Compuware Corporation

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Compuware Corporation

31440 Northwestern Highway
Farmington Hills, Michigan 48334-2564
U.S.A.
(810) 737-7300
Fax: (810) 737-7108

Public Company
Incorporated: 1973
Employees: 2,600
Sales: $234.94 million
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software

Compuware Corporation is an international computer software organization. The company’s activities include developing, marketing, and supporting systems software products. Historically, Compuware’s principal emphasis has been on products designed to improve programmer productivity primarily for International Business Machines (IBM) and IBM-compatible mainframe computers. Compuware operates through two divisions—a product division and a services division. The product division tests, debugs, and maintains large-scale application software. The services division plans, develops, implements, and maintains computer systems for public sector clients and large corporate clients.

Compuware was established in 1973 by three co-founders: 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 provided “programmers for hire” to provide additional manpower for specific client projects or to create solutions to particular needs. Unlike other companies specializing 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, not how to market their goods or services. 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 the company entered the software market with a fault diagnosis tool called Abend-AID. The name Abend-AID 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 revenue generated by the services division grew smaller as sales from the products division increased. The company’s offerings focused on integrated systems software products 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 (ICP) 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 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 CICS (Customer Information Control System) was introduced in 1985. The following year, Compuware introduced MVS PLAYBACK, the company’s first product in its automated testing line. PLAYBACK simulated an on-line 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.

Compuware entered a phase of rapid growth during the second half of the 1980s. In 1987, Inc. magazine ranked Compuware among the fastest growing privately held companies in the United States. Its premier product, Abend-AID received an ICP $100 million award, and IBM recognized Compuware as a business partner-authorized application specialist. In addition, Compuware expanded its global presence. Following a decision to operate in Europe through wholly owned subsidiaries, Compuware acquired European companies that had been distributing its software products in England, France, Italy, Spain, and West Germany.

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 revenue.

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 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 DBA-XPERT 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. In order 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 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 relaxing 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 first 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.

Despite its successful stock offering, 1992 also marked the first year since its inception that Compuware failed to earn a profit. The company’s reported net loss totaled $23.8 million. According to a published statement, the lack of profitability was attributed to special pretax charges of $52.6 million related to expenses surrounding its acquisition of XA Systems Corporation. XA Systems software products were primarily classified as file and data management tools.

In a move designed to augment its fault diagnosis product line, Compuware purchased the Eyewitness product line from Landmark Systems Corporation in 1993. The acquisition increased Compuware’s product line to 27 software products. As of March 31, 1993, Compuware had licensed over 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 revenue generated from the services division was 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 in order 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.

Despite its growth and expansion, Compuware’s executives insisted that the company’s basic mission remained unchanged: to help people do things with computers. They acknowledged, however, that the processing power of computers had changed vastly during the company’s twenty years in business.

One significant change within the industry was 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 on-line banking. According to Compuware’s data, only 13 percent of mainframe computer operators used software to diagnose faults. Even less 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 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 EcoSystem line during the second quarter of 1994 to help network clients schedule batch jobs and better manage database environments.

In a similar move in early 1994, Compuware announced an agreement to acquire Uniface Holding B.V. Uniface, based in Amsterdam, Netherlands, was a supplier of client-server (network) application and development software. According to Grain’s Detroit Business, 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.

Principal Subsidiaries:

Compuware Nordic APS (Denmark); Compuware France; Compuware GMBH (Germany); Compuware Italy; Compuware System Software B.V. (Netherlands); Compuware Nordic AS (Norway); Compuware S.A. (Spain); Compuware Ltd. (UK); Compuware Corporation Do Brasil (Brazil); Compuware Japan Corporation; XA Systems Corporation; EcoSystems Software, Inc.; Uniface Holding B.V.