Rocket Software Bulks Up i Biz with Aldon Acquisition

April 7, 2011 Timothy Prickett Morgan

Over the past couple of years, Rocket Software has quietly built up a tidy business related to the OS/400 and i, thanks to its acquisitions of application modernization tool maker Seagull Software and terminal emulation software maker BlueZone. With the addition of Aldon, which Rocket Software acquired on March 22 just as IT Jungle was going on hiatus, the software conglomerate is adding application lifecycle management to its IBM i toolbox.

Aldon goes way back in the IBM midrange, all the way back to 1979, in fact, when Albert Magid and Don Parr, founded it as a services company focusing on the System/3X minicomputer market. A few years later, Magid wanted to turn Aldon into a software company and bought Parr out. Over the next three decades, the company, which is based in Emeryville, California, created change management software and then application lifecycle management tools that are installed at more than 1,300 customers today. Back in May 2007, Aldon was acquired by Marlin Equity Partners, a private equity firm that is based in El Segundo, California. Marlin Equity, which owns a portfolio of technology companies (Phoenix, the maker of BIOS software for PCs and servers, is the one I recognize besides Aldon), was founded by David McGovern, a managing director at equity firm Gores Technology Group who left that firm in 2005 to run his own show. Marlin Equity, like other firms in that business, buys companies and assets so it can sell them at a profit.

Aldon and Marlin were privately held companies, so they did not disclose the terms of the acquisition back in 2007, and Rocket Software is privately held as well. So there are no financial details of the transaction this time around, either. Or any financials that show how Aldon has fared in the past three years.

Dan Magid, the son of the founder Albert Magid, was working with Marlin to identify investment opportunities and Matt Scholl was president and chief operations officer at the Aldon business in the wake of the Marlin Equity acquisition. Now that Aldon is a business unit inside of Rocket Software, Magid (the son) has been tapped to be the business area executive for the Aldon Lab at the Aldon Rocket division. According to Richard Berman, a spokesperson for Rocket Software, the various software units of the company run as business units (some of them have labs associated with them) and the people put in charge of them are called business area executives. The interesting thing about Rocket Software is that many of the people who were running businesses before Rocket Software acquired them are still running these units after the acquisitions and after many years have passed.

In the past nine years, Rocket Software has done 30 different acquisitions of public and private companies as well as intellectual property acquisitions, according to Berman. The company was co-founded in 1990 by Andy Youniss, who is still its president and chief executive officer; the other co-founder is a silent partner who is still involved with the company. Rocket did 24 acquisitions up through October 2009, when it raised $91.9 million in equity to fund acquisitions of companies and assets. It is not clear who the equity investors were or what stake in Rocket Software they held then or hold now.

At the time of the equity infusion, Rocket Software had more than 700 employees and on the order of $150 million in revenues. Today, a little more than two years later, Rocket Software has 900 employees and more than $200 million in annual revenues. A little under 100 of those employees come from Aldon; it is not clear how much revenue comes from Aldon. Rocket Software has two software development labs in the Ural Mountains in Russia, as well as the Aldon lab in Emeryville and another one in Bentonville, Arkansas. (Home of Wal-Mart, but not related to the retailing giant.) It has other development labs in the United States, United Kingdom, China, and Australia.

Rocket Software has four businesses: business intelligence and analytics, database servers and tools, storage and networking, and application development, integration, and modernization. Seagull, BlueZone, and now Aldon all fit into that final group.

“Aldon is just an absolutely great fit,” says Berman. “From a product standpoint, it could not be a better fit for us.” Magid agrees, saying that its ALM products fill a whole in its application development tool lineup. “Rocket also brings a whole different set of tools and a large customer base that we can sell into,” Magid adds. And Magid says he is looking at how some of the code and tools inside of Rocket Software might be used to accelerate the introduction of new features for Aldon’s products. For instance, Magid is looking at how the business intelligence tools sold by other Rocket Software units could be integrated with Aldon’s ALM tools to generate more reports and graphics for the compliance and auditing functions of the ALM suite.

Rocket Software also will give Aldon more access into IBM, of course. The biggest companies, and those with multiple touch points, get the most attention from Big Blue.

Rocket Software is very heavily focused on development, in terms of its employee head count, and that is something that Magid finds refreshing. About 35 of Aldon’s employees ahead of the Rocket Software acquisition were on the development team, and Berman said that the majority of Rocket Software employees were in development and product support roles.

Correction: Andy Youniss, it turns out, has a silent partner who co-founded Rocket Software, which the company told us after this story ran to press. Seagull Software is no longer a public company, obviously, and we added to the list of software labs that Rocket Software runs around the globe.

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