PLATINUM Technology, Inc.
PLATINUM Technology, Inc.
1815 S. Meyers Road
Oakbrook Terrace, Illinois 60181
Fax: (708) 691-0710
Sales: $95.7 million
Stock Exchanges: NASDAQ
SICs: 7372 Prepackaged Software
PLATINUM Technology, Inc., is one of America’s fastest growing software development companies. Based in a Chicago suburb, PLATINUM writes and sells an extensive line of software tools and utilities that ease the use of International Business Machine Corporation’s DB2 mainframe relational database management system. As growth in the mainframe market slowed in the 1990s, PLATINUM jumped into the rapidly expanding client/server database market as well, supporting such operating systems as UNIX, DOS, Windows, and IBM’s OS/2, and such databases as Informix, Microsoft SQL, Oracle, and Sybase. It shifted its focus to open enterprise systems management (OESM), which enables efficient data operations across wedded mainframe computer, minicomputer, and personal computer networks. In the mid 1990s PLATINUM also sold educational and training services and publications to support its software and the DB2 system. PLATINUM’S more than 6,000 clients include AT&T, IBM, Sony Corporation, the University of California, the Federal Reserve Bank, and other government agencies. In 1995, PLATINUM completed a series of acquisitions that nearly tripled its size.
PLATINUM Technology was the brainchild of Andrew “Flip” Filipowski, former president and founder of the now-defunct DBMS Inc. The son of immigrants and a college dropout, Filipowski grew up in a working-class Chicago neighborhood. After a stint as a tutor with the Evelyn Wood Reading Academy but with no professional sales experience, Filipowski joined Cullinet Software Inc. (then known as Cullinane Corp.) as a salesman. He became the company’s first million-dollar salesman and within five years rose to executive vice president. Cullinet was then the fastest-growing database management systems developer in the country; however, because of the complexity of such systems, many customers experienced difficulties in operating their systems, resulting in inefficient and often ineffective operations. Filipowski identified the related needs for both software and training that would ease the use of such systems. In 1979, after Cullinet declined to develop the increasingly important special services market, Filipowski left to found DBMS Inc.
DBMS’s software products acted as more manageable layers on top of standard database systems, much as Microsoft’s Windows allowed the DOS operating system to become easier to use. In conjunction with its software sales, DBMS offered training programs and expert systems to help companies get the most out of their database systems. Originally aligned exclusively with Cullinet, Filipowski recognized that his company’s fortunes were too closely tied with the other’s, leaving DBMS vulnerable should Cullinet slip. DBMS soon began to support the other major database suppliers, Applied Data Research, Inc., and IBM. Later, DBMS would include workstation development tools among its product offerings. DBMS’s strategy was to sell various software programs bundled as kits, which it offered at a steep discount. Because of the cost in time and effort in developing software, DBMS would purchase some of the components of its software kits, allowing it to bring its products more quickly to the marketplace. By 1986, DBMS had passed $20 million in annual revenues. However, by then changes in database technology were making much of DBMS’s product line obsolete, and Filipowski prepared to update DBMS’s technology. As he told Crain’s Chicago Business, “it was like [DBMS was] selling spark plugs for the Edsel.”
The United States was then in the throes of the takeover fever of the 1980s, and DBMS soon became the object of a hostile takeover by Shamrock Holdings Inc. Unable to agree with the new owners on the future of the company, relationships turned bitter. Shortly thereafter, Filipowski found himself surrounded by a cadre of armed guards and ejected from his own company. Within twenty-four hours, Filipowski started PLATINUM Technology, taking DBMS’s top software developers and executives with him. Two years later, DBMS Inc. went into a slide and was bought up by Computer Associates International.
At that time, IBM was phasing out its earlier database management system in favor of its new DB2 relational database management system for its mainframes, which had been introduced in 1983. PLATINUM began writing software for the new system, reasoning that the introduction of DB2 would create a worldwide market for businesses that could help install and customize the system and then train employees on the new system. The DB2 technology, an electronic filing system, involved enormous amounts of information arranged in a vast array of file and data structures, which in turn taxed the operating capabilities and efficiencies of mainframe computers. PLATINUM offered data processing tools for the system, such as software that allowed data to be analyzed, modified, or transferred among databases while enhancing mainframe efficiency and performance during such tasks. PLATINUM also developed educational programs that trained personnel in DB2’s installation and operation. In 1988, PLATINUM became a Business Partner in IBM’s Authorized Application Specialist Program for DB 2.
In its first year, PLATINUM recorded revenues of $1.5 million with a loss of $895,000. One year later, it earned a profit of nearly $400,000 on revenues of $6 million. Competition was high, however, principally from market-leader BMC Software Inc. Filipowski’s initial strategy involved what Business Week dubbed“guerrilla tactics.” Recognizing that BMC refused to sell its products under its list price, PLATINUM offered deep discounts on its line. Although PLATINUM’S products were not yet perfected, with more bugs than its rival’s products, customers were attracted by the savings PLATINUM offered, ranging in the hundreds of thousands of dollars. Filipowski exploited another weakness he found at BMC. Because BMC relied heavily on telemarketing to sell its products, PLATINUM created a direct-sales staff, who could also offer more extensive, personalized technical support to their customers. As Filipowski told Fortune, “We identify our competitors’ ‘religious behavior.‘ That’s finding out what’s sacred to them, what won’t they change—say, a reliance on telemarketing. We attack by replicating their system or doing something else better. We work like the devil not to be religious.... That way, if anyone picks on us, we change. We survive.” PLATINUM’S strategy worked well, gaining them a foothold in the market and soon a steadily increasing market share.
A more important initiative came in response to the need for distribution of the PLATINUM line. With a potential customer base that included every one of the thousands of companies using DB2, Filipowski needed a way to provide individualized installation, training, and ongoing support of his products on a global scale. However, as a small company, PLATINUM did not have the resources to compete with larger, more established software and computer consulting companies. Rather than undergoing the lengthy and expensive process of opening additional offices and acquiring and training personnel to staff them, or licensing its products to franchises, Filipowski instead hit on the idea of building a network of affiliated companies. By recruiting a number of small consulting companies to sell its products under the PLATINUM name, PLATINUM could extend its reach across the United States and throughout the world, giving PLATINUM the appearance—and credibility—of a large company. In return, the smaller consulting firms would be better able to compete with larger firms while still maintaining their independence. As Filipowski explained to INC., “the little guy’s margins were constantly being squeezed.”
By 1990, PLATINUM’S network included more than 30 affiliates with nearly 3,000 employees. With each company, including PLATINUM, contributing into a fund, PLATINUM was able to create national and international advertising campaigns. PLATINUM telemarketers passed on potential sales to companies according to their established territory, and profits were split between PLATINUM and the affiliate making the sale and providing the service. At the end of 1990, PLATINUM itself had grown to 80 employees, it had licensed 1,900 products to 300 customers, and its revenues had doubled over the year before to $15 million, pushing its profits to nearly $3 million.
In April 1991 PLATINUM went public, selling 2.5 million common shares in its initial offering and netting $18 million. Part of these funds were used for the purchase of another company’s related DB2 software. Then in June 1991, PLATINUM was named as one of four partners in IBM’s developmental System View systems management architecture. Along with Candle Corp., Bachman Information Systems, Inc., and Goal Systems International Inc., PLATINUM received access to IBM’s research efforts on SystemView, allowing them not only a first look at the new system’s specifications but also design input to allow SystemView to work more effectively with, and thereby increase demand for, their own products. IBM also agreed to market only PLATINUM’S DB2 products in Japan. In return, PLATINUM would pay IBM 10 percent of earnings from PLATINUM’S SystemView software products. Within months, PLATINUM’S share of the then $170-million market had risen to 11 percent, behind BMC s 16 percent, and IBM’s leading 32 percent share.
The following year, Business Week ranked PLATINUM at the number two spot on its list of the best small companies of 1991. PLATINUM posted revenues of $32.1 million and profits of $5 million, and in 1992 captured a 35 percent share in the DB2 software market, equaling BMC. Quality control problems, particularly glitches in its software, still presented some difficulties, but the company’s continued discounted pricing and its vows to achieve statistical perfection for its software, had kept sales high. By then, PLATINUM’S products were divided along three lines: PLATINUM Catalog Facility; PLATINUM Analyzers, and PLATINUM Utilities. All three lines focused on improving the utilization and performance of the DB2 mainframe system. By the end of 1992, PLATINUM’S revenues had jumped to $49 million, with earnings of $9.3 million.
Changes in technology and the marketplace’s application of new technology were beginning to have an impact on the mainframe software market. Rapid developments in the power and speed of personal computers had made them a more viable tool for data-driven applications. Companies were shifting from a dependence on mainframes to the use of more flexible and less expensive client/server systems, which comprise networked personal computers linked to a central server. IBM’s sales of its mainframe computers dropped, causing stock prices of mainframe software developers, including PLATINUM, to fall. Although mainframe software sales soon rebounded, given the great number of mainframes already in existence around the world, PLATINUM moved to support the new technology by writing software and providing support for client/server systems. At the same time, the company continued to enhance its mainframe software portfolio, with a focus on the integration of mainframes with client/server networks. PLATINUM increased its software design staff to 76 people, twice its former size. However, Filipowski also used the strategy that had worked for the company before: He acquired third-party software rather than develop his own from scratch. In 1993 PLATINUM purchased Datura Corp. of Richmond, Virginia, a specialist in client/server software, for $6 million. This purchase began a period of rapid growth for the company, as PLATINUM sought to expand further the reach of its software capabilities. PLATINUM’S client base had grown to 1,200 customers licensing 8,000 of its products. Its revenues had reached $62 million.
Price cuts on IBM mainframes in 1994 helped stem the tide of clients turning from the larger machines to client/server systems, providing PLATINUM some breathing room in which to develop its new product lines. Meanwhile, PLATINUM began its surge of acquisitions, picking up 13 companies over two years, including, in 1994, Datura; Aston Brooke Software, a provider of performance monitoring tools; and Dimeric Development Corporation, a developer of UNIX tools and utilities. Ranked 43rd among Fortune’s fastest-growing American companies, PLATINUM had extended its product line with PLATINUM Information Environment products, which included en-terprisewide client/service software applications, and PLATINUM Client/Server Products, which comprised 18 tools and utilities for distributed database management systems across multiple operating platforms. Software products accounted for 63 percent of PLATINUM’S $95 million in 1994 sales, with support and maintenance services and educational and training programs providing the remainder.
PLATINUM’S acquisitions continued into 1995, when it announced the purchase of ten more companies, together costing an estimated $300 million. In addition to these acquisitions, PLATINUM also formed development and marketing alliances with Oracle, Sybase, and Informix, while continuing its association with IBM. PLATINUM’S chief, Filipowski, was determined to reinvent the company, transforming it from its former narrow range of mainframe products to a wide-ranging vendor of MVS- and UNIX-based enterprisewide desktop network systems management tools, utilities, and support services. In tripling the size of the company, PLATINUM first investigated problem areas for corporate network users, then chose and approached the companies working in each segment. Response from each company was positive because most were small companies with limited abilities to market their products. Under the purchase agreements, all of the acquired companies’ CEOs remained in place, and the companies continued to develop their respective products. In 1995, PLATINUM unveiled its PLATINUM Open Enterprise Management System, which provided full integration of PLATINUM and third-party software into a network system.
Despite a sustained period of net losses due to the scope of its acquisitions, PLATINUM continued to be viewed as one of America’s fastest-growing and most promising companies. PLATINUM’S competition broadened, too, as it faced Computer Associates International Inc., Legent Corp., Tivoli Systems, Inc., along with long-time rival BMC Corp., and other industry powerhouses. Yet most analysts agreed that, even while confronting the difficulties of merging so many different companies and corporate cultures in a short time, PLATINUM’S chief asset may well be Andrew “Flip” Filipowski.
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—M. L. Cohen