chris horn's blog

The text below is from an invited keynote talk I gave this morning to a seminar on innovation organised by the NSAI, the Irish national standards coordinating body.

I talked about how in the formative days of IONA, we used the OMG as a vehicle for promoting our technologies and products, and how critical our participation in a standards initiative was for our company.

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Exactly twenty years ago, American Airlines and Hewlett-Packard Corporation took an initiative to develop new standards in the global software industry to interconnect distributed software applications. The initiative rapidly gained momentum, with all major software suppliers - with the sole exception of Microsoft - quickly joining. Yet by 1996, a small company from Ireland, IONA Technologies, was a widely recognised world leading - arguably the world leading - implementor and vendor of these new standards, ahead of such major vendors as IBM, Oracle, HP, Microsoft, Digital and Sun. As a result, IONA had major customer contracts with companies such as Motorola, Boeing, Goldman Sachs, Lufthansa and Hong Kong Telecom. How on earth did that all happen ?

Sean Baker, Annrai O'Toole and I co-founded IONA in early 1991, as a spin out from the TCD Computer Science Department. We had been working together on how best to interconnect distributed software applications for over a decade, in part using collaborative research funding through pan European R&D programmes made available by the European Community in Brussels. When in 1989, American Airlines and HP took their initiative which led to the formation of the new standards organisation, the Object Management Group, we followed the developments with interest. One of the first actions taken by the OMG was to issue a world wide call for proposals for technologies which could underpin the new standards. As a direct result of our participation in the European R&D programmes, the three of us started attending the OMG meetings to track the development and discussions about the definition of the new standards.

One of the interesting consequences of the culture of the global software industry is the frankness and openness of talented software engineers. Many experienced software engineers are quite prepared to exchange professional views on particular technologies and products, and even - perhaps especially - those upon which they themselves have worked or are currently working. Simply by engaging and discussing with such individuals who work for software vendors, a perspective can often be reached on the status of strategic initiatives being taken by their employers. Equally, the concerns and priorities for new technology adoption by large end user customers can often be discerned by chatting with experienced software professionals working for such organisations.

By our regular attendance at OMG meetings, we reasonably quickly came to a number of conclusions by late 1990. First, our research work over the prior decade was as advanced as anything that we could perceive amongst the teams working within the world's leading software vendors. Second, those major software vendors who had publicly committed to the OMG were in fact several years away from releasing commercial implementations of the OMG standards, for various reasons. Third, the customers who would use the OMG standards were very keen to have product quality implementations as soon as possible, so as to solve specific business challenges they faced in their operations and markets.

By the summer of 1993, we released one of the first implementations in the world of the new OMG standards, at a major global tradeshow hosted by the OMG in San Francisco. As a direct result of that show, we gained our first commercial customer, SAIC, a major US systems integrator. By early 1994, we had been chosen by Motorola against competition from HP and others, as a key foundational product underpinning the entire ground control systems for their 4B$ Iridium global satellite telephony system. By 1995, we were chosen by Boeing against competition from IBM and others, as a key foundation for the complete re-building of almost all the software systems for the manufacture and assembly of all Boeing airliners, across 18 factories in the USA. By 1997, we completed the fifth largest IPO in the history of the Nasdaq exchange on the basis of our diversified blue chip global customer base, rapid revenue expansion and track record of 24 quarters of profitable growth.

What lessons are there from the IONA experience, particularly as regards Irish companies, and particularly as regards the role of standards ?

I have already alluded to one lesson: working within standards organisations can give you very valuable market intelligence about the strategy and status of your competitors, and of your potential customers.

Clearly, for IONA, standards were an absolutely critical catalyst. A new company can chose to play the standards game, or instead develop its own proprietary non-standard technology. Some companies, such as Tibco and one of our competitors, chose the proprietary route. Proprietary strategies are workable, and help insulate and define intellectual property of an organisation: on the other hand substantial effort is needed in marketing a proprietary technology in the face of standards, including convincing potential customers that re-training their technical staff on a proprietary technology is nevertheless worth the effort.

We chose the standards route. But with standards at the core of your strategy, how do you build intellectual property and barriers to entry against your competitors ?

One important direct consequence of playing the standards game was that our marketing strategy and necessary budget both became much less challenging. The OMG, and major global vendors, were already investing heavily in promoting the OMG standards. Qualification of sales leads became trivial: if the prospect already had an interest in the OMG standards, then we had an interesting offering for them. If the prospect had little or no interest in the OMG standards, we qualified them out of our prospects pipeline. Furthermore, simply by attending OMG events - standards meetings, seminars and trade shows - we had a pool of qualified prospective customers immediately in front of us.

There are two complementary approaches to playing the standards game as a vendor. The first is to ensure that your product conforms to a specific standard. In my view, this is a "me-too" approach: your product conforms to the standard, as most likely do your competitors' products. Conformance to the standard becomes merely just one hurdle for your product value proposition: you will only beat your competition if your product then implements the standard in some sense "better" than anyone else - faster, smaller, lower cost, whatever.

The second approach is to establish, or to play a very strong industry lead in establishing, a new standard. In this way, your own product becomes one of the very first, if not the first, implementation of the new standard. If there are customers out there interested in the potential of the new standard - those attending the standards events and tradeshows and seminars - you can then quickly gain momentum over your competitors who have yet to ship a standards conformant product. Further, your potential customers become more comfortable in working with you as a relatively small supplier and early market entrant, since they know the more established vendors in due course will bring out their own implementations of the standard. However this is not a danger to your business but an opportunity: get a toe hold in a customer account, and show how good your company, your team and your products are.

We took both approaches. We had a very good implementation - both from the technical perspective and business proposition - indeed of the emerging standards; and also we also took a very strong lead in helping evolve the standards. Because we had early adopters - customers who started using our product because it was an early implementation of a new emerging standards - we were able to directly influence the standards with a number of key feedbacks and proposed modifications to improve the standards based on pragmatic field experience. In turn this meant that some competitors who had yet to ship a product implementing the standards, either eventually shipped product which did not implement the latest version of the standards, or delayed their product ship dates while they busily re-engineered their work to chase a set of evolving standards. Furthermore, we encouraged our customers to contribute to the debate: by having customers actually turn up themselves at the OMG standards meetings, OMG began to accelerate the switch from a vendor driven push for a new set of standards, to a customer driven pull, whilst all the time keeping IONA at a focal point. Thus in turn created further obstacles and challenges for our competitors racing to stay current with the latest influences on the evolving standards.

Let me attempt to summarise for you. You can play the proprietary game, and face the marketing challenge of finding customers prepared to invest in non standard products. Or, you can play the standards game, gain market insights and quickly find interested customers. You have then to play the standards game better than your competitors, either by a "better" implementation or by using your technology to define a new standard, or just possibly both. Innovating and building a new standard around that innovation creates an interesting opportunity for you and simultaneously a dilemma for your competitors, as they try to catch up with the adoption of the standard in the market by your customers.

Our experience in IONA shows that it is possible to build a global technology player out of Ireland. Standards were an absolutely critical part of our strategy. I very much welcome the NSAI's excellent guide on good practice in innovation and product development. To paraphrase: yes, Ireland can.

Eva Paus, as far as I know, was the first to coin the term “Tico Tiger” in 2005 in her book subtitled “Can Costa Rica become Ireland ?” Richard Soley more recently resurrected the term when he suggested I use it as the title of a talk I gave this week in San Jose, Costa Rica, “Experiencias del Tigre Celta para el Tigre Tico”. “Tico”, by the way, is a form of endearment which Costa Ricans use colloquially to refer to each other as natives of their country, perhaps as we in Ireland sometimes call ourselves “paddies”.

I first met Richard just about 20 years ago, in Brussels at an annual ESPRIT conference. Pretty soon thereafter, when I was an academic in Trinity College, together with IONA co-founder Annrai O’Toole, I collected Richard from an OMG meeting in the height of the “troubles” in Northern Ireland and drove him across the border down to Dublin to give an invited talk on the OMG in Trinity. Richard regularly reminds me, and did so again last week when I met him, of our three passports – American, Irish, and British – being scrutinised at length by gun toting teenagers in army fatigues – apparently employed by the British Army – at the heavily fortified border crossing with the Republic. I think he was quite shocked, actually.

I was in San Jose, the capital of Costa Rica, last week to give an invited talk on the experiences and some lessons, from my personal perspective, of drama of the Celtic Tiger. The talk itself was on Thursday evening last, to the Club de Investigacion – run by Roberto Sasso – whose members consist primarily of senior executives from end user organisations throughout Costa Rica. Via Roberto, I also met the Minister for Foreign Trade, Marco Vinicio Ruiz and separately, the chief executive of CINDE – the equivalent of the Irish IDA.

It was my first visit to Costa Rica. I had heard of course of its astonishing natural beauty and lush green landscapes, as well as its extraordinary Caribbean and Pacific coastlines. However, I had not realised it was such a geothermally active region, with 38 volcanoes. San Jose appeared reasonably clean, not very much litter, and not very much graffiti, at least in comparison to parts of Dublin! In a very surprising way, it reminded me of the extraordinary beauty of the countryside of Rwanda, which I visited earlier this year, with luxurious forests and vegetation, lurking volatile summits, wonderful animals in natural habitat (e.g, gorillas in Rwanda, jaguar in Costa Rica..), low rise red tiled and silver corrugated roofed homes and buildings, and extraordinarily warm and generous people. I was fortunate enough to be taken, and to have a clear view for at least ten minutes, of the crater of Poas volcano , 2,800 metres high and about a 2 hour (uphill!) drive from San Jose. On the way down, I also visited the La Paz hotel gardens, with a wonderful track through native rain forest and damply intimate to a series of four spectacular waterfalls. Some of my own photos are here. It is the rainy season at the moment, and on Friday afternoon I experienced the heaviest and darkest monsoon cloud in my life: over 12 cm of rain gushed over San Jose in just a few hours. Everyone seemed to take it in their stride, and said it was routine and would probably rain as heavily the next day. And I thought we had had a wet summer in Ireland, but this was something else..

The democratic institutions of Costa Rica are interesting, and ones from which we in Ireland and in other countries, might appreciate. The President and elected members of parliament have four year terms. Since the 1949 Constitution, a member of parliament can only seek re-election after sitting out one term, ie after a four year participation in parliament, a further four years must pass before he/she can seek re-election! In the case of the President, eight years must pass before he/she can seek re-election. In my view, this philosophy ensures that politicians have an opportunity to stay more aware of ordinary society than some of the long term career politicians which we have in this country. The current president, Oscar Arias Sanchez, is a Nobel Peace Prize laureate, after his work helping end civil wars elsewhere in Latin America. The next elections will be in February 2010.

In 1948, Costa Rica disbanded its armed forces, and has no military forces and no military drain on the public finances. There has been no civil war since 1948, unlike some of the neighbouring countries. There is a public security force, currently with a small number of aircraft and helicopters, for general law enforcement, border patrol, anti-narcotic activities, and rescue.

The Costa Rican economy has been growing fairly steadily, at about 7% in 2007. It has a high standard of living relative to its neighbours about a per capita income of about U.S. $5,800 (and approximately double that on purchasing power parity – PPP – terms), and an unemployment rate of 4.6%. Consumer price inflation has been consistent at about 10% for the last decade. Both the central government and the overall public sector ran fiscal surpluses in 2007.

Costa Rica’s economy has been driven by eco-tourism (particularly from the USA, Canada and Spain) and agriculture, and in particular organically grown coffee, flowers, bananas, pineapples and strawberries, with Dole and Chiquita. However more recently Intel Corporation is established in San Jose and employs over 2,000 people; Proctor and Gamble employs 1,200 people, and both Hospira and Baxter Healthcare add to the health care products industry. There are untapped (for environmental reasons) oil reserves off the Atlantic coast. 90% of electrical power is generated by hydro-electric units, and all fossil fuels are imported - in Ireland, well over 90% of our electricity generation is by contrast from fossil fuels. Surprisingly, in Costa Rica there are not yet any geo-thermal units [actually there is one so far, and I stand corrected since the original version of this posting - see Ignacio Trejos's comment below], and it would seem that Costa Rica has ample opportunity to become a net exporter of electricity, based on its natural hydro and geo-thermal resources.

In the school system, the Government has given tax breaks for the purchase of computers, and many schools are fully equipped. Programming has become part of the entire school agenda. Turning to the software industry, the Microsoft evangelist in the region, whom I met, has done an excellent job for his company: all school students leave school not only with a good grounding in Office tools, but also as at least Visual Basic programmers. There is very little Java competency. The quality of programming capabilities in the young adult population is high. There are today about 80 independent software vendors, many of them however small, exporting in total approximately 200M US$ worth of services and products.

The Club de Investigacion is having its 20th anniversary year. It has recently published a digital strategy for Costa Rica, as part of a national drive improve productivity and to triple income per capita by 2021. It is available in English here and covers the major themes of productivity in the economy; education; and transparency in government institutions.

Next year, the OMG will celebrate its 20th anniversary year, and its June meeting will be hosted in Costa Rica. The OMG was highly influential on the development of IONA, and as a one time Board member of the OMG, I hope to be there to join in the celebrations of the longest global standards organisation in the software industry.

Twenty years of Club de Investigacion, and almost 20 years of the OMG. Reflecting back to 1988 and 1989, I do not believe any of us would have anticipated the rise of the Celtic Tiger in Ireland just a few years later.

I wonder what the next twenty years will bring for the Tico Tiger..