IBM Buys, RIM and MS aim to Reverse Downward Trends

IBM Corp. is buying a Green Hat, a software testing solutions provider with cloud-based hosting technology that can accelerate the rollout of new environments. Elsewhere, Research in Motion Ltd. (RIM) may get new leadership while Microsoft Corp.’s Windows Phone platform loses market share.

Focal Points:

• IBM has entered into an agreement to acquire software quality and testing software provider Green Hat, headquartered in London, UK and Wilmington, DE, for an undisclosed amount. Green Hat allows software developers to setup virtual software and hardware testing configurations in the cloud or in-house environments such that the costs for hardware, labor, and software are reduced by an order of magnitude and cycle time is shortened. Green Hat offerings support all the testing phases from unit test through system, stress and volume testing and alleviate the agile programming testing bottleneck, according to company executives. Once the acquisition is complete, Green Hat’s technology will be integrated into the IBM Rational Solution for Collaborative Lifecycle Management and offered through IBM Global Business Services’ Application Management Services (AMS). AMS can deliver life cycle assistance from strategy to managed services for development shops. Elsewhere, Google Inc. announced it has purchased 200 more patents from IBM, adding to the than 2,000 it has acquired previously.
• RIM has been on a downward slide lately. It has suffered with poor sales in developed markets, lackluster response to its PlayBook tablet, a worldwide October outage, and the delay of the devices based on the much-needed new operating system pushed off until late 2012. Now, it appears as if investor cries for replacing its co-CEO management team with a new leader may finally be answered. Reports are surfacing that the longtime CEOs may be ousted after the conclusions of a governance review by the company's independent directors wraps up later this month. Rumors are circling that the replacement may be former chief operating officer of Royal Bank of Canada, Barbara Stymiest, who has served RIM as a board member since in 2007. RIM also announced that it has slashed prices of its 16 gigabyte (GB), 32 GB, and 64 GB PlayBooks to $299 – a potential signal that the company is ceding the tablet market to more successful competitors.
• A new report from market research company comScore Inc. shows that Microsoft's Windows Phone 7 is continuing to lose its already shaky footing in the smartphone market. The announcement shows that Microsoft's market share has fallen from 5.7 percent to 5.2 percent of the market between the August and November ranking. This is particularly disappointing for Microsoft as the "Mango" update arrived in the fourth quarter with the inclusion of commendable improvements billed as Windows Phone 7.5 and comScore measurements include total subscribers not just new shipments. Conversely, Apple Inc. iPhone and Google Android devices achieved new subscriber highs reaching an average of 1.5 million new activations per day during December, according to reports. Microsoft plans to increase sales with updates in Q2 and Q4 with competitive pricing, an enterprise push, and new high-end phones.

Experton Group believes IBM's acquisition of Green Hat fits well with the company's established and growing strengths in its Rational software development and testing suite as well as its development and test cloud offerings. Testing configuration acquisition, setup, and management is drain on resources and capital that adds no value to the development process but can consume half of the testing costs and resources. The removal of this headache --- combined with potentially tight integration with IBM's software and services groups -- should be an easy win for IT executives who need to rapidly and cost-effectively deploy and deliver testing environments. IT executives should consider the IBM Green Hat virtualized solutions, especially if it can be demonstrated that the offerings have an ROI of less than one year and usage significantly shortens the application delivery cycle.
While the prospect of RIM getting new leadership remains conjecture at this point, it is difficult to believe that this reality will not come to bear. The company desperately needs to restore its shareholder faith and RIM has no cards to play other than bestowing a new head and following up quickly with new, competitive product. Unfortunately, the next version of the BlackBerry OS remains at least six months (likely more) away and product margins will remain grim until and unless new products take off in a major way. IT executives should feel secure in their BlackBerry infrastructures – save for the major outage last October, which the company says will not repeat given architecture improvements – but should actively be planning and adopting alternatives.
Microsoft is hell-bent on making a splash with its Windows Phone products, and despite the company's penchant for abandoning poorly performing markets, it is clear that its commitment to smartphones is secure for the foreseeable future. While sales barely register compared to Android and iOS, the Windows Phone platform is attractive, offers a friendly interface, and has nice enterprise tie-ins with backend Microsoft management and collaboration technologies. While its market position is bleak, IT executives should consider devices using the platform, as Windows Phone is a serious smartphone contender worth testing and deployment.