IBM i Playing a Role in Rocket’s Ambitious Growth Strategy

August 14, 2012 Alex Woodie

Rocket Software has quietly built itself a comfortable position in the IBM i business. Since its acquisition of Seagull Software in 2006, the company has added two more major players in the industry, including Aldon in 2011 and iCluster earlier this year. The acquisitions will continue over the next several years, as Rocket aims to triple the size of its overall business by 2017.

The IBM i portion makes up a sizable fraction of Rocket Software’s total business, and is on the order of $65 million per year across 9,000 customers (see full analysis on the size of Rocket’s IBM i investment below). That might be 25 percent of Rocket’s total business, which is going to get much, much bigger in the coming years.

According to Brian Starr, a Rocket vice president and general manager of the company’s Storage, Networks, and Compliance business unit, you can expect Rocket to do many more acquisitions in general, and probably more IBM i acquisitions, in the future.

“We want to double or triple the size our business in next three to five years,” he told IT Jungle recently. “We’ll continue to grow organically and inorganically through acquisitions, and, yes, IBM i is a part of that growth strategy.”

Rocket was founded in 1990 as a developer for mainframe utilities. The mainframe has been good to Rocket, but the company has looked elsewhere for growth, and has done more than 30 acquisitions over the years.

There’s no telling exactly how many IBM i customers Rocket Software has or how much revenue they generate, since Rocket is a privately held company and not required to disclose that level of detail about itself. But through a little simple math and the power of the IT Jungle search function and previous reports, we can tease out some numbers that give us a general idea of how big Rocket’s IBM i business is.

When IBM bought DataMirror in 2007, it had about 2,200 customers and $45 million in revenue, generated primarily from two main products: iCluster for high availability and Transformation Server, a database replication and integration tool. iCluster was estimated at the time to make up one-half of that amount, or about $23 million, while Transformation Server (which IBM still owns) accounted up the rest.

Seagull Software had about 10,000 customers, including a mix of IBM i and z/OS shops, with sales of about $28 million in 2006, the year it was acquired by Rocket (and also the year it acquired the BlueZone emulation business). Most of these revenues came from IBM i shops, which is Seagull’s primary focus, although it also supports Web enablement and modernization on z/OS and Unixes.

The numbers for Aldon are a little more iffy, since Aldon was a private company, unlike DataMirror and Seagull. We do know that Rocket Software had more than 700 employees and on the order of $150 million in revenues when it raised $92 million in a 2009 equity sale. When it bought Aldon in 2011, it disclosed 900 employees and more than $200 million in annual revenues. Just under 100 of those employees come from Aldon; it is not clear how much revenue comes from Aldon. A guesstimate based on comparable revenue-per-employee figures says that $20 million to $25 million of that $50 million increase came from Aldon. As for number of customers: When Aldon was acquired, for the first time, by Marlin Equity Partners, Aldon executives said the company had about 1,400 customers.

So with $23 million from iCluster, $20 million to $25 million from the Seagull/BlueZone IBM i business, and $20 million $25 million from Aldon, that brings the total IBM i revenue figure to $63 million on the low end, and $73 million on the high end. With 1,100 IBM i customers from DataMirror, 8,000 IBM i customers from Seagull/BlueZone, and 1,400 customers from Aldon, that gives Rocket a total of about 10,500 IBM i customers (although invariably there is some overlap among them).

Rocket, of course, isn’t going to telegraph the shots it intends to take in the acquisition department. But don’t be surprised if it scoops up some profitable IBM i software developers in hot areas that complement its existing focus areas, such as business intelligence, app development, file transfer, or security. Or it could go in a completely new direction, such as mobile software or cloud.

Whatever direction the company goes, the IBM i platform figures to play a role. “We see the IBM i platform as an important platform,” Starr says. “Rocket as a company is focused on supporting the IBM i channel at as large a level as it can.”