Jade on the comeback trail
- 18 November, 2004 22:00
The familiar Chinese curse, "may you live in interesting times," might well have been applied to Jade Software Corporation in Christchurch. "Interesting times" the company has seen, indeed. Not only has it experienced the full range of conditions from massive profit to staggering loss, but it has had to entirely rebuild its business during a time of global recession and reduced IT spending.
Jade has gone through an astonishing number of changes and restructurings in recent years, starting with its origins as Aoraki Corporation, supplier of the LINC database software platform for Unisys. As a sample of these changes, the staff has been reduced by 25%, a new CEO is at the helm, founder Gil Simpson's share holding has been brought down from 90% to 10%, and the company, though still private, is now mainly owned by investors in the US and UK.
The most recent round of changes has been initiated by incoming CEO, Dr Rod Carr, a former Reserve Bank deputy governor, who has been running Jade since July of last year. So far, it looks like the strategy is having a positive effect, with a recent infusion of $25 million from stockholders, including the Skipton Building Society (UK). Major changes were needed, because the company purportedly had expenses of $46 million in 2003, with revenues of only $30 million.
The fundamental problem lies in convincing companies abroad to rely upon a New Zealand-built development environment, in a highly competitive environment filled with well-funded overseas competitors. Australasia alone doesn't have enough potential customers to sustain the effort. Marketing in the US and UK is extremely difficult, despite substantial reference sites.
The chief advantage of JADE, from a marketing perspective, is a clear migration path from LINC. LINC is in use by numerous Unisys customers across the globe, and it does not have the Windows-based, user-friendly features of the JADE environment. However, the company must compete in this market with Unisys, which continues to sell and upgrade LINC.
A recent strategy has been to make the development environment free, in order to build the development base. Although this raised some media interest, in reality it brings JADE into line with other development environments such as Borland's Delphi, which also provides free development environment and then licenses the resulting software.
"We moved to this strategy with the perception that were out of step with industry practice," Carr says. "It is still too early to attribute growth to the change in development environment pricing. We are seeing many downloads of the free environment, but how many of these will turn into requests for production licenses is not yet apparent -- since this requires actual deployment."
There are currently about 40 partner firms that have written applications in JADE, providing 3-4% of the company's revenue. One JADE-built application of note is the Greentree Financial System, which has been both popular and successful in the local market. The company hopes to expand this base through the developer give-away program.
"One key strategy has been to facilitate easy transition from LINC on Unisys mainframes to JADE on Intel," says Carr. "We signed our first of LINC-to-JADE conversion sites in North America, with clients such as Flathead County; in the UK, a conversion to JADE for Homeloan Management, a subsidiary of Skipton Building Society has recently gone live. In New Zealand, TSB Bank has gone live with a conversion from Unisys LINC to JADE on an IBM platform. This halved its IT costs, and also provides TSB Bank with a path for future growth."
The Jade strategy is to also focus on interoperability, adherence to web service standards, and a capability to integrate further with relational systems.
"In the US market, we are focused on LINC-to-JADE conversion," says Carr. "There are over 400 sites in the US running LINC on Unisys. These all represent potential migration targets. One advantage is that JADE gives customers a choice of platform vendors such as IBM, Dell and HP in addition to Unisys, and a choice of operating systems including Windows and Linux. For customers, it's about choice and interoperability."
The relationship between Jade and Unisys has a long, often bumpy, history leading up to a separation in the early '90s, when Unisys "took back" the LINC system developed and maintained for it by the then-named Aoraki Corporation. Jade now has a number of customers that have converted from LINC, but continued with Unisys platforms. This requires keeping lines of communication open. On the other hand, since the targeted LINC sites are all Unisys customers, Unisys is the chief competitor. It would seem logical to come to some sort of arrangement with Unisys, if possible.
"We're not in conversation with Unisys at this point," says Carr. "We would be open to talk to any strategy. But it does take two to make a partnership. Unisys remains confident they have an adequate upgrade path. There is an ongoing relationships with Unisys due to shared customers, such as Skipton, (soon to be a major shareholder in Jade) which has been a Unisys customer for 100 years." (Skipton was a customer of Burroughs, before Burroughs acquired Sperry to become Unisys. Burroughs, of course, goes way back as an office machine supplier.)
The UK strategy is to focus both on conversion and on sales of the Jade Co-ordinated Care application. There are also some UK customers that started out with Jade, including English Welsh & Scottish Railway Ltd. (EWS).
In Australasia, Jade has a number of financial applications and customers such as Allianz in Australia; and in New Zealand, Southland Building Society, ASB Bank, and TSB Bank, plus farmer and shareholder registry applications for Fonterra.
"A principal differentiator from other development systems is that we control all of the components of our technology," says Carr. "Customers can get access to core technology, so features can be finely tuned. There are also significant cost savings. To this we add knowledge of specific areas of deployment. For example, we now supply the majority of student administration sites in New Zealand. We can rely on domain knowledge and competency within a specific area. To attract developers, we provide free development licenses, make the software available on the internet, and ensure that it is taught in a large number of tertiary institutions."
One of JADE's strengths is its capability to work on a variety of different platforms. The company is in communication with a number of hardware and operating system vendors to expand platform availability. An intriguing new area, which is likely to see growth, is movement toward mobile technologies.
"The Royal District Nursing Service in Australia now has a field service using a mobile version of Jade Case Management," says Carr. "It is accessed via handhelds by nursing staff in the field. At this point, this is just a client, not a JADE end-to-end system. We are looking into full deployment on mobile, however. There are many opportunities here, particularly in the health sector. Other areas in which mobile deployment would be useful are in connection with telemetry for services such as coal train and container management, where we already have applications."
To finance all of this growth, the company has reached out to a select group of investors, with impressive results. "The current capital raising leaves us with shareholder funds of about 50% of annual revenue and cash of about 25% of annual revenue," says Carr. "We are not looking at an IPO. Current investment is sufficient to underpin existing and organic growth. Additional capital would only be needed if we decided to embark on an acquisition strategy -- which is not in the cards at present."
Recent reorganisation is also beginning to have an impact, reducing the company's operating costs by about 25%, which brings them in line with revenue. Revenue this year is expected to rise 11%, to $36 million. This is a far cry from the $60 million per year made during the days of the LINC contract, but it is substantial, and can yield a profit as well as paving the way for growth.
Carr is bullish on the company's future prospects. "I came to Jade just last year," he says. "I have found the technology really stunning; it is robust, scalable, high-performance technology. The challenge for me is to create a business model for taking that technology to the market. A number of strategies have been tried already, and there are now more than 200 million dollars of implementations. One important factor is that Aoraki/Jade has been in business for over 20 years, and we can point to customers that wrote code in the '80s that can now run on internet-accessible platforms. Not too many companies can say that."
For local developers, this is all good news. Not only does the free development platform make Jade more accessible, but its development locally means that obtaining assistance and cooperation from the core developers — a key promise of this technology — is greatly simplified. And a now apparently healthy, continued presence in Christchurch of the Jade Software Corporation is helping to form the nucleus of an important IT concentration.