1 Campus Martius
Detroit, Michigan 48226
Telephone: (313) 227-7300
Web site: https://compuware.com
Subsidiary of Thoma Bravo, LLC
Sales: $472.4 million (2017 est.)
NAICS: 541511 Custom Computer Programming Services; 511210 Software Publishers
The Compuware Corporation develops software and provides services for the mainframe computer systems of large corporate clients. Its programs and consultants address a variety of corporate mainframe needs with application development services, mainframe management platforms, automation and testing software, and other products and services. Compuware's portfolio of popular products and brands includes the Topaz mainframe developing and testing platform; ThruPut Manager, which optimizes batch processing; and File-AID, a file and data management platform. Once a large publicly traded firm that served several different information technology (IT) market sectors, Compuware became a streamlined, mainframe-focused subsidiary of Thoma Bravo, LLC, in 2014.
Compuware was established in 1973 by three cofounders: Peter Karmanos, Thomas Thewes, and Allen B. Cutting. According to a Detroit News report, Karmanos, Thewes, and Cutting pooled $9,000 to establish the company. Their original mission statement was: “We will help people do things with computers.”
The first office occupied by the fledgling company was located in Southfield, Michigan. Originally, clients came to Compuware for data processing professional services and help with computer installations. In addition, Compuware offered “programmers for hire” to provide additional manpower for specific client projects or to create solutions to particular needs. Unlike other companies that specialized in software and computer services for a specific industry, Compuware differentiated itself from competing companies by its emphasis on diverse applications of mainframe computer technology. Karmanos, quoted in the company's 20th anniversary publication, stated: “We were there to help them solve computer problems…. We were a resource, a technology resource, to help our customers work smarter and be more productive.”
Compuware continued in its original role as a provider of data processing professional services until 1977, when it entered the software market with a fault diagnosis tool called Abend-AID. The name was derived from the term abnormal end, which referred to unexpected system errors or failures. These types of problems were often caused by faults in computer programs, changes in system environments, or other errors or failures.
Prior to the availability of Abend-AID, computer programmers confronted with abnormal end situations were required to use manual techniques to test and debug programs. The process involved preparing trial transactions through lengthy procedures such as manually creating experimental entries, writing special test programs, and reviewing program logic. Compuware called this process “tedious, time consuming, and error-prone.” The Abend-AID program worked automatically. It intercepted system error messages during actual program execution. This enabled programmers to pinpoint precise error locations and identify the cause of the failure. Abend-AID also offered recommendations for necessary corrections.
Because mainframe computers were critical to business operations, time spent correcting problems often had a significant effect on a company's ability to conduct business. Quick remedies helped reduce the amount of downtime associated with computer problems and helped reduce programmer manpower costs. Abend-AID's success in the marketplace enabled Compuware to become established as a major force in the industry. Following the introduction of Abend-AID, Compuware organized a products division to sell Abend-AID and other software packages. Although the company continued to provide services, the percentage of total revenues generated by the services division grew smaller as sales from the products division increased.
During the 1980s the company's offerings focused on integrated systems software products that were designed to improve programmer productivity through program testing, data manipulation, interactive debugging, and fault diagnosis.
Interactive analysis and debugging products were tools to help programmers identify and correct errors in software by evaluating the quality of a program's code and logic. They worked by enabling a programmer to use either test or production data and progress through a program one statement or statement group at a time. Whenever an error was detected, the programmer could stop and make an immediate correction. Using this process, programs could be tested one step at a time until they were free from errors. The first software package in the interactive analysis and debugging product line, MBX Xpediter/TSO, was introduced in 1979. In 1983 Xpediter earned Compuware its first International Computer Program award, granted in recognition of $1 million in sales.
File and data management software packages were used to automate test data preparation, thereby insuring the integrity of the data manipulated by programs. Compuware launched its line of file and data management products in 1983. The first offering in the line, File-AID, was originally sold under an exclusive marketing arrangement with another company, but rights to the program were purchased by Compuware in 1992. Using File-AID, programmers had immediate and direct access to the data necessary to conduct tests and analyze production work. Although early File-AID products were designed for the International Business Machines Corporation (IBM) and IBM-compatible mainframe computers only, subsequent File-AID products were designed for other types of computers.
CICS-dBUG-AID, designed for use with IBM's Customer Information Control System (CICS), was introduced in 1985. The following year Compuware introduced MVS PLAYBACK, the company's first product in its automated testing line. PLAYBACK simulated an online systems environment that helped computer technicians execute transactions and check data created by manipulation. PLAYBACK streamlined testing procedures by reproducing a real-time environment without requiring that network users staff terminals or even that the communications network be active. Products in the PLAYBACK family offered five phases of testing: the ability to test a single program from a single terminal; the ability to test a single program from more than one terminal; the ability to test the integration of more than one program; the ability to test a program's proficiency at varying production volumes; and the ability to confirm that programming changes made no unexpected consequences in other areas. Subsequent products in the PLAYBACK line permitted the creation of training sessions for network users.
To accommodate its expansion, Compuware announced a decision to build new headquarters in 1987. The $20 million facility, located in Farmington Hills, Michigan, provided 165,000 square feet of space in addition to a 4,000-square-foot satellite facility in Southfield, Michigan. When Compuware moved in, it employed 746 people and expected to increase its staff to 995 within a year. The company's annual compound growth rate for the previous five years stood at 34 percent. Software products accounted for 65 percent of revenues; professional data processing services contributed 30 percent; the remaining sales were generated from software developed for specific markets and from educational resources. As the 1980s ended, Compuware broke the $100 million mark in total annual revenues.
The 1990s brought an increased interest in expansion and growth through acquisition. For example, in 1991 Compuware merged with Centura Software in a move aimed at strengthening its interactive analysis and debugging product offerings. Compuware also increased the attention given to smaller computers. Although the company historically had focused on the sale of mainframe programming software, it released a version of File-AID that was able to test and edit mainframe data files on personal computers (PCs). File-AID/PC enabled program developers to move blocks of data from mainframes to PCs where they could be scrutinized, copied, edited, modified, or printed. The technology provided a means for discovering programming flaws in a quick manner.
Other new products introduced in 1991 included DBAXPERT for DB2 (a database management program) and Pathvu/2 (an OS/2 version of a previously released interactive analysis and debugging product). Like its mainframe counterpart, Pathvu/2 provided programmers working with COBOL an automated analysis and documentation tool to evaluate the structure of the programming code. To show what was happening within a program and to document missing elements in the code structure, Pathvu/2 created a graphic display of the program's organization. Compuware reported total revenues of $141.8 million in 1991.
In 1992 Compuware established the Compuware Japan Corporation. Compuware Japan's main office was in Tokyo, and company officials hoped to add a branch in Osaka. Compuware Japan planned to focus on adapting existing products for Japanese programmers using Fujitsu and Hitachi hardware in addition to IBM mainframe equipment. The following year, Compuware further expanded its presence abroad with the establishment of Compuware Corporation Do Brasil. Brazil was estimated to be the fifth-largest IBM mainframe market in the world. Compuware's move followed a policy change that relaxed government-imposed import restrictions on computers and software. Company officials expected the Brazilian subsidiary to be well positioned to serve the emerging Latin American market.
Compuware's initial public offering of common stock occurred in 1992. The stock was offered at $22 per share and 5.5 million shares were sold by the company. Net proceeds (after underwriting discount and other expenses) totaled $111.5 million. In addition, existing shareholders sold 3.9 million shares of common stock.
In a move that was designed to augment its fault diagnosis product line, Compuware purchased the Eyewitness product line from the Landmark Systems Corporation in 1993. The acquisition increased Compuware's product line to 27 software products. By March 1993, Compuware had licensed more than 41,000 copies of its products to more than 5,700 customers around the world. Software license fees and maintenance fees produced 74 percent of the company's total revenues. The remaining 26 percent was generated from professional services.
Compuware's Professional Services Division operated branches in seven locations: Baltimore, Maryland; Columbus, Ohio; Colorado Springs, Colorado; Lansing, Michigan; Toronto, Canada; Detroit, Michigan; and Washington, DC. Most of the revenues generated by the services division were received from business application programming services. Business application programming services were those in which Compuware's programmers wrote original software to perform a particular function. Other services division operations included analyzing business problems and using computer techniques to overcome them; providing conversion services to organizations switching from one type of computer environment to another; systems planning, a service involved in identifying business objectives and information requirements to make recommendations for hardware and software; and consulting. Although revenues earned by the services division typically carried lower profit margins than did revenues earned by the products division, Compuware stated that it remained committed to providing services to its customers.
One significant change within the industry during the company's 20 years in business had been the expanding presence of PCs. Some industry analysts had criticized Compuware's emphasis on mainframe computer technology. In response, Compuware noted that the 36,000 mainframe computers in operation were running “mission-critical systems” applications that were not suited to PC technology. These included credit card authorization services, airline reservations, and online banking. According to Compuware's data, only 13 percent of mainframe computer operators used software to diagnose faults, and even fewer used software for debugging, file and data management, and automated testing. Compuware's own analysts felt a sufficient base existed for expansion in the mainframe market.
Nevertheless, in 1993 Compuware turned its attention to the PC arena with its acquisition of EcoSystems Software, Inc. The EcoSystems product line included programs that were designed to be used in PC networks. The PC market differed significantly from the mainframe market because of the wide variety of computer hardware manufacturers and operating systems employed. Two new products were added to the EcoSystems line during the second quarter of 1994 to help network clients schedule batch jobs and better manage database environments.
In early 1994 Compuware acquired Uniface Holding B.V. in a stock trade worth $268 million. Based in Amsterdam, Netherlands, Uniface was a supplier of client-server (network) application and development software. Industry watchers expected the acquisition to provide Compuware with a strong presence in the PC market at a time when its mainframe software licensing was still growing at a rate of about 30 percent. The acquisition was also expected to give Uniface a greater presence in the North American market. Two additional acquisitions in 1994 were Computer People Unlimited, Inc., and Meta Technologies, Inc., both IT service firms. Compuware also purchased several product lines from other companies, including Advanced Programming Techniques Ltd.'s Oliver and Simon interactive analysis and debugging software.
During the fall of 1995 Compuware acquired CoroNet Systems of Los Altos, California, a maker of networked applications management software, and renamed the company's product EcoNet. That purchase was quickly followed by several more, including Icons GmbH of Germany, Technalysis Corp. of Minneapolis, Direct Technology Ltd. of England, and Adams & Reynolds, Inc., of Cleveland. Direct Technology made software testing products; the others were computer service firms. Compuware was increasingly offering products and services that addressed the Year 2000 (Y2K) computer software problem, and revenues from this business segment were growing rapidly as the magnitude of the problem became known. Annual revenues for fiscal 1996 hit a peak of $614 million. However, Compuware's overall growth had slowed, due in part to the lackluster showing of Uniface, and the company reorganized its structure during the year.
The company had been growing by leaps and bounds, but was still in the same Farmington Hills, Michigan, headquarters it had occupied for more than a decade. Karmanos was seeking a new home, and the nearby city of Detroit was determined to lure him to its underused downtown. In early 1999 an agreement was reached for the company to move there. Two new buildings were to be constructed at a cost of $1.2 billion. To lure Compuware downtown, the city had agreed to purchase software and services from the company and provide it with huge financial incentives, including cutting the city's business tax. In April Compuware announced record sales of $1.6 billion for the fiscal year with net income of $350 million.
The company's acquisitions continued during the summer of 1999 with the purchase of the Data Processing Resources Corp. of Irvine, California. The $450 million deal would give Compuware 3,400 more employees and broaden the company's service business. Compuware's profits had been growing faster than its revenues, leading Business Week magazine to rank it number six on its 1999 list of 50 top-performing companies.
Beginning its second quarter-century in business, the company was making acquisitions at a rapid pace to broaden its product line and to boost its presence in the service business. The Y2K problem was providing the company with a temporary surge in income, but it seemed certain that Compuware would be around long after the dust had settled on that particular issue.
The 21st century brought new challenges to Compuware, above and beyond the soon-forgotten Y2K scenario. In 2002 the company embarked on a costly lawsuit against IBM, claiming that IBM had stolen a proprietary software source code. Compuware's external legal fees related to the lawsuit against IBM increased each year, costing the company $12.5 million in 2002, $34.6 million in 2003, and $45 million in 2004.
Such large legal fees, in fact, contributed to Compuware's restructuring initiative, beginning in late 2002. Its workforce was cut by 1,600. Restructuring efforts also included a focus on acquisitions to fill in product and service gaps. Toward that end, in 2004 Compuware acquired the Changepoint Corporation, a project performance management software supplier, for $100 million, and Covisint LLC, an online automotive industry solutions provider, for $7 million
Despite burgeoning legal fees and restructuring, Compuware leadership purposefully avoided offshore outsourcing strategies. Instead, the company planned to develop better products and provide better service, according to Karmanos. He told Andrew Dietderich in Grain's Detroit Business in June 2004, “I'm not interested in supplemental staffing, I'm not interested in being the cheapest supplier. I'm interested in delivering high-value technology solutions and building a company on that foundation.” Karmanos suggested that offering more value to customers was key in battling offshore companies.
Meanwhile, Compuware continued to explore ways to offer additional value to customers, to function more efficiently, and to partner with the community. In 2003 the company moved to its new Detroit headquarters, a base for more than 4,000 workers that united the company's southeastern Michigan workers and enhanced operations efficiency. Compuware had gained a new client during this time in the Detroit Public Schools and was recognized for its efforts in saving the school system more than $3 million and helping it accomplish technology goals set years prior.
In 2005 Compuware acquired Adlex, Inc., a provider of service delivery management technology. However, in the most significant development of the year the company's costly legal battle with IBM came to an end. Not only did the two warring companies agree to settle their differences privately but also IBM then paid approximately $140 million over the next four years to license software products from Compuware and purchased millions more in services. Key acquisitions for 2006 included ProviderLink Technologies, a North Carolina health care industry solutions provider that Compuware picked up for $12 million, and SteelTrace of Dublin, Ireland, a brand of software project management solutions that cost Compuware $20 million. Steel-Trace was then renamed OptimalTrace. That year also saw Compuware ink a major services contract with Hewlett Packard.
Covisint continued performing well for its parent firm in 2009, extending several important contracts and introducing Appcloud, a cloud-based marketplace where health care tech providers could sell their wares. During the fall of 2009 it paid $295 million to acquire Gomez, Inc., of Lexington, Massachusetts, which developed web experience testing solutions for website quality control. The following year all of Compuware's assorted application performance management (APM) products, many of which carried the Vantage brand name, were rebranded as Compuware Gomez. The company made a second major APM-focused acquisition in 2011, paying $256 million to pick up dynaTrace, another Massachusetts software maker.
Despite the company's ongoing efforts at fine-tuning its strategy to respond to a rapidly changing market, a major global recession had descended in 2008, decreasing customer spending on IT enhancements and sending Compuware's revenues into a backslide for several years. Various cost-cutting measures and other adjustments kept the company profitable for a while, but its net income growth stalled at just around $140 million for several years. Although sales began ticking upward after bottoming out in 2009, a multiyear surge in operating expenses ultimately led the company to post a $17.3 million loss for 2013. In an effort to cut costs, Compuware launched a streamlining campaign that included spinning off Covisint as a publicly traded company.
Sensing opportunity, equity funds and other corporate suitors began making formal offers to buy out Compuware. In early 2013 the company rejected a $2.3 billion bid by the hedge fund Elliott Management, one of its major shareholders. Later in the year Starboard Value, another shareholder, began publicly lobbying the board of directors to find a buyer for some or all of the company's assets. In 2014 the company sold its Change-Point and Uniface units. Although Compuware's turnaround program did seem to be improving matters, it was progressing too slowly for Elliott, Starboard, and other shareholders. Under pressure, the company replaced half of its board of directors and key members of its executive team, before finally accepting a $2.5 billion buyout offer from the Chicago equity firm Thoma Bravo, LLC, during the fall of 2014.
Following the sale, Thoma Bravo split its new subsidiary in two, operating the mainframe-focused business under the Compuware name and launching the new company Dynatrace for the APM business. After regrouping and shoring up its business for a year, the stripped-down Compuware went back on the acquisition hunt in 2016, picking up assets from several leading mainframe solutions developers to fuel what it dubbed its “Mainframe Renaissance.” In 2017 it acquired MVS Solutions, the maker of ThruPut Manager, a mainframe batch automation application suite. “We're taking the company out of the mainframe dark ages,” CEO Chris O'Malley declared to ADTMag's John K. Waters. “Without a mainframe renaissance, large global enterprises above a certain vintage will simply not be able to compete in fast-moving digital markets where disruption is the norm.”
Updated, Frank Uhle; Catherine Holm; Chris Herzog
Compuware GmbH (Germany); Compuware Japan Corporation; Compuware Ltd. (UK); Compuware Europe BV; Compuware Asia Pacific Pty. Ltd.
BMC Software, Inc.; CA Technologies; Computer Sciences Corporation; DXC Technology Company; HP Inc.
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