In recent years, the software tools business has been a tough one. While Borland was a high flyer in the 80s and early 90s, the tools business was commoditized by and large by Eclipse over the past few years. The company is a shadow of its former self and recently sold off its development tools business to Embarcadero. But Borland isn't the only casualty in the tools space. There's been ongoing consolidation in In recent years, the software tools business has been a tough one. While Borland was a high flyer in the 80s and early 90s, the tools business was commoditized by and large by Eclipse over the past few years. The company is a shadow of its former self and recently sold off its development tools business to Embarcadero.But Borland isn’t the only casualty in the tools space. There’s been ongoing consolidation in tools for years. And we’ve seen other tools companies suffer, too. Agitar, which by all accounts had impressive testing tools and a great pedigree, recently decided to have an “orderly wind-down” of their business. Although that’s one step better than bankruptcy, it’s not a great outcome for investors, customers, or the employees who will lose their jobs. (I’m not sure if they will update their tagline but “Develop with Confidence” doesn’t seem to ring true anymore.) Perhaps Agitar’s failure was in part due to their high-end pricing model and lack of community leverage. But it still speaks to the fundamental problem in selling tools on their own. Despite the benefits tools provide to developers, they’re just not highly valued in corporate IT. Recently, there have been rumors that Zend cut 25 percent of its development team in Israel. Zend still has a growing business in tools and in runtime infrastructure with the Zend Framework. So this layoff could be more of a speed bump than a sign of a fundamental problem. But I’ll bet over the long haul, Zend’s infrastructure business becomes far larger than the tools themselves. For Zend, the tools business is a means to an end –to build an application platform for broad deployment of web applications. So it makes sense for Zend to have both. And Microsoft has been operating in a similar fashion in recent years. They give away most of their tools as “express editions” in order to encourage developers to use Microsoft’s runtime infrastructure. But if there are equally good open source tools and runtime environments, it’s hard to say what advantage Microsoft has. The fact that Microsoft only supports Windows is a severe limitation for developers who want the broadest possible market. Why limit yourself to Windows when you can chose tools and infrastructure that run equally well on Windows, Linux, Unix et al? Not surprisingly, even Ray Ozzie has acknowledged that open source is a disruptive threat to Microsoft’s business.So what’s a company to do? Tools can be part of an overall strategy, but it’s unlikely to be a huge standalone business these days. Instead focus on opportunities that add value in runtime production systems. Open Source