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Well, hello everybody. Here we are at the Rational Software Conference 2009 in Orlando, Florida

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as always. And we've got another guest with ourselves. Would you like to introduce yourself?

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Sure. I'm Scott Hebner and I'm the marketing leader for Rational.

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I guess the first kind of fun thing to ask is, as I was very carefully making sure to

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say, this is RSC, not RSDC.

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That's right.

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So the question is, what happened to the D? Where'd that get off to?

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Yeah, well, it's been an evolution. This is actually our 12th conference. And it used

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to be called RUC, which was the Rational User Conference, and then it became the Rational

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Software Development Conference. And now what we've done is, we were going to call it the

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Rational Software Delivery Conference, because what's really happening here is the audience

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that's here is beyond just developers now. It used to be a very developer-oriented, developer-centric

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conference, and it's evolved to be really about software in general. How do you get value

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at a software? Whether you build it yourself, develop it yourself, whether you buy package

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applications like SAP or Oracle, or you're using services, applications in the cloud, or however

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you get the applications. Customers have a big portfolio of application investments. So

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what Rational has really become all about now is helping them get value out of it, make the

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right investments, execute with precision, be able to do things not only well, but do the

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right things. So we're starting to broaden it. And what's interesting about the show, the

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statistics that I saw in registrations, I don't know what the finals are, but only about 40%

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of the people here are actually developers.

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You've got IT executives, you've got security analysts, you've got product managers that build

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cars, or medical devices, you've got security analysts. So basically what you have is you have

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people that are responsible for using software in their company, in one form or the other. I don't

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mean using it in terms of, you know, the end users, but using it as a tool for the business.

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Using it as a tool for the business, right. And so it's a much broader conversation than

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it was many years ago. And we felt that we were losing attendance because the thought that

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it was about software developers. The other interesting dynamic here is that it's becoming more than

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just rational, right? Because you start to think about what's being discussed at the conference

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like Smart Products and Smarter Planet and the role that Tivoli plays and the role that

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WebSphere plays and it's becoming cross-brand.

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Yeah. I mean, for all the IBM events I go to, it was kind of weird and fun, on the other

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hand, to see Al Zoller up there from Tivoli talking, which is, there's not always a lot

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of cross-brand GM keynoting and things like that. And it was nice to see the sort of like

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software development side of everything Tivoli was talking about, hooking up with the rational

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side and vice versa.

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Right, right. So like we have IBM Pulse, we have IBM Impact, right? And

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so we've got to think hard about over time, you know, what do we do with the name of this

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conference?

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You've got to come up with a snappy name.

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We've got to come up with a snappy name and perhaps we shouldn't tie it to only rational

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and really broaden its values. Impact is all about business processes, right? And Pulse

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obviously is about service management and operational, both asset and, you know, physical or virtual

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services like applications. And so what's this conference about? This conference is about

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software investment management, delivery of software. Again, whether you source it from the external

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world or whether you build it yourself is a secondary thing. So just because we took D,

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development, out of the title, doesn't mean that there's not a boatload of developers here.

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It is still a developers conference, but it's more than that.

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I've been trying to kind of sort out in my head the, whether you want to call it the evolution

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or addition or whatever that, that, that rational is kind of going through. And it does seem

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like this year there is, to, to your point of what you're talking about, there's a lot

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more emphasis on, I guess, the management of, of software as an asset that a company.

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And I wonder with some of the things that you talked about this year at, at RSC this year,

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like, like what, like what are the tools and other things that you guys are providing now

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to help people? I mean, I guess at the end of the day, a lot of what we're talking about

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gets down to there's some person or team of people who are going to make some decision

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about software in the company, like, and allocating things like that. And so, I mean,

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what are some of the tools and stuff that you guys have been talking about this year

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that help with that?

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It's just so much about doing the right things, not just doing everything well, right? And

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I think if you kind of look at this, the evolution of all this, you know, it used to be about

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the individual, making the individual more productive, they can produce more code, it's

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higher quality. Then it was about the project teams, right? Things like clear quest, clear

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case. It was all about being effective with the teams. Then it became more of an organizational

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discussion. How do you share assets and skills? How do you, how do you have the flexibility

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to move things and share things across multiple projects? And now we're onto this discussion

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about the next tier, which is about the business. We have a bunch of studies that show that

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in general, the IT leaders and the business leaders aren't always seeing things the same

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way. And most business leaders, almost 80% of them, have a feeling that IT is not executing

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on their priorities. So there is a chasm between what the business feels it needs and what they

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think IT is actually executing against. So that's a big part of the new expansion now is, you know,

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I think we're making really good progress as a community in doing things well. Now the trick is, are we doing what's

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really needed for the business as the business priorities are always evolving and changing?

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Right, right, right.

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How do you keep everyone in sync, right?

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So that's what some of the newer products this week are, like rational insight. It's all about executive dashboards

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that can monitor in real time, right, a real data collection, you know, sense if you will. It's

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all instrumented. What projects you have underway, how they're performing, are they on budget, are they

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on target, you know, then you can say I'm putting this much money in this project and that much on that and

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that can be viewed by the business people saying, oh no, you should really do it the other way around

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because that one's a higher priority. And it creates that conversation not only on where the money's

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going and the investments are going, but how are they progressing, right? You know, who's behind and who's not and so forth. And then you can

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react and shift things. Another product would be rational focal point for project management, so this is a

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brand new product. And that's about the project managers making sure they're able to in real time, again,

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understand the status of the project in a lot more granularity so they can see what's working and

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what's not working and they can then respond. And does that follow a similar sort of, I don't know,

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pattern or architecture or sort of interworking as insight where you're sort of each of the different steps

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or repositories or whatever. The different moving parts are somehow instrumented and there's reporting

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that goes through that.

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Exactly. It's just different, it's different tiers or different links of the same chain,

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right? So the JAZZ technology platform is what integrates it all together and allows you to create a process

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out of it. The measured capability improvement framework is this methodology that we're now

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talking about and helping customers with, which helps you establish your business goals, establish

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your operational goals to implement the business goals, and then what are the best practices in

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achieving the operational goals. You might want to, you know, you're realizing that competition keeps

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beating you to market. So you want to cut your new release of your product from 18 months to 12

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months. That's your business objective. Then you set up a set of operational objectives that says,

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okay, in order to do that, you know, we need to stop rework because we do 40% of the rework because

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we seem to get the requirements wrong, right? So that's your operational objective. Then you say,

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okay, what are the best practices that we can put into, you know, into action that will help us

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improve our requirements management so that we're not reworking things all the time? And there's a set

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of best practices that then get created that can be implemented in JAZZ. Right. So what you have

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with Insight is the executive dashboards built on Cognos that allows you to monitor everything.

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The focal point tool is then the project, the actual project management tool with all the metrics and,

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you know, here's how many people are on this and you can shift things around depending on who's behind,

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who's not. And then you get into products like Rational Requirements Composer that not only helps you to

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derive a greater degree of precision in the requirements, so you're doing the right things,

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but it helps keep everyone in sync through collaboration technology so that if the business

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leaders are thinking there's a change or if you're an agile development project and you realize we can

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actually do things in a different way, you want to make sure the business people are okay and it helps

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facilitate that collaboration so that everyone's in sync and therefore ultimately you don't rework as much.

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And so really what JAZZ is doing in these three products I just mentioned that are new this week,

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they're helping to take the application life cycle management infrastructure that the teams use

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and putting a layer on top of it that allows them to now interact with the business leaders and the

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IT executives and the CIO and the CFO in a way that in the past was always manual and was always ad hoc.

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You've mentioned the business needs several times. I mean, obviously, it's always nice not to create software in a vacuum

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and hook up to that. And that always seems to have been a plagued problem of whatever you want to call it,

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application life cycle management or software development is somehow linking those two things together

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and making them mesh together more so than just the development folks saying like,

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we've got this iteration done or something or somehow assessing the value between the two. And I'm curious,

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a lot of the MCI or some of the MCIF stuff seems to address this, this, as we used to call it,

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business IT alignment or whatever in the operations area. And I wonder what, like what some of the things

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you've been talking about, how it sort of hooks up or sort of has the business hooked down into,

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if you will, the development process.

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I think there's a couple of macro things going on here. First of all, I think most businesses viewed

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their investments in software and IT as being an operational enabler. It was about getting a

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process built and deployed. So it was never viewed as a strategic business asset. It wasn't like the

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capital that you have or the buildings and all the physical assets. It wasn't like your fleet of

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delivery trucks where you really managed that very, very well. You knew where all the investments were,

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and how they were performing and how many miles were on this truck versus that truck and the services.

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Software was never managed that way because it was really in the back room thing to enable the process.

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Right. I mean, what's interesting is that it kind of implies that you can

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not care about it in a negative sort of way, sort of a black box of budget, if you will.

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And I think the truth of the matter is that everyone cared about it, but it was one of those

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things that was in the background. Most business leaders were saying, look, I need an application to do

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this, right? And someone would go off and build it, but they left it to a great degree of it was

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really up to the IT team on how to figure out how to do it. And then they come back and say, well,

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it doesn't quite do what I need to do. But now think about their use of software.

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It is so critically important to the business people, right?

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If you're going to be, if you're going to be a leading car, an automobile manufacturer or treadmills even,

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I remember reading an article a couple of years ago when I was buying a treadmill,

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the number one buying criteria is the programs. It's no longer the, you know, and so if you don't build,

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so that the product people, the business people care more and more about the software, right?

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You can't have an online website that's up to sell your product unless it's PCI compliant because you

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can't have credit card transactions. So there's a much greater degree of focus there and the business

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people are always coming up with new ways to create money and enter new markets and very fast moving,

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very dynamic. And it's the whole notion of manual connections, right? And the more you can automate

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them, the more you can, you know, facilitate, um, a collaborative environment where you can work

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together and keep, be kept in sync. And then the ability to really agree on what you're trying

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to achieve and then continuously understand and approve where you are. Um, and that's really what's

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happening here is the, the line is finally blurring between development, operations, and business.

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Right, right.

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We've always talked about it, but even though we've talked about it, it still was very mandatory.

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There's always been, um, communication between business, operations, and development. There's always

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been an attempt to try to align it all. Right. But that doesn't mean that they are aligned because

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they're, you know, you have different, a whole bunch of moving parts in each one of those three

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areas. Right. Right. And I think the magic sauce here, if you will, or the secret sauce here,

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is that if you can automate how you interact with each other, that's based on real-time information,

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right, in a clear set of objectives, and you can facilitate the collaboration, again,

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in real time, right, in an easy-to-use fashion that people can really collaborate on priorities

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and status, and everyone can see the view that they want to see. Right. And then you're

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able to, you know, agree, again, not only on the metrics, but you're able to monitor them,

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and improve them, and it's really all about the automation, and the collaboration, and the

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ability to report against how you're progressing. Right. And what's interesting with this whole

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conversation is that those are the three pillars of a business process. Even if you're doing an

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insurance process for an insurance process to process a claim, right, you need the right people

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collaborating in the business, you want to automate its use, productive, and you want to know how many

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claims you're able to process and whether you can improve the number and the quality of them. And so

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you measure it, and then you learn what's not working, you improve it. So it's the same kind of

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things needed here is the way to get these teams working together is to put a business process in

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place for how you go about investing in and delivering software. It's almost as if it's sort

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of the maturation of software used in business to be a little bit more professional, if you will.

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I think software is one of the most exciting areas to be in, I think, and it's come a long way. Just

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think about the last 10, 15 years. I mean, it's just amazing. I mean, it wasn't long ago that I

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remember with OpenDoc, I think it was like in 1995 or 1996 or something like that, say 10 years ago,

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we were amazed that we had two clocks running at the same time on Windows. Remember that? Yeah.

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That was not that long ago. You look at other industries, like if you're a producer of mechanical

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products or electronics products, they've got that down to an art form. You've got these big machines,

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they can crank these things out, right? Very well designed in terms of process and all that.

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And software, just because it's much newer, you know, it hasn't gotten to that level yet of

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science. Of stability. Of stability and science. But now it has to be because now it's affecting,

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you know, if you're a producer of a product, whether it be a physical product like a car,

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or whether it be a virtual product like advice, right? Or whether it be like, you know, like AIG,

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you know, the financial products division, right? It's all about the financial stuff.

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So an application could be a product. It's affecting your product safety, your product

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reliability, your brand image, your customer satisfaction. You could potentially get into

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lawsuits where you get sued. There's a lot of, you know, recalls, you know, cars are getting recalled,

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medical devices and, you know, almost invariably, it comes down to, man, there was a software.

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In this world that, I mean, it used to be that you deploy an application, if something wasn't

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working, we've all gone through this, right? Where some things doesn't quite work right,

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or there's an error, and then it's fixing the next release, right? If your Blackberry or iPhone

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software doesn't work, you know, it's okay, you get another release of it. Or, you know,

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everyone has either cable or satellite dishes, right? And, you know, there's always downloading of

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new software and firmware updates. And so we sort of live in that world. But you start thinking about

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these broader uses now of software, you've got to get it right the first time. You can't have your

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analog brakes or your exhaust system in your car or your sensor windshield wipers not. So the

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competency of a product manufacturer, now that they have, you know, is becoming a software

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competency because that's what differentiates all these products. And so software has become more

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than just an IT and a business enabler from a business process perspective. It's becoming the key

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ingredient in all these different products. Right. And therefore, it is more than doubled

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in importance just by the nature that it's being used so much more pervasively. And I think business

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leaders around the world are starting to say, you know, I got to stop ignoring it. I mean, to me,

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it was a technical thing. I know it was important. I know that it was enabling a lot of business

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capability. But it's such an important thing now, right, that we need to really start to understand,

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you know, if we're putting this much money into software that's accumulated this much over the

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last many years, you know, are we really sure we're getting the value out of it? Well, great. Well,

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thanks for spending all this time to talk with us. I think that sort of added some nice dimension to

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the announcements that I've been looking over. Yeah, you bet. I look forward to our next conversation.

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We'll see you at what level we're at. We'll see you in six or 12 months, depending on what happens.

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I think last time, it was about six months ago that we talked last, right? Yeah. I think our next

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conversation, I bet you we'll start getting into this notion of dynamic infrastructure and

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agility at scale and cloud and, you know, because I think the next major step here is,

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okay, how do I start to really free up more capital and more money to invest in

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new innovative projects? More efficient as a community and how we produce software. Now we're

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worried about making sure we're aligning that with the business needs in terms of the investments

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that the business is making in us as a community. I think the next step is now, how do we help to

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free up money and capital so that we can reinvest in doing more and more projects that are going to help the

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business, right? Right. And I think that's when you start getting into these discussions of cloud

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and software as a service. You're not only building applications for that, but software delivery

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and collaborative life cycle management services that are on the cloud. Right, right. You know,

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I want to onboard you real quick to do a project in the next week for me. I don't want to have to go

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buy you tools and get you, you know, all these things. You can just dynamically provision a set of,

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you know, client services and boom, you get it done. And then a week later, you're doing something else. Then I

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deep provision it and I only have to pay for it for a week. Well, great. Well, okay. Thanks for sending

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all this time to talk with us. You bet.
