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Borland Developer Tools Group is gone. CodeGear has been born. Long live the
king!
In the start of this year, Borland announced that they were going to split
out their divisions responsible for JBuilder, Delphi, C++Builder and Interbase
to a seperate entity with the intent of selling it. During the process, the
entities were as a whole called Borland Developer Tool Group.
Yesterday (Nov. 14 2006), Borland announced that the split had completed but
not sold. DTG is now to be known as CodeGear. A fully owned subsidary of
Borland, which were one of the results possible that I mentioned in my comments
back at the start of the year.
Obivously Borland have not been able to find investors that have fullfilled
the criterias set up by Borland. At least 4 criterias were made public
around the time of the split (in no particular order):
- Right price
- Secure future of the products
- Secure future of the employees
- Secure future of the userbase
According to the statement made by Borland, there have been negotiations with
several serious potential buyers, but Borland decided that none of them
fulfilled all the criterias and thus a sale was not to be.
What are the implications of this? Lets look at the main negative sides
first:
- There will be no additional infusion of money or ressources from a
serious investor, which many of us hoped for. Money is not everything, but it
certainly helps alot, wanting to advance several productlines that all
are feeling the effect of being in a segment, where more and more free or
lowcost tools are available, and where the playing field has changed
significantly due to the renewed focus on RAD development by MS.
- There is a risc that the management team (mostly now ex
Borlanders) still sees the boundaries of status quo rather than the
open fields a visionary outsider could have seen. There is nothing to
stir up the pot as fresh blood in the top and a new organization...
aslong as it doesnt happen too often!
- Lack of or negative PR value. A high profiled successful sale would
automatically have provided much needed positive PR. A non sale automatically
provides bad PR, as it indicates that the interest was not high enough for
potential buyers to live up to Borlands criterias. This is obviously a
problematic indication.
But is there anything positive to be said then? Yes:
- The internal structure of CodeGear is intact. There is little, if
any, confusion internally of who makes the decisions and how the
processes are working. This means that the main part of human ressources can
focus on the core business rather than having to learn new structures,
internal information flows and tools which we all know is very time consuming
and usually takes a year or more to get past.
- CodeGear has seemingly been given vast control over their own life.
Although it would be naive to think that they woudlnt have to account for
potential losses to Borland, all indications are that Borland have given them
the handle to the throttle of the code train. They decide how to market, they
decide how to sell and what to sell and finally they get the income that they
earn. Usually this sense of having control gives employees extra energy and
abilities to find solutions to problems, ideas for income areas etc. And as
all know.. if you dont have positively motivated employees you have nothing in
IT.
- Fresh sheet posibilities. The Borland brand have had its ups and downs.
People still remember Inprise too well and all the blunders made in the name
of the old brand. It is only logical that a sizeable marketing campaign
will start to brand CodeGear globally. This provides a posibility to set
things straight, regain trust from customers and hence infuse a new mindset in
customers and potential customers minds.
No doubt, CodeGear have alot of challenges ahead. They need to balance off
their income and their expenses, while still being productive
and trustworthy and without neglecting the obvious need for marketing and
branding. This is the main challenge I see short term. Long term, many more
challenges has to be overcome, like making the decision about if they
aiming at being market leaders or followers.
I see developer products as a three 3 level pyramids:
The first pyramid, shows the potential number of customes. 2nd shows the
potential income level per unit sold to the customers and the 3rd (furthert
right) shows the expected support cost per sold unit.
The pyramids has been divided into 3 levels, small companies or individuals,
medium sized companies/organizations and large companies/organizations.
Individuals, of who there are many, usually dont have very large pockets
filled with money and do not have an inhouse support/helpdesk to assist with
solving problems.
Large companies have a potential smaller userbase, however the income per
sold unit can be expected to be significantly higher and they often have
internal support structures (or are ready to pay for support) that means that
support cost for the vendor of developer products is significantly lower.
In the middle are the medium sized companies or organizations.
It is obvious that the different sizes of companies have different
requirements and potentials. For that reason they also need to be attacked
differently. As CodeGear must be assumed to have relatively limited ressources,
focus is needed. Its not possible to make all 3 level of users happy having one
single organization. It would however probably be possible to choose either the
medium to small sized companies or the large and medium sized companies as focus
area.
That means that the developer tools should be target for either low/mid end
or for mid/high end. Targeting includes featureset, pricing and support
levels.
Which level is the right to target for CodeGear to be successful, I dont
know. However with the Turbo products it seems that they are targeting the low
end market, while with the architect products they try to target high end
markets. Imo this is not the way to go as the focus is too diversified, unless
one finds a way to provide the low end products at true low end prices
where peer to peer support groups are sufficient and accepted as the only
mean of support. Its important that price of product and support level
match the low end expectations, which usually is... "I have paid so and so much
for your product... I want lifetime _free_ support and _free_ updates as I have
deserved it."
The only way to get around that is to price the low end products low enough
to make that argument logically void by the low end users themselves.
Focus should not only be on which customer group to sell to, but
also on... do we want to be followers... or market leaders?
One of the reasons for the success of Borland in the good old days were that
they were market leaders. They produced products that were unbeatable in
features, price and performance, and that operated in a segment where no others
were active.
The last many years, Borland unfortunately have changed from being a market
leader to being a follower in non niche segments. This is not the receipt to
success.
CodeGear should definitely focus on areas where no one else have focused and
make those niche areas mainstream between developers. This status will ofcourse
not last forever, as big companies with big muscles at some point will step in
and try to takeover the leadership in those areas too when the business case is
big enough. And for that reason, CodeGear must continue to locate niche areas
and innovate to bring those niche areas together on a higher level.
That is where CodeGear can flurish.
Stay a follower and your ressources will always be drained by the strategical
decisions of the market leader until the time where no ressources are left.
I wpuld like to congratulate CodeGear on now having a relatively stable
foundation to work from and I wish them all the best in the future.
Components4Developers and our customers certainly bet on that you are going to
do well!
Kim Madsen
CTO Components4Developers
The opinions stated in this article is the opinions of the writer, and not
necessarely the opinion of the company behind the author.
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