Why Software Futures bought Eikon

About two years ago we were still competition," says Derek Hughes about the relationship between Software Futures (SF) and Eikon. But that has since changed. "We became non-competitors." SF, he explains, has focused heavily on custom software development in the past two years, while Eikon stayed focused on selling products.

That is one of the reasons for the recent acquisition. "By combining the two we are bringing back the balance between the two sectors. There is a helluva lot of synergy here."

The other motivation is the fiercely competitive market. "Both [Software Futures and Eikon] are relatively small players competing against big guys," Hughes says. He believes the merger will give the company the critical mass it needs to clinch deals. And it is to be a true merger. The Eikon brand will be retained as the product arm of SF, with full integration of the businesses.

The deal was also very opportune. Eikon concluded a management buy-out from the Brainware group earlier this year and was looking at either a listing or joining forces with a bigger player. Had that not happened, says Hughes, the deal would not have been possible. "I don`t think we would have been able to do a deal with Brainware."

Another reason is the international opportunities. "The deal helps us to secure the local market, so now we can start looking for international business." That is not a vision, but a short-term plan. Hughes says SF is looking at one or two international opportunities right now, and could conclude a contract soon.

The reasoning behind the search for international business also hinges on three factors: credibility, financial reality and infrastructure. "SA has a good reputation for skills and a weak currency," Hughes says. "We also have a good telecommunications infrastructure."

Combined, he believes, these factors make doing business with SA very attractive. He foresees putting a small team, no more than 10% of the workforce, on the ground at foreign locations, while the bulk of the work gets done locally. But he promises that the lure of strange and alien idols will not see SF adopt a shotgun approach. "We will look at selected clients inaccessible markets." Accessible in this case means continental Europe, the Middle East and the Pacific Rim. "America is probably a bit inaccessible at the moment."

So what is it that Software Futures is after? "Rational is very attractive," Hughes says. Eikon has been distributing Rational Corporation application development products for the last five years. That and the Iona middleware distribution fit in well with the SF offering. The combined entity will be pushing object and component technologies, which Hughes believes will be of benefit to the country. "The SA market is still in the adoption phase of these technologies. We hope to accelerate the rate of adoption."

There is still enough competition out there to keep the company on its toes, however. The services side is a dog-eat-dog market. "We typically find ourselves up against anything from five to ten players when bidding for a contract," says Hughes.

As far as the integration between the businesses goes, he sees no potential for trouble, except "the usual hitches when you bring a group of people into a company. We have similar flat management structures and a similar culture. Our core values are the same."