Select report for RATL:
Enter a new ticker symbol:
Business Description for RATIONAL SOFTWR (RATL) 03/1998
Rational Software Corporation (Rational or the Company) is the author of the
Unified Modeling Language (UML) and an industry leader and standards-setter in
software development. Rational's mission is to ensure the success of customers
who depend on their ability to develop software. Rational unifies proven
principles of software development, tools, and services into what it believes
are best practices that unite developers, analysts, designers, quality
engineers, and project managers in improving software timeliness, reliability,
and return on investment. Rational's integrated family of tools supports
requirements management, visual modeling, testing, and configuration and
change management. Rational's extensive range of professional services
accelerates customers' ability to apply the principles and tools on their
projects.
INDUSTRY BACKGROUND
General
Software permeates products and processes encountered in almost every aspect
of daily life. Many companies base their businesses on enterprisewide
information systems that are increasingly built as distributed systems
exploiting a company-specific intranet or the Internet. Software is at the
core of business applications ranging from equity-trading systems to inventory
management. The telecommunications business is highly dependent on software in
areas as diverse as call routing, switching, rate setting, and billing.
Software is the central element of command-and-control systems in submarines
and military aircraft. Software governs the operation of machines from
ordinary office copiers and cellular phones to life-saving medical devices. As
organizations seek competitive advantage by exploiting the ongoing
improvements in microprocessor technology and the emergence of new computing
platforms, software is becoming more pervasive and more sophisticated. The
success of businesses around the world depends increasingly on their ability
to construct and modify software systems that match their changing business
needs.
Traditional software-development techniques have not kept pace with advances
in computer processor technology, with the development of new platforms such
as the Internet or company-specific intranets, or with the general demand for
distributed software systems such as multitiered client/server applications.
Software, therefore, has increasingly become the constraint on performance,
quality, and time-to-market for many organizations. The ability to quickly and
cost-effectively create complex software applications that perform as desired
and that are easy to maintain and reuse in related applications and products
can be a critical competitive differentiator. As the number and complexity of
software applications continue to expand, it is becoming increasingly
important for businesses to migrate to a more effective approach to software
development.
Component-based development is a way of constructing software systems by
combining and integrating preengineered and pretested software components.
Component-based development has emerged as a powerful technique to simplify
the construction of software systems and to improve their quality. Software
components can be designed, developed, and tested once, and then combined
multiple times by other users to create new software systems in a manner
analogous to combining hardware integrated circuits to create a new electronic
device. By increasing software reuse, this approach reduces the amount of
source code that must be created in
connection with the development of a new software system, helping to reduce
risk, time-to-market, and cost, as well as to improve the quality of the
resulting software.
PRODUCTS AND SERVICES
Rational supports component-based development with an extensive family of
software products covering critical phases of the software-development
lifecycle, from initial analysis of requirements through detailed design,
coding, testing, debugging, and maintenance. Rational's products support
individual designers and developers, development teams, and project managers.
The major components of Rational's product line are RequisitePro for
requirements management; Rational Rose for visual modeling; Purify, Quantify,
PureCoverage, SQA Suite, Rational Visual Test, and preVue-C/S for various
aspects of automated testing; ClearCase, ClearCase MultiSite, ClearCase
Attache, ClearDDTS, and ClearQuest for configuration and change management;
and Rational Apex for managing development teams and the components they
generate. These tools work together to enable customers to employ proven
principles of effective software development throughout the project lifecycle.
RequisitePro: Requirements-Management Tool
RequisitePro is a family of products that help users define and manage the
formal requirements for their software systems. RequisitePro runs on Windows-
based PCs and makes use of Microsoft Word and Microsoft Access. RequisitePro
allows users to collect and organize textual descriptions of software
requirements in the form of structured documents, which can be queried later.
Rational Rose: Visual Modeling Tools
Rational Rose is a software-engineering tool that allows users to visually
model and document the structure and behavior of their software systems. The
Rational Rose product line supports major platforms, including UNIX, Windows
95, and Windows NT, and implementation languages, including C++, Visual Basic,
Java, Forte, PowerBuilder, and Ada, that are widely used today.
Automated Testing Tools
Rational's solution for automated testing focuses on helping users verify
the reliability of their software, the correct functionality of their
software, the performance of their software, and the performance of the
overall system (including databases and middleware) of which their software is
a part. Rational's automated testing solution helps users deliver software of
higher quality more quickly and at lower cost.
Purify (for UNIX), Purify for Windows NT, and PureCoverage help users verify
the reliability of their software. Purify and Purify for Windows NT employ
patented object-code insertion (OCI) technology on users' executable code and
automatically detect many common runtime errors. Users can fix the problems in
their source code, guided by the precise information provided by Purify and
Purify for Windows NT. PureCoverage also employs OCI technology to analyze
users' executable code and to report which parts of the code have not been
executed and tested. Using this information, users can develop more complete
test suites and deliver more reliable software.
SQA Suite verifies whether client/server software has the proper
functionality--in other words, that it does what was intended. SQA Suite
includes: SQA Robot, which allows users to create and run automated tests; SQA
Manager, which allows users to plan, manage, and measure the progress of
testing projects; SQA LoadTest, which allows users to test client/server
applications under different load, stress, and multiuser scenarios; and SQA
Process, which is a methodology for the automated testing of Windows
client/server applications.
Rational Visual Test, an automated, language-independent, software-testing
tool, is designed to test proper software functionality by rapidly creating
tests for applications of virtually any size and created in any implementation
language by capturing those tests for later reuse. These capabilities enhance
the ability of organizations to deploy applications for the Windows 95 and
Windows NT operating systems. Rational Visual
Test is integrated with Microsoft Developer Studio, a desktop development
environment. Rational acquired Visual Test on October 2, 1996, from Microsoft.
Quantify (for UNIX) and Visual Quantify (for Windows NT) help verify
software performance by measuring where time is spent during software
execution and by providing users with accurate data on potential performance
bottlenecks. This data tells users what portions of the application need to be
tuned or revised to improve performance.
The preVue family of products helps to automate software load and stress
testing, which verifies that a software application will perform properly in
the face of a given load, as measured by the number of simultaneous users or
the level of computer network traffic. Thus preVue helps users verify that
their software will perform as desired once it is deployed. The preVue family
runs on UNIX-based workstations and is integrated with major commercial
database management systems such as Oracle.
Configuration and Change Management
Rational's configuration and change management products provide
comprehensive support for developers and development teams working in parallel
on a shared set of project artifacts, such as source code, binary files,
models, requirements documents, test cases, reports, and so on. ClearCase
provides secure and reliable access to all project artifacts, allowing teams
to share these artifacts and work in parallel, making changes simultaneously,
without interfering with one another's work. ClearCase maintains a full audit
trail of who changed what, when, where, and why, manages multiple versions of
software and software systems, and reliably performs builds of software
systems. ClearCase MultiSite supports geographic distribution of software-
development teams working on a shared set of artifacts. ClearCase Attache
allows access from a Windows client to ClearCase on UNIX or Windows NT.
ClearDDTS (for UNIX) and ClearQuest (for Windows NT) allow users to manage
requests for changes (such as error reports or requests for enhancement) and
to track their progress during the development process.
Rational Apex: Integrated Development Environment Tools
Rational Apex is a software-engineering environment for control of software
projects. It effectively controls large-scale development efforts, helping
customers improve time-to-market while reducing risk and cost. It also makes
large-scale software reuse possible by directly managing software
architecture, significantly improving the efficiency of the overall software-
development process. Rational Apex runs on UNIX platforms and is available in
versions that support the C/C++ and Ada programming languages for UNIX,
Windows NT, and embedded applications.
Technical Consulting and Customer-Support Services
Rational's services include consulting and training that enable customers to
adopt advanced software- development processes and to use component-based
development effectively. Consulting services range from helping customers
implement large-scale software reuse to working with customers to develop the
right architecture for their software systems to helping customers'
development teams work through the first few iterations of the controlled
iterative development process. Rational also offers several standard
consulting packages and training courses that assist customers in the
implementation of controlled iterative development and the use of component-
based development. Rational also offers a support program that entitles a
licensee to receive all enhancements and upgrades to the licensed product that
are published in the succeeding 12-month period, as well as certain other
support services.
RECENT ACQUISITIONS
For a listing of recent acquisitions by the Company, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations:
Overview: Recent Acquisitions."
BUSINESS ALLIANCE WITH MICROSOFT
On October 2, 1996, Rational and Microsoft announced the formation of a
business alliance that consisted of Rational's acquisition of Microsoft's
Visual Test product, technology cross-licensing, joint development projects,
and joint marketing programs.
In connection with this alliance, Rational acquired from Microsoft the
Visual Test product, a leading software-testing tool.
The cross-licensing element of the alliance includes a five-year license to
Rational to develop and distribute, as part of Rational's products,
Microsoft's Developer Studio, an integrated development environment for
Windows 95 and Windows NT.
Rational has entered into a two-year agreement to develop a visual modeling
product, including certain elements of Rational Rose, for distribution in
certain Microsoft development tools that run on Windows 95 and Windows NT.
Rational will be obligated to provide timely product updates to maintain
compatibility with changes in Microsoft operating systems. Following
expiration of the agreement, Microsoft will have the option to obtain a
perpetual, nonexclusive right to source code for the product, including
certain aspects of Rational Rose technology.
Rational's objective in acquiring the Visual Test product and partnering
with Microsoft is to extend Rational's product line and to increase the use of
component-based development by providing visual modeling capabilities to
developers using Microsoft's visual tools. In addition, Rational believes that
its arrangement with Microsoft has exposed Rational's technology to potential
customers outside of its historical customer base. Rational expects that
continued changes in its pricing models and combinations of features within
product lines will be required to encourage these potential customers to
purchase Rational products. Rational's objective in entering into the cross-
licensing arrangements with Microsoft was not to generate direct product
revenue from Microsoft, and Rational does not expect such arrangements to
directly result in a material increase in product revenue.
See "Factors That May Affect Future Results: Business Alliance with
Microsoft; Acquisition of Visual Test; Licensing of Rational Rose Technology
to Microsoft."
PRODUCT DEVELOPMENT
Rational believes that its success will depend largely on its ability to
enhance existing products and develop new products that meet the needs of a
rapidly evolving marketplace and increasingly sophisticated and demanding
customers. Rational intends to extend and strengthen its lifecycle support for
component-based development by expanding its product offerings, introducing
new products, and offering higher levels of integration between its products.
Rational uses its own software processes and tools extensively in its own
software-development activities. Although Rational has primarily developed
products internally, it may, based on timing and cost considerations, acquire
technologies or products from third parties.
Rational's research and development staff, including product development,
product support, and technical writing personnel, consists of 626 employees as
March 31, 1998. Rational's total research and development expenses were
approximately $61.6 million, $47.2 million, and $33.8 million in fiscal years
1998, 1997, and 1996, respectively. As a result of the Company's mergers with
Pure Atria and SQA, accounted for as poolings of interests, research and
development costs are presented on a combined basis for all periods shown.
CUSTOMERS AND APPLICATIONS
More than 265,000 licenses of Rational's software products, exclusive of
Rational Visual Test but inclusive of SQA Suite, have been sold to more than
21,000 customers worldwide. No single customer accounted for 10% or more of
revenues in fiscal 1998. Rational's comprehensive solution of software-
development tools and professional services is used by major organizations in
many industry segments to design, build, and maintain complex software
systems. |
