When Progress Software, a long-established supplier of fourth generation development tools, splashed out $13m last May to buy Apptivity, a specialist in Java tools with virtually no revenues, the inevitable questions arose. Progress, with a set of 15-year- old fourth-generation language tools and a relatively low-profile database, was not exactly ailing, but its revenues were […]
When Progress Software, a long-established supplier of fourth generation development tools, splashed out $13m last May to buy Apptivity, a specialist in Java tools with virtually no revenues, the inevitable questions arose. Progress, with a set of 15-year- old fourth-generation language tools and a relatively low-profile database, was not exactly ailing, but its revenues were slowing and questions were being asked. Did this mean that Progress was planning to put its existing tools on ‘care and maintenance’ while it jumped directly into the new Java generation? We got a lot of questions. How do the two things relate? says Joe Alsop, chief executive of Progress. Most of these came from Progress’s 2,300 value added resellers, which develop and sell applications based on Progress’ 4GL and database. These VARs account for two- thirds of Progress’ $188m revenues, and, while they want a way forward from the old style 4GL, they do not want anything too dramatic. Progress has a strong position in the enterprise application business. Nearly $1.5bn worth of Progress-based applications are sold each year. And these applications sustain the business of many significant companies, including enterprise resource planning supplier, QAD. In January, Progress attempted to answer the questions over its strategy when Alsop and other senior executives went on the road to explain a complicated migration strategy, dubbed the Universal Applications Architecture (UAA). UAA is a method by which applications written in any Progress tool set (Progress, Apptivity, or Webspeed, for linking web pages to transaction systems), can be seamlessly mixed. The UAA technique wraps the business logic of applications in a layer of code that enables them to be treated as objects that conform to the common object request broker architecture. This will not happen overnight. Progress has to adapt its own tools to conform to the new architecture, and that could take a year. But Progress resellers have reacted positively, with several indicating that it will encourage them to stick with the supplier rather than migrate to rival development environments. In spite of its complexity, the migration strategy has also been warmly greeted by industry analysts, who believe that Progress appears to be making a successful transition into the new generation. We are impressed with the company’s focus on components and applications integration, said Judith Hurwitz, president of the Hurwitz Group. Certainly, this was not the view of most observers a year ago. Then, they looked at the company’s revenue slowdown in 1996 and concluded that it was succumbing to the heavyweight competition from giants such as Oracle and Microsoft. But 1997 was a highly successful year for Progress, partly because its 4GL sales held up, but also because at least two of its three acquisitions started to show signs of life. Revenues for 1997 grew 7% to $188m, while operating income doubled to $9.3m. Neither Apptivity and Webspeed contributed much to this joint sales made up 10% of revenues. But both are growing fast and will eventually outgrow sales of the Progress 4GL, which are expected to stabilize and then shrink. But this will not happen for a while, says Alsop, I can’t see a problem or a slowdown. All of this suggests that Progress, mishaps aside, is likely to continue on its growth path.
Global Technology Business.