Can a small application development specialist with big ambitions beat SAP at its own game? Linwood Pearce, CEO of Template Software, is either an inspired visionary or he’s wildly deluded. We are going up against SAP, Baan and PeopleSoft, he says. For a fledgling business application supplier, putting the three biggest names in integrated business […]
Can a small application development specialist with big ambitions beat SAP at its own game?
Linwood Pearce, CEO of Template Software, is either an inspired visionary or he’s wildly deluded. We are going up against SAP, Baan and PeopleSoft, he says. For a fledgling business application supplier, putting the three biggest names in integrated business software on its hit list is an ambitious but credible strategy. But Template Software is not – it is a $13.5 million provider of reusable software templates, visual tools and associated services, designed to help companies deploy customized applications. In other words, it is a software development specialist. Pearce believes, however, that the speed and price at which tailored applications can be built using his products brings a new slant to the build/ buy debate. Template competes in the traditional application development space (against Forte and Dynasty) and against the established packaged application vendors. Using Template, says Pearce, customers generally only have to write 10% of their code, and, on fixed price contracts where Template does the development work, the company normally bids half the cost and half the time of its competitors. Key to his claims is Template’s library of more than one million lines of reusable object code, organized into layered templates. At the base of all its applications is a foundation template, comprised of components for building the core structure of a distributed enterprise application. This typically provides up to 75% of the code needed for a complete application, says Template. On top of this are cross-industry templates which add workflow and systems management functionality, typically making up between 10 and 30% of the finished application code. Finally, the company is developing a series of industry specific templates, adding tailored functionality for industries such as telecommunications, finance, manufacturing and transport. This layer, says Pearce, will add a further 5% to 15% of the application code. Template argues that, because the percentage of fresh programming in a template-based application is so low, mission-critical, enterprise applications built using its products generally take six to 12 months to deliver, similar to the time required to implement SAP’s R/3 integrated business suite. And says Pearce, unlike other custom-developed applications, the majority of the Template code will have been rigorously tested. 70% to 80% of the application is being tested by 300 people daily, he says.
So far, Template’s products have received positive reviews and, according to analysts, the company has a one to two year lead over its application development competitors. Template’s strategy, however, is not unique. Taligent, the joint IBM, Apple and Hewlett-Packard initiative, was working on a similar scheme until it was folded last year. But Pearce says that there are distinct differences between Template and Taligent, which make the Template toolset much easier and more cost-effective to use. Taligent didn’t get a lot of re-use – it didn’t focus on visual development tools. You have to package re-use in such a way that users don’t have to know each object, he says. According to Pearce, 180 Template-based systems are in operation and the company’s client base includes impressive names such as North West Airlines and United Health Care. But most of these applications are in specialized fields, such as airline maintenance, where off-the-shelf products are limited. And even this market is set to get markedly more competitive, as enterprise application vendors, including Oracle and PeopleSoft, begin to deliver their own industry specific offerings.
Template’s challenge, if it is to compete effectively with these companies, and to expand out of its niche, is to develop a support infrastructure suitable for a fully-fledged applications supplier rather than just a tools provider. Pearce says that the company’s strategy to achieve that goal i
s to go out and acquire expertise. We will grow by acquiring companies rather than employing people, he says. The company already has a direct presence in the UK, is in talks to acquire its French partner, and is also looking to expand into Germany. Aiding that bid, in January, the company announced an initial public offering of 2,100,000 shares of common stock at $16 per share, the proceeds of which will be used as working capital and to expand the company’s infrastructure. Template also received a cash injection in late 1996 when it sold a 10% stake to telecommunications giant Alcatel for $8 million. The two are now working on a telecoms industry template incorporating support for specifications laid down by the network management forum, a group of 180 telcos, dictating how they design core applications. But even with the aid of partners, does Template have the breadth to specialize in so many vertical markets, and the depth to become a fully-fledged business solutions supplier? Pearce says that, while building up its own internal sales and support forces, Template, like SAP, will also look to third-parties to help flesh out its operations. Today, however, 90% of sales are direct with just 10% going through other channels. Another revealing statistic is Template’s dependence on a small number of customers. In 1996, for example, three clients accounted for more than two thirds of the company’s revenue.
While Template undoubtedly has sound technology, it still has a way to go to live up to Pearce’s ambitions.