Hard times in the software trade

Yesterday was the Monday when 71 of Jade Software's 383 staff were told "don't come to work tomorrow" as the Christchurch software maker tries to slash operating costs by up to 25 per cent.

With the layoffs came news that the company was seeking between $12 million and $25 million in capital from private investors and redeveloping its business "to ensure a sound foundation for a sustainable future".

Clearly something had to be done. Revenue for the first six months of the year was down 29 per cent, there are no significant new sales this year, plus confusing messages about the company and its products.

The newly appointed chief executive, former Reserve Bank deputy governor Rod Carr, said too much was being spent on some products and markets with too little return.

Carr has even deeper structural questions to deal with: what sort of company is Jade? What is it really selling? What is the best way to do that?

The answers are important for the whole industry. When the Government talks about encouraging the development of scores of $100 million technology companies, that means growing companies such as Jade, which had $46.7 million in revenue last year.

Some of the problems could be seen at a recent health information systems conference in Auckland, where Jade took a large stand to promote its healthcare applications.

Like many New Zealand companies working in that niche, Jade has innovative solutions which are changing the ways hospitals and health systems are run, and customers around the world are endorsing its vision.

But unlike most of the other vendors in the room, Jade is not primarily a healthcare software developer. It does not have a board, developers and marketers focussed on that particular, highly specialised market.

Will it continue to develop those applications, to keep abreast with the regulatory changes, the inevitable technology shifts? Customers must take it on faith that it will.

Jade the company is the home of Jade the technology - a combination of software development tools, a programming language and a database in one neat package.

Both are the creation of Sir Gil Simpson, New Zealand's most successful software entrepreneur. About 20 years ago, Simpson and then-partner Peter Hoskins developed a software development language called Linc (logic information network compiler) for Burroughs mainframe computers.

To achieve widespread distribution, Simpson essentially gave Linc to Burroughs, now Unisys. Linc became a mainstay of Unisys, providing the basis for high-end applications for more than 4000 customers worldwide, including many large banks and financial institutions.

Simpson made many millions developing and supporting Linc. Unisys made billions.

Then Simpson had a better idea - Jade, a development environment which allows developers to quickly build applications which can be as large and complex and robust as those which run on multi-million dollar mainframes, but which can run on PCs.

It's one thing to have a world-beating piece of technology. It is another to get it to the world.

At the time Jade was launched, Simpson was running several businesses under the Aoraki or Cardinal banners, including some which developed custom applications.

These were a good way to prove the value of the new technology, as their customers wanted solutions which worked, on time and on budget, and they did not care too much about what was under the hood.

Other organisations which develop custom solutions adopted Jade for the same reasons, including IBM Global Services Australia and Mi Services.

Another source of potential customers is Linc users. Jet (Jade enabling transition) allows them to migrate their applications off the mainframe. Understandably, it is not a business which Unisys is encouraging.

Simpson also tried to interest application developers in his new product, with limited success. While Auckland company Greentree used Jade to develop its next-generation accounting package, other New Zealand companies shied off.

Most say it is hard enough to sell their own product without having to sell an unknown platform as well - it is easier to say their application runs on Oracle or SQL Server or some other well-known brand.

Meanwhile, several of Jade Corporation's custom developments turned into products, including a healthcare management system, the student management system in use at Waikato University and Christchurch Polytechnic, and a system to manage cargo and container ports.

Leaving those product divisions within the larger technology company is a recipe for disaster. Making products requires a different mindset and different disciplines from project-oriented custom development.

To reach their potential, Jade's product verticals may need to be spun off, perhaps by float, perhaps by sale to a competitor.

The company needs to be clear about the core technology business. At the moment, the choice for most developers is between Java or Microsoft's .Net. Compelling arguments are needed for them to learn Jade.

If Jade technology had been developed in the labs of IBM or Hewlett-Packard, it would be backed by multimillion-dollar campaigns.

Instead, it has been incubated in what is essentially a family firm in a slow-moving city a long way from its markets.

If Jade is indeed a world-class technology, Carr and Simpson need to build a world-class company to expand it, or watch it die a slow death.

* Email Adam Gifford