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April 23, 1997updated 05 Sep 2016 12:01pm

AONIX: IS IT ANY MORE THAN A NEW NAME?

By CBR Staff Writer

Huddled together for warmth and security in an increasingly unfriendly world, Interactive Development Environments Inc, IDE, and Thomson-CSF’s Thomson Software Products group, TSP, last November finally announced the completion of their merger and launched a new company under the moniker of Aonix Inc (CI No 3,040). It is all too revealing that TSP and IDE should claim Aonix to be one of the world’s top 50 software companies with a combined revenue of around $75 million, as this was exactly what had been said about Thomson Software Products when it was created by a merger some two years earlier. The implication was that either IDE was worthless, or TSP had lost a substantial slice of its value in its short lifetime. In one sense, this latest move could be seen as a last ditch attempt to resurrect the fortunes of Thomson, following its acquisitions of Must Software International and Alsys Inc in the early 1990s. However, the pulling power of blue chip customers from American Airlines Inc to Xerox Corp using IDE’s main money-maker – the dreadfully named Software through Pictures StP object-based data modeling tool which IDE rebuilt in the early 1990s from the ground up with a new repository-based architecture at a cost of $15m – along with the seasoned sales force of Thomson, could help hoist Aonix out of its technical niche and into the world of mainstream commercial software development … and into profitability. Aonix has hastened to announce a clear cut strategy for growth, based on end-to-end tools for object-oriented client-server development combined with an intelligent use of its Nomad 4GL and middleware assets for building Web-enabled data warehouses.

By Kevin White

The key to its long-term strategy however is StP, the gold-plated object-based data modeling tool into which IDE had at one time poured so much money and effort that it more or less priced itself out of the CASE computer-aided software engineering tools market. IDE used to be one of the leaders in structured CASE with StP bringing some rigor to the laid-back world of Unix programming, but like its main competitor Cadre, it got left behind in the move to objects. When it brought out a new set of high-end tools with full object-oriented capability, it still found it hard to compete against the lower prices of Rational Software Corp, Protosoft Inc, Popkin Software and Systems Inc and Select Software Tools Inc. If, as seems likely, there are enough organizations that prefer to buy the best solution rather than the cheapest or the simplest product, IDE could start to thrive in this latest guise. As well as building on its well-established reputation in the safety-critical software and embedded systems sectors, the best prospect of a bright future must now lie in following the rest of the market into the Windows development space. Here it can busy itself to provide a repository that sits at the core of an integrated software development environment. Post-merger, the added value of an alpha-to-omega toolset, rather than the offer of an assortment of isolated point products, might be great enough to justify the relatively high cost of the Aonix approach. Cost is the catch to Aonix. Nowadays who is willing to pay $15,000 for an all encompassing CASE tool when they can get a perfectly good but less comprehensive one for a quarter of that price? Aonix chief executive Chris Kenber answers frankly with: ‘In all my time we have never lost business on price, but we have often failed to compete because of price.’ Historically, IDE was a $20m technically rich company with very little sales savvy. ‘An StP sale used to be a very technical sell, rather than a business deal,’ Chris Kenber confirmed. Its strength was in Unix-based object-oriented development. In many senses this placed it in a niche of a niche. Around 70% of its business was coming from supporting technical development projects like embedded switch design, it had very poor penetration of commercial accounts. Embedded systems is a profitable niche but not one that will drive the value of the new business upwards very quickly and Kenber is keenly aware that some changes are needed. The target is the top-end of the market for object-oriented-based software design – big repository-based legacy re-engineering projects, as well as embedded systems, but to fuel growth Aonix is looking at volume markets. Here it will face the challenge of the hugely popular low-price Windows tools typified by the highly successful Windows-based Select/OMT from Select Software. This and other mass-market products were cleverly designed to be ‘just good enough for their purpose’. In contrast, probably the principal reason why IDE has been considerably less successful in the market than the likes of Rational or Select is because it has made StP an industrial strength product. Its design was better than it had to be. Although IDE was acquired by Thomson, the strategy for Aonix has been mapped out by IDE personnel who are still based at the old headquarters in San Francisco. The eight people that were pulled together last April to set the strategic business and technical direction for Aonix were all mostly ex-IDE staff.

Plausible strategy

Restructuring has taken seven months and an estimated $11m – not accounting for revenue that slipped inexorably away while everyone was busy thrashing out a plausible strategy for the new company. This is a merger between two radically dissimilar companies which throws into sharp relief every small discrepancy and overlap in the amalgamated products and services. ‘Some elements of the negotiations as well as the post-merger planning were very complicated and very frustrating,’ Chris Kenber admits. Cross-Atlantic mergers and acquisitions activities are particularly awkward. ‘Thomson is very large, very bureaucratic and very French. In many senses, TSP was not a company, it was a collective.’ There were 14 different legal and fiscal entities to bring together before the thing could be merged with the US firm. Post-merger, Aonix faces problems in presenting itself as a unified whole. It has 450 plus staff, including 80 sales and 60 consultancy personnel, and offices in San Francisco, France, Germany, Sweden and the UK. While accepting they have been slow off the blocks with Aonix, company executives are clear about the way ahead. ‘The intention is to float the company within the next 18 months’ Chris Kenber told us. Thomson is hoping to see its return in the form of a successful initial public offering. But before that, Aonix will need a series of bumper quarters. Long- term success for the company will depend on how nimbly it can articulate its move downstream into the buoyant and turbulent waters of Windows-based commercial developments. It is a whole new ball game, and Aonix may not have the commercial muscle to catch Rational but it can at least now put some weight behind the ball.

This article is extracted from the April edition of our sister publication M&A Impact.

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