the Google Code Blog and the Google Testing Blog. You will see that besides the well-known projects, Google releases a lot of interesting open source tools created by its development team.

Another Suitor for Borland?

According to Reuters, Micro Focus, which agreed in May to buy Borland, said on Monday that Borland had received a preliminary non-binding indication of interest from an unnamed financial buyer. The price offered would be $ 1.20 versus the $ 1 offered by Micro Focus. If the transaction is not approved by the shareholders, Borland would have to Micro Focus $3 million.

Borland entered a nondisclosure agreement with the new suitor and it has granted it access to its accounting books. Among the possible buyer, the name of Embarcadero and Oracle are mentioned. Embarcadero already bought last year the CodeGear division and might be interested for some new tools that will complete its current offer… for cheap. Oracle, who just bought Sun, could seize the occasion to create a more complete offer of software development tools around Java. JDeveloper, the Java IDE from Oracle, was originally build around the JBuilder technology from Borland.

Will Borland Survive yet Another Crisis?

Borland discreetly announces this week the resignation of both Tod Nielsen, CEO since 2005, going to VMware as COO, and Peter Morowski, SVP of research and development, leaving the company to pursue other opportunities. Borland will also reduce its workforce by approximately 130 employees, or approximately 15 percent of its regular full-time staff. For the fourth quarter of 2008, Borland is expecting to report total revenue in the range of $38.5 million to $40 million, down at least 10% from previous quarter. Considering that operating costs of revenues for the third quarter were around $45 million and that a lot of them are fixed costs, this will be another quarter with an important operating loss for Borland. The current CFO will act as CEO.

In the past year Borland has often blamed its IDE division to be the cause of this problems, slowing its ambition to be an ALM leader with huge financial losses. In May, Borland finally managed to sell the CodeGear unit to Embarcadero. The financial results of CodeGear are now difficult to estimate, as Embarcadero is a private company. What is left at Borland is a mixed set of products, resulting of some in-house innovation and external acquisitions (Togethersoft, Segue), grouped under the “Application Lifecycle Management” banner. None of the components of this set is considered as a top leader in its specific market and good integration between existing products is always difficult to realize. Trying to sell these type products is more difficult, because you have to reach a higher level in the enterprise than for individual developer products. It is also the type of project that most companies will postpone in a period of difficult economic conditions. Furthermore, this put Borland in competition with bigger fishes, like IBM that purchased rival Telelogic last year, and companies like MKS that have their roots in the ALM market.

It would be a bad thing if Borland fails just after having celebrated its 25th birthday, but if it was already struggling in times where the economy was good, we could fear that survival would be even more difficult in the hard times that are ahead of us. Researching for this post, I found that Borland had already cut 40% of its workforce in 1995 after the resignation of its founder Philippe Kahn, so maybe we should believe that it could be just “another deep crisis” in Borland history, a company briefly knew under the name of Inprise ;o)

Borland full press release

Borland (Finally) Sells CodeGear to Embarcadero

Yesterday Borland Software Corporation announced today a definitive agreement to sell the assets of its individual developer tools unit, CodeGear, to privately held Embarcadero Technologies. The purchase price for CodeGear is expected to be approximately $23 million. Borland will also retain CodeGear’s accounts receivables with an approximate value of an additional $7 million. The transaction is expected to close by June 30, 2008.

Borland made this announcement the same day that it announced a GAAP net loss of $22.3 million for the first quarter of 2008. Borland has been loosing money for quite a long time, at least since it already tried to sell its tools division at the end of 2006, before setting an independent entity named CodeGear. In 2007, Borland already reported a GAAP operating loss of $61 million for the year compared to a loss of $53.1 million in the prior year.

For 2007, CodeGear reported $57 million in revenue and Borland total revenue were $268.8 million. The price paid by Embarcadero is therefore around 50% of yearly revenues. This could be compare for instance with the price paid last year by IBM to acquire Telelogic, which was around 300% of 2007 revenues. Borland management has been accusing the tool division for dragging down profitability for a long time. It is more difficult today to be active in this market area, when most developers could use free open source solutions like Eclipse or NetBeans. Even commercial editors like Oracle or Microsoft offer a free basic edition of their IDE. With this transaction, we will finally able to judge Borland’s management on its ability to develop the other products (Silk, Caliber, StarTeam, etc.)

The question is why would Embarcadero buy such an apparently bad business? First, its current product is centered around database development, so there is no redundancy with CodeGear programming tools… but the management could see redundancies in the sales and administration people and cut a large part of the costs. With a “small company” culture, Embarcadero could be used to a more controlled spending that people used to the large pockets of Borland. Due to the price paid, Embarcadero is taking a relatively small financial risk, as it could have more easily a positive return on its investment with CodeGear recurring revenues. Finally, as Embarcadero was until now active on a “niche” market (database tools), it could have been less sensitive to the competition in the IDE segment.

It has to be noted that CodeGear has also made recently good efforts to explore new markets, like PHP and Rails, different from its existing Delphi, C and Java base. This could provide a good opportunity to cross-sell products through existing customer base. I hope that the growth forecasts announced in the acquisition press release will realize for the benefit of employees of these two companies, but I think that the expansion of diffusion of free open source and commercial competing products will make it very difficult to achieve them.

If You Can't Beat Them, Join Them !

August 13th, Borland's subsidiary CodeGear announced JGear™, a set of specialised plug-ins for the Eclipse open-source development platform. JGear augments Eclipse in three areas - Java application performance, visual development and team collaboration. According to CodeGear, the top pain points for Java developers using Eclipse stem from the difficulties of application performance tuning , Java code archaeology, coding and configuring Java servers and frameworks, team collaboration

The new JGear product line includes - JGear™ Performance for Eclipse, JGear™ LiveSource® for Eclipse, and JGear™ Team for Eclipse (both Client and Server editions). JGear Performance contains a variety of performance and tuning features such as memory and CPU profiling and debugging; automatic detection of potential memory leaks; and real-time monitoring of programs' use of virtual machine memory. JGear LiveSource includes a graphical EJB workbench and Web services designer; Unified Modeling Language visualisation of code artefacts and design for analysing an application's design and implementation; CodeGear's LiveSource technology that simultaneously replicates changes to models in the code and vice versa to aid alignment between software architects and developers; and creation of Enterprise JavaBeans and model relationships. JGear Team offers a complete agile team collaboration and development system based on open-source components. JGear Team is both a turnkey server solution and an Eclipse developer client solution JGear Team Server is a team development server stack based on best of breed open-source components such as Subversion, Bugzilla, Continuum, and XPlanner. JGear Team Server includes ProjectAssist™ - the JGear Team administrator client for simple single-click server installation and configuration, team project creation, user administration and setup.

This is a normal evolution for CodeGear as the future is difficult in the software development IDE sector if you want to remain the supplier of an isolated solution. Competition with open source and free products like Eclipse or NetBeans is difficult to sustain. A better strategy is to offer additional services that could be missing in the core open source solution and that developers are ready to pay some dollars to obtain. Acting like this in the Eclipse ecosystems, CodeGear recognises that its survival may depend on its ability to transform itself from software producer to plug-in developer.

http://www.codegear.com/
http://www.eclipse.org/