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The Flip perspective

There's certainly no more vivid an industry figure than Flip Filipowski. With his high-profile investments in The House of Blues, Boston Market and other concerns, it is often forgotten that Platinum Technology's chairman and CEO started his career as a database administrator at Cullinane Corp. Filipowski knows the software business, and is pushing to make his firm a $1-billion-a-year performer. Managing Editor Jack Vaughan spoke with Filipowski after the recent PlatForum '98 user meeting in Chicago.

You're just coming off a big user show. Did you get the sense that your customers were ready for the year 2000?

I think that I asked the question during my keynote and found the audience sort of had a low rate of hands being raised in terms of confidence that their organizations are prepared for the year 2000. But generally, I think we have a pretty good feel for the U.S., European and Asian preparedness for year 2000. A rational person would say that people are still well behind where they should be, even in the United States, and that the story is worse elsewhere.

Are you worried? Are you building a bunker?

I did put in an electric-generating capability in my main residence. But, no, not really. I don't want to play the role of an alarmist in this situation. I think that it's a "hold your breath, cross-your-fingers, hope it's a non-event" situation. If it turns into a disaster, we're all screwed anyway.

Are Platinum customers still point tool buyers? Are they embracing the suites?

There are a good number of folks that still, to this day, acquire the Platinum products one by one. But I think we've also given [them] the alternative to acquire products within the suites one by one. We really don't expect people to buy the entire suite [but rather to] accumulate it. I think we expect them to upgrade it later, and I think the analogy of Microsoft Office is the right one.

Many of us accumulated that suite one by one, and we got hooked on Word or Excel first. After we became comfortable with one or two [products], [and] we liked the integration, we bought the rest of it. From then on, once we had two, three or four of the pieces and had some experience using it, we bought the Microsoft Office suite rather than individual components. That was more on the upgrade than on the initial purchase. And I think that's exactly the way we see the enterprise suites working. People are accumulating things to address a specific pain -- whether it's process management or project management or data modeling or object design, whatever. And then when they see that the three or four or five pieces from Platinum work well for them, then we can see the upgrade of that.

The Flip perspective

How do you see the future of application development generally?

We certainly think that folks are understanding, as they often do in cycles, that no matter what quick-fix approach they've tried -- whether it's rapid application development or if it's called Internet or intranets -- the bottom line is that a system is a system, and an application is an application, even if it's called data warehouse.

And you have to have a certain amount of discipline if you're going to do a major project that's got some impact on a firm, and it's going to involve multitudes of people.

In fact, these applications, whether they are data warehouses, intranets or Internet-based apps, all seem to have a level of complexity that increases over time as you involve more complicated components. I believe very strongly that as we get further along in the I/T maturity curve, more and more firms will adopt a full engineering life cycle to manage their various apps.

On repositories

Why is the idea of a repository making a comeback?

I think the repository is the cornerstone, and probably the most important thing across the enterprise. It's sort of the glue, the thing that gives people [the ability] to make order out of chaos. And that's why the repository is a central figure in each of our business units and in each of our suites

And customers are beginning to adopt that thinking themselves more and more. That's why I suppose we've been so successful with our repository.

But when you look at it from the application life-cycle point of view, you have the desire on an enterprise level to define the processes that run the business. And the processes are, in fact, larger than I/T in many organizations. The way we approach the application life cycle has kind of put us smack into a prime area of interest. We just happen to have constructed our application life-cycle suite with an emphasis on process and project management, and subsequent to that, really addressed component design and data modeling. What, with a small degree of surprise, we found, is that organizations are adopting the life cycle of engineering tools to learn more than just their I/T business. That's been a pleasant surprise.

How do you estimate IBM's position today vis-à-vis repositories?

I think IBM has sort of a regret, and that is that they really never put their efforts behind this strategic component in the way that they ought to. And, when they did, they failed to materially affect the way the world runs I/T. Today, they're struggling, trying to come up with a strategy, sometimes trying to work with Oracle and us to come up with a competing strategy to where Microsoft and Platinum find themselves.

We're not necessarily in one camp or the other. We are capable, in an agnostic way, of working with both. But we sort of get the chance, at this point, to observe the IBM envy as it's materializing because they lack a unifying repository strategy to offer to their customers. They know it's central to their strategy, that any competent software company has to have [one] in order to become important to a client. They just don't have an answer yet. So they're struggling to come up with competing standards and competing views, and trying to get people to kind of jump on the bandwagon.

What was your thinking behind the LogicWorks purchase?

Certainly we were getting a brand name; that was the dominant data modeling tool in the business. We thought it complemented the process dominance that we had achieved. We know that we're in a battlefield that primarily exists today between two suite creators, us and Rational. But I think we've taken the high ground on the process, project and data modeling area.

They've taken the high ground from us basically and entered testing into the equation, where they maybe have an equivalent advantage over us today that we have over them in process and project management. And we felt pretty strongly that strategically we were taking a very big bullet out of their arsenal in the sense that Rational today as an organization is totally dependent on ERwin for their data modeling capability as they have nothing to offer other than it.

At the same time, we knew that we brought to the table the ability to put the data modeling standard in the form of ERwin into the hands of some other people that would make it a very important part of their application life-cycle strategy. That materialized in the deletion by IBM of their Data Atlas product from the VisualAge suite and the inclusion of ERwin as the replacement.

UML

Two things people have been watching are Platinum's repository work with Microsoft and Rational's UML work with Microsoft.

We sort of suffer from an impression angle. We were probably the single most important contributor to the development of the UML standard. We were influential in the creation of the current UML standard ...

And many of the things that are in the standard today are over the dead body of Rational, frankly.And as contributors to the standard, we were the ones that created some of what UML stands for in terms of the key components, although Rational has very effectively made the world believe that they were the ones that more or less invented it.

Well, they brought together the Three Amigos [Booch, Jacobsen and Rumbaugh]. They're like the UML rock stars.

Yeah, although our view of the world is that we have the next generation of rock stars. They might have the Rolling Stones and the Beatles, but we've got the Smashing Pumpkins. We've got others that stand out -- Tom Veda, for example. Between Veda and Desmond DeSosa, I think we have the next generation of thinking in that area.

You were a database administrator in another life. How do you view the conflict of data and applications today?

I think we're very sensitive to the fact that application development, in the classic sense of from-scratch, is a thing of the past. So our suites are primarily about objects and components and rules and data -- in the context of living with versioning, changing, managing change, designing the changes, and living with that whole life cycle as an application matures. And there's a real emphasis taped to providing engineering support for folks that bought SAP or PeopleSoft or Baan, any of the big ERP kind of solutions. That's the angle.

Are they concerned that Platinum's many purchases have been accompanied by losses?

We've had eight quarters of substantial profit. The only thing we do is conservatively write off the acquisitions, which is a non-issue. But we've been substantially profitable and they understand it, and that's why we're hitting all-time highs in our stock. Customers understand that it's a very conservative thing to do to acquire a company and write it all off up front and not have to deal with the good will [depreciation] and that in the future. So those are non-issues in our financial statement.

They know that on an operating level, we are massively profitable and we have no debt, $300-and-some million in cash, and are one of the top 10 software companies in the universe. Those are the important things. There's some old-fashioned thinking sometimes among a few constituents in which they don't get it, they don't understand the financial picture, so they just look at the write-offs associated with acquisitions and sort of think we may be losing money or something; but that's because they're naive.

How would you pit how you buy companies vs. Rational and Computer Associates?

I think we're akin to the way Rational has approached the world, although I think we've been a little more organized in it and a bit more global in our thinking than Rational. Rational is still a pretty small company with a singular focus on application life cycle as opposed to the infrastructure. We have a broader view of the world, one that includes how systems management affects application life cycle, and includes the issues of data movement, business intelligence and data warehousing and how it affects applications.

So we have a broader view of the world and we're obviously a much more massive company with far more ability to have strategic relationships with our customers than Rational is. But they do have a decent strategy. I think their strategy, if you look at it, has been stymied a little bit because they truly have had a difficult time putting their acquisitions together, maybe reminiscent of some of the early days in which people didn't understand the way acquisitions were going to drive our industry, and were viewing Platinum a few years ago. They're kind of in that two-year-past cycle.

If you want to look at another company that is a very dangerous competitor to us and a very, very smart operating company -- and which, I believe when the dust settles, will be one of the major distribution companies that will be a factor -- that's Network Associates. Platinum and Network Associates probably represent the current thinking in terms of how to do acquisitions. We're probably a little bit more skilled at it these days than Network Associates, but they're the only other ones that I think, with the exception of maybe Rational, that get how to do it and understand how to build a company in this day and age to be a real dominant force.

CA's model, although it looks like it's built on acquisitions, is really a financially based strategy. It's got mature products and extracts the maximum profit netting by acquiring technology to fulfill a suite. They do it on a different basis, and it's night and day compared to a Rational or a Platinum or Network Associates.

On innovation

At PlatForum you urged developers to be innovative. You think this goes beyond just business issues.

Tom Peters, if you saw his keynote, kind of made it clear that the current generation doesn't get the way to optimize or optimally maximize the technologies that have become available. The tools, in the form of IP and the availability of it, are so potent.

I think I made it clear in my keynote that we're looking at something that rivals electricity in terms of its impact. Creative thinking applied with these tools can rearrange the essence of social structure within our species. I mean, it's a massive thing.

And it is not a typical thing today for organizations to think out of the box. We're still in that early adoption stage in which we're relating the power of these technologies to current thinking, and to current applications and not coming up yet with revolutionary customer supply-chain relationships that are going to be possible. We're coming out of an era in which we were using I/T for efficiency, and I/T for labor improvement and productivity.

I think the systems exist, the data exists and the platforms exist to allow more than trivial deployment of true one-on-one customer relationships. [An example is found at the airport when a flight is canceled] where the information is there - they know the flight has been canceled, they know who the important customers on board are. The systems can be built quite easily at this point to enhance the experience so that an exception like the cancellation of a flight can be dealt with in a way to enforce customer loyalty as opposed to having it as an event that destroys it. [Systems could page the passengers, and automatically book them first-class tickets on the soonest - even a competitor's - open flight.] When I use that example I'm scratching the surface of the kind of systems that could be built and the kinds of technology that can be deployed to alter the competitive landscape.

How do you view the destiny of independent point-tool companies?

I think there is an accumulation of enterprise strength in our suite as well as perhaps even in Rational's, although I think they're less interested in the process and project end of it and the data modeling end of it as an offering. I think they've got true strength in the testing end, where we have as yet faltered in having a competitive response. Between the two of us, we've created an environment in which it's very hard for some of the independent companies to survive in a point product kind of a way. And I think we've seen sort of a deterioration of some of those individual companies as a result.

And, truthfully, because Y2K problems have extracted so much budget out of many elective things - meaning the election to defer data warehousing or whatever - this has caused the makers of point products that [cover] one aspect of the application life cycle to kind of struggle. And for better or for worse, I think it's going to leave the two of us, Rational and Platinum, kind of standing with the only solutions.

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