COVER

WEB WEAVERS

For software developers, the graphics-rich portion of the Internet is a veritable wid West of opportunity

SHELDON GORDON January 29 1996
COVER

WEB WEAVERS

For software developers, the graphics-rich portion of the Internet is a veritable wid West of opportunity

SHELDON GORDON January 29 1996

WEB WEAVERS

COVER

For software developers, the graphics-rich portion of the Internet is a veritable wid West of opportunity

The year was 1987, the World Wide Web not yet even a glimmer in computer hackers’ eyes. Tim Bray, a computer scientist at Ontario’s University of Waterloo, and two of his colleagues began working with Oxford University Press and the Canadian government to develop an efficient system for searching the entire contents of the Oxford English Dictionary—all 22,000 pages and 60 million words. When they finished the project, Bray recalls, “it suddenly dawned on us that there were other large, complex, intimidating objects out there, and people might pay us to solve those problems, too.” In 1991, Bray and his partners founded Open Text Corp., based in Waterloo, which soon became a leader in text-indexing software that allows computers to retrieve items from large collections of documents. But the huge opportunities just were not there. “The market wasn’t nearly as big as we thought,” Bray says. “The world wasn’t sitting there palpitating to be changed.”

Then came the Web, the multimedia portion of the Internet—a veritable Wild West of opportunity. In 1994, just as the Web was beginning to attract millions of new users to the Internet, Bray had the idea of applying Open Text’s search-and-retrieval software to the Web’s massive, decentralized and disorganized trove of data—a storehouse of knowledge that, in printed form, would make the Oxford dictionary look like a pamphlet “I saw a crying, and poorly met, need to find things on it,” says Bray. ‘When I got the idea for building our index, I was so excited I was physically shaking for a couple of days.” The result was the Open Text Index—a constantly updated inventory of millions of Web pages, available on the Web itself and searched almost instantaneously by Open Text’s “search engine,” which obeys commands in English, German, French, Spanish, Chinese or Japanese. Now, Open Text is poised to enter the Internet sweepstakes with an anticipated $86.4-million ini-

tial public offering. It is one of a growing number of Canadian companies that smell profits in what is fast becoming one of North America’s most popular pastimes: surfing the Web.

The competition facing most of those companies is fierce. Open Text, for example, has to vie with such U.S. search engines as Lycos, Webcrawler and InfoSeek for popularity among Web surfers. To complicate matters, the company allows Web surfers to use the Open Text Index for free—a common strategy among Internet companies, who hope that by giving away their services now they can raise their profiles and improve their chances of earning future profits. In Open Text’s case, that means marketing customized versions of its text-retrieval software for so-called “Intranets”—applications in which companies tap into the Internet for their own internal and external communications networks.

Worth an estimated S550 million a year worldwide, and growing by as much as 35 per cent a year, that mar ket already features a formidable rival to Open Text: Ottawa-based Fulcrum Technologies Inc. Fulcrum has been marketing text-retrieval software since 1983-and has been profitable every

year since it went public in 1993. Even more impressive, its shares closed at $38 last week, up from $11.88 a year earlier. Until recently, most of Fulcrum’s sales were for independent computer networks rather than for the Internet. But last September, in a major deal with U.S. computer giant Novell Corp. of Provo, Utah, the company licensed its first Internet product, Surfboard, which provides searching capabilities to Internet users browsing through Novell’s on-line technical information service.

Peter Eddison, Fulcrum’s vice-president of marketing, predicts that the Internet will be the defining force in software development for the foreseeable future. As for Fulcrum’s rivalry with Open Text, he notes: “We market for enterprise deployment in large organizations. They’re trying to do that, too—so we have the same target in mind. But we’re 10 times as large and we’re profitable. And we’re not sure that giving away software to become famous, as they do, is the best approach.”

In fact, Open Text lost an undisclosed amount of money last year on sales of $11 million. But providing the Open Text Index on the Web is “a marketing guy’s dream,” says David Weinberger, the company’s vice-president of marketing. “Good karma never hurt anybody,” he adds. “Over the past quarter, 20 million searches were done with our search engine. It’s like advertising: not everybody who reads the ad is a prospective customer. But we’ve gained tremendous mind share and in an emerging market like the Internet, mind share is the most important thing to have.”

That emerging market is also attracting other Canadian companies. Within the next month, Simon Fraser University’s Exemplary Centre for Interactive Technologies in Education (ExCITE) will spin off one

of its developments, NCompass, as a private company. NCompass is a software technology that is used when embedding small programs, called applets, into other programs. A bank, for example, could embed a mortgage-rate calculator in its Web home page; a videogame producer could embed a running demo of its latest game. NCompass also enables software developers working with Microsoft Corp.’s Object linking and Embedding technology to create programs that can be activated by computers running Internet browsing software, such as Netscape Navigator or Internet Explorer.

InContext Systems Inc. of Toronto, headed by Robert Arn, is also profiting from the Web. Arn, 53, a former Rhodes scholar with a PhD in linguistics, taught that subject at two Canadian universities before becoming captivated by a universal computer language known as Standard Generalized Markup Language (SGML). After founding InContext in 1991, he planned to create and sell SGML software to large corporations and institutions. But the SGML market grew slowly: in 1994, the company posted sales of only $1.4 million.

Then, the Web took off—and so did Arn’s business. Web pages are composed with something called HyperText Markup Language (HTML), which is an application of SGML. Sensing opportunity, InContext launched an editing tool last July called Spider, which makes it possible for novices to create their own Web pages by pointing and

clicking a mouse. Now, InContext has teamed up with CompuServe, the world’s No. 2 commercial on-line service, to make Spider available to that company’s four million subscribers worldwide. Spider is also a built-in feature of two Web browsers, Netscape’s Navigator and Microsoft’s new Internet Explorer. Result: in the most recent quarter, ending on Sept. 30, InContext gross revenues hit $720,000, up from $165,000 in the same period a year earlier.

Speedware Corp., another Toronto software firm, recently launched its first Internet product, Speedware Autobahn. Although now most Web pages are static, Autobahn makes it feasible to take reservations, keep track of inventory and sell tickets over the Internet. As a result of sales to such high-profile customers as HewlettPackard, which includes Autobahn in its Internet programming software, Speedware expects to break even in the latest quarter, compared with a loss a year earlier. “Our sales force is busy like crazy,” says CEO Ian Farquharson. He pauses, then sums up the feelings of many lured by the promise of the Web: “The Internet is already exploding beyond belief, but it has barely started.”

SHELDON GORDON