In a bid to lock up the application lifecycle market, Platinum Technology Inc has announced it will acquire data modeling tools vendor Logic Works, Inc, from Princeton, New Jersey for $175m in stock. According to Meta Group, Logic Works’ ErWin has a commanding 42% share of the data modeling market. It aims to dominate the […]
In a bid to lock up the application lifecycle market, Platinum Technology Inc has announced it will acquire data modeling tools vendor Logic Works, Inc, from Princeton, New Jersey for $175m in stock. According to Meta Group, Logic Works’ ErWin has a commanding 42% share of the data modeling market. It aims to dominate the entire application development lifecycle, says Platinum president Andrew Flip Filipowski. With the Logic Works acquisition, the only missing links are development languages, Platinum’s thin offerings in application testing. Filipowski expects the Logic Works deal to hasten market consolidation. By the end of 1998, there will be only two places to get this suite, Platinum and Rational, he predicts. Over the past five years, Platinum has aggressively acquired tools companies to expand from its DB2 niche to client/server and data warehousing worlds. Logic Works was already Platinum’s third this year, coming on the heels of process modeling vendor LBMS and training services player Mastering Inc. Will Platinum keep up its five-year old buying spree? Andrew Flip Filipowski, Platinum’s president, said yes, it will set its sights on doubling its 2000-person consulting services business by year end, but no, it didn’t have any immediate plans in the pipeline. Logic Works plugs a huge gap in Platinum’s tool product line. More significantly, it lands Platinum with a stellar catch, bagging the sector’s market leader. A survey previously conducted by Logic Works prior to the acquisition revealed that 20% of ErWin customers were already performing some form of object modeling, while another 40% were actively considering doing so.
A bit of a bargain
In other words, there are some real potential synergies between ErWin and Paradigm Plus, Platinum’s object modeling tool-which until now has been an also-ran to Rational Rose. It looks like Platinum might have got a bit of a bargain. At $175m, it was paying only four times Logic Works’ 1996 revenues. With revenues of its newly acquired business unit expected to rise 50% this year, Platinum expects the deal to be accretive to shareholders. (Wall Street differed, dropping Platinum’s share prices 5% upon hearing the news.) With the deal, Logic Works will become a wholly-owned subsidiary, whose name will likely become Platinum’s Princeton Laboratory (following the usual script with Platinum acquisitions). While the Logic Works name will likely become history, its products will retain their household name identities. They will still be offered as standalone products, but in the long run Platinum will also build a suite that integrates source code and interface, providing a single means to toggle between differing modeling views: business process, objects, and database models. Today, Platinum’s Paradigm Plus and ErWin can interface through CDIF file exchange, an industry standard, lowest-common denominator means of exchanging model files that originated from the CASE world. In the near future (the ink was so new on the agreement that Platinum did not yet have a date), Platinum and Logic Works will develop APIs for exchanging models, akin to the interface that now exists with object modeling rivals Rational and Riverton. Product Synergies. There is little if any overlap. For instance, Logic Works’ BPWin, which provides business process and modeling and data flow diagrams, is not duplicated by Platinum. It provides meta data management capabilities, including ModelMart, which allows the sharing of models between ErWin and BPWin, but it does not duplicate Platinum’s repository offerings. In fact, Logic Works had previously announced a migration path to supporting the emerging Microsoft/Platinum repository. Other potential synergies exist in data warehousing, where Logic Works has added dimensional modeling with star schema notation and validation rules for fact, dimension, and outrigger tables. These capabilities will fill out Platinum’s data warehousing offerings, which currently include the InfoBeacon ROLAP tool; Forest and Trees managed query environment; the recently acquired HP Intelligent Warehouse management suite, a family of replication and data extraction tools, and a growing stable of implementation services. Platinum has also promoted the potential advantages of bundling the Logic Works family of products with its database management offerings, including Desktop DBA and Enterprise DBA (for tuning databases), and SQL Station (which is used for tuning SQL statements). However, a recent Computer Finance survey indicates that there is little crossover between database administration and data modeling, and that the markets for both sets of tools are far different. In most organizations surveyed, DBAs focused on the mechanical aspects of tuning database performance and keeping it running, while application developers were concerned about the logical modeling of the database. If Platinum is smart, it will follow the Rational script. No – not the buying of Pure Atria, but its brilliant acquisition of SQA which, like Logic Works, was another household name. Although in that instance, rational bought SQA, to Rational’s customers the deal in many looked quite the opposite, as Rational let SQA’s mass market machine assume overall channel strategy. Platinum, like Rational, has come from a high-end, enterprise heritage, and never succeeded going down market with query tools such as Forest and Trees, which has been soundly beaten by the Crystals, Cognoses, Brios, and Bushiness Objects of the world. Those companies excelled in channel sales and volume pricing, whereas Platinum has a direct sales heritage. With Logic Works, Platinum for the first time acquires a company used to selling low and selling in volume. Logic Works today boasts an installed base of 50,000 licenses in 7,000 organizations worldwide, with revenues of $40m. Although the company’s outlook has not always been so rosy (it had to restate revenues in recent years wasn’t solidly profitable until a year ago), it now makes money with license revenue averaging less than $1000 per customer. Platinum was not specific about its post sales plans, except to say that it expected to absorb the entire Logic Works organization and anticipates fertile cross-sales opportunities, especially with Paradigm Plus and ErWin. Given that there is little overlap between the organizations, layoffs are unlikely in sales. As for alliances, Filipowski promises to honor Logic Works existing commitments, including its alliance with Rational. In other words, competition. Customers expect that companies like Rational and Platinum, although they are competitors, must still work together well,’ he said. But the deal clearly places Rational in an awkward position. Aside from development languages, data modeling has been the main gap in Rational’s product line, and its alliance with Logic Works (where both have interfaces that can import and export each other’s models) was seen as a major workaround.
Swallow its pride
And with Logic Works now a part of the Platinum stable, Paradigm Plus product development will now have advance access to the ErWin source code. In the long run, users will have the final say. If Rational ROSE shops want their ErWin badly enough, it would make business sense for Rational to swallow its pride, and compete with a non-native interface. As the leading product in a niche market, Logic Works undoubtedly attracted many proposals from would-be suitors. Under its founder and first president, Ben Cohen, Logic Works jealously guarded its independence, a strategy that had severe financial consequences until recently. During Powersoft’s heyday, ErWin was the leading data modeling tool in Powerbuilder shops, and the company would have been a logical addition to the expanding Powersoft/Sybase stable (the company later acquired EssDesignor as substitute). And, it is tempting to ask if Rational was yet another in the long list of rejected suitors, and if so, how would Rational’s fortunes have differed today if it was able to lock up such a sweetheart. Might it have avoided the Pure Atria disaster? As of press time, Rational was not available to comment whether it would continue the Logic Works alliance with an acquirer that is likely to become a stronger rival in its core market. This brings on yet another tempting question: Will Platinum’s acquisition of Logic Works present yet a second chance for EssDesignor, now re-christened PowerDesigner? Conceivably, Sybase could promote PowerDesigner to the non-Platinum modeling crowd-Rational, Select, Riverton-as a truly object model-independent tool without the ‘hidden hooks. Object modeling vendors who have worked closely with Logic Works will look at this [deal] twice, said Steve Clark, Sybase vice president of enterprise application platforms. However, given that the Platinum deal was only announced hours earlier, Sybase had yet to draw up any SWAT plans.