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Iona: a case study of frustration in Web frenzy

In a comeback play, the development software company embraces Java and jumps into the booming but crowded application server market.

Iona Technologies doesn't want to be a footnote in the annals of computing.

The development software maker was poised to hit the big time when the Web's explosion came four years ago. To make software work in the much more complicated world of the Internet, developers needed sophisticated networking tools that let applications work as easily across the Net as they did on local PCs.

Iona had just the ticket in its complex development software, built around the Common Object Request Broker Architecture (CORBA) programming model that, if properly deciphered, could turbocharge ordinary client-side applications to function in a wide-area networked world.

But what should have been a slam dunk for the Irish company has turned into a protracted battle, first to evangelize the byzantine structure of CORBA, then to explain why companies should use it instead of the more approachable Java programming language.

Iona has hit a rocky stretch lately. It posted a loss in the March quarter, it reshuffled its board of directors, and its stock has dipped from $50 to about $13 per share.

In hopes of turning it around, Iona has embraced Java and is jumping into the booming but crowded application server market.

An application server is software that runs the transactions between Web browsers and back-end services, such as databases, human resources software, or stock trading systems. Some 50 companies, ranging from start-ups such as Bluestone to software heavyweights such as Sun Microsystems, Oracle, and IBM, are vying for a share of the market that is expected to grow to more than $2 billion in revenue by 2002, according to Forrester Research.

Iona executives say they plan to combine their disparate, hard-to-use products with new Internet-based technology--and unify them up into one application server that makes it simple for developers to build e-commerce Web sites.

"With our various technologies, we actually have a world-class application server. The trick now is to make them easily usable within the Internet arena," said Annrai O'Toole, Iona's chief technology officer.

Analysts say it's not too late to enter the application server market but said Iona made a mistake by banking its future with CORBA and waiting too long to support the much easier-to-use Enterprise JavaBeans (EJB) programming model. Analysts also say Iona has been hampered by buggy software and problems with its sales organization--two areas Iona executives claim they have fixed.

Other CORBA software makers, such as BEA Systems and IBM, moved to EJBs much faster, said analyst Anne Thomas, of the Patricia Seybold Group.

"Iona waited too long to see what was valuable and didn't recognize that Java was going to be a serious application environment. They insisted that it was a toy," Thomas said. "They never acknowledged that building things in CORBA was hard--that a Visual Basic programmer would not be able to pick this up and use it, which is what EJBs are aimed [at]."

Analyst Mike Gilpin, of Giga Information Group, said the move to EJBs and the application server market is one Iona had to make.

"The fact the application server market has moved its center of gravity toEJBs means being the leading CORBA vendor no longer is a ticket to success financially," he said.

Iona chief executive Chris Horn said the company's goal is to build software that bridges the two programming models, allowing developers to transition from the more mature CORBA model to the emerging EJB model.

Iona entered the EJB space in February by buying a small software firm called EJBHome, and executives believe they're in good position to capitalize on the application server market. A recent Forrester Research study found that twice as many companies use Java and CORBA than Microsoft's proprietary COM programming model.

Like other app server makers, Horn said Iona plans to offer a range of products, low-end versions for smaller businesses, and high-end application servers for those who need more reliability and speed.

Horn said Iona later this year will release OrbixHome, a drag-and-drop development tool that lets programmers write and run EJB applications that sit on top of a CORBA engine. OrbixHome in January will fully support Java2 Enterprise Edition, which includes the latest version of EJBs; Java servlets, small Java applications that run on the server; and JavaServerPages, which allows Web pages to include Java applications.

By the middle of next year, Iona plans to ship a high-end application server that bundles OrbixHome with a variety of Iona's existing Orbix products, which handle security, transaction processing, and software connectors to back-end services such as databases.

O'Toole said the company is building software connectors to Web servers and will add support for XML, or Extensible Markup Language, a Web standard that helps businesses exchange data.

"What we've been doing is fitting all the pieces together and making all those things work seamlessly," he said.

Analysts say buggy software is another issue Iona has to resolve. Gilpin said many customers he's talked to say Iona takes too long to fix bugs. Gilpin believes Iona's developers are swamped with building new products, leaving little time for bug fixes.

O'Toole disagrees, saying Iona has worked hard the last two years building its support staff. Like Microsoft, Iona is releasing service packs every quarter that allow customers to upgrade their systems with bug fixes, he said. "We've been successful wrapping our arms around that."

Iona's stock slumped this spring after the company lost $400,000, or 2 cents per share, in the 1999 first quarter. Horn said the company missed expectations partly because its newly hired sales staff didn't close large deals in time, but he believes better training has fixed the problem. The company rebounded in the second quarter with a profit of $1.2 million, or 6 cents per share.

Lazard Freres analyst Erick Brethenoux believes Iona is turning things around. For the current fiscal year, he predicts the company will post a profit of $6.1 million, or 30 cents per share, on revenue of $103 million.

Analysts believe Iona's new strategy is smart, but are more skeptical. "It provides them with a better story than they have now," Gilpin said. "But a lot of customers are looking at IBM, BEA, Sun, Oracle today. How many of those who will say, 'Let's look at OrbixHome,' remains to be seen."