At a time when organisations are trying to save money by maximising and enhancing existing technology, the testing tools market takes on a new lustre. This appears to be much of the logic behind UK company Micro Focus shelling out a combined $US155 million for Borland Software and the application testing unit of Compuware.
In New Zealand the Borland customer base is around 50, including large companies such as Telecom.
It has done well in the independent testing market recently, since Rational was absorbed by IBM and Mercury Interactive by Hewlett-Packard. Those testing products tend now to be offered as part of a broader bundle of software/hardware.
“It’s an incredibly positive move that should drive a lot of business opportunity in New Zealand,” says a Borland partner, commenting on the buy-out.
That may be because it will give Borland direct access to the Compuware market.
Currently, the testing tools market is worth around $2 billion globally. Because organisations are trying to make better use of their assets, the market is expected to grow substantially.
There is a view the growing complexity of enterprise IT systems is making it more difficult to develop and keep applications running without suffering poor performance. New technologies like web services and service-oriented architecture are making it harder to balance performance and stability.
Compuware CEO Bob Paul says in a statement accompanying the acquisition announcement that new, disruptive technologies like web services, virtualisation and cloud computing increase the difficulty of getting applications to deliver value back to the business.
Micro Focus’ historical niche is in developing Cobol compilers, predominantly for mainframe shops looking for an alternative to IBM Cobol tooling. Since 2006 the company, through acquisition, has been broadening its product portfolio to drive growth through market expansion.
CEO Stephen Kelly says the Borland acquisition will add new scale and breadth in an attractive adjacent market to existing business. The application testing/automated software quality market is seen as highly complementary to Micro Focus’ core application and modernisation business.
That’s because customers are looking to upgrade legacy systems rather than to replace them.
Borland sold off its historic tools business, Codegear (think Delphi and JBuilder) a year ago to Embarcadero, chosing to focus on the application lifecycle management market to enhance the management of application delivery. Unfortunately for Borland, that market, till now, has moved slowly.
That said, Borland is represented in more than 80% of the Global 2000 companies, part of why it is so attractive to Micro Focus, which is looking to expand into the US market. Micro Focus’ share price jumped 7% on the announcement.
Micro Focus will pay US$75 million for Borland and US$80 million for the Compuware acquisition. Both will be funded from existing cash resources, supplemented by a new, three-year revolving credit facility of $US175 million provided through a syndicated loan consortium, comprising Barclays, HSBC, Lloyds and RBS. The acquisitions are expected to be completed around mid-year.