FlashPoint: A New Macromedia is Pushing Boundaries

Roughly a year ago, life wasn't so pleasant for Macromedia and its channel partners. The company was still laboring on merging operations and technology from Allaire, a software company it acquired in early 2001 for $360 million. Macromedia was also struggling to bring onboard more than 10,000 Allaire partners and software developers, including many that didn't see the value of the merger and had no idea how to leverage the combined product line.

Several partners recall a fiery closed-door meeting with Macromedia officials at the DevCon 2001 conference last October. Almost a year after the merger announcement, partners were still lost and their frustrations reached a boiling point.

"There were a lot of interesting things said, and it was very contentious," says John Stanard, CEO of Webworld Studios, a Web application-development and consulting company in Arlington, Va. "But it helped, because they really began to reach out after that."

David Mendels, senior vice president of the Macromedia Alliance Program and chief strategy officer, bluntly admits that Macromedia did a poor job externalizing its postmerger technology vision, which left partners disgruntled. "To be honest, a lot of our partners had problems last year because we didn't communicate," Mendels says. "So we got out on the road for partner seminars and meetings, we revamped our partner portal and the program structure, and just made our people as accessible as possible."

Since that pivotal meeting, Macromedia has pulled out the stops for its Alliance partners. It seems to have paid off: In the 2002 VARBusiness Annual Report Card (ARC) survey, solution providers gave Macromedia top marks in the Web and Internet applications category. Further, the company also took first place in the application development and deployment tools category. And VARs expect to increase business with the company moving forward (see "Taking Care of Business," page 40). Now Macromedia is hitting the streets to spread the word about its newly integrated Macromedia MX portfolio, hoping to attract new customers, developers and VARs. Macromedia officials say the primary focus of the company's upcoming developer conference, DevCon 2002, will be MX, particularly Flash MX, which integrates content with application code, making Web sites richer and more interactive.

Flash? Yes, Flash. No longer is it the elaborate Web-graphics technology that, while impressive, does little more than slow Web-site visitors down with lengthy intros and banner ads. There's a new Flash in town, and a revamped Macromedia is setting its sights on the enterprise market.

Here's a closer look at Macromedia's history to see how the critical Allaire merger came together and why Flash MX may be the most exciting Web technology in the industry.

Merger Magic

Solution provider Rick Kollmeyer wanted to build applications, plain and simple. His company, Blue Edge Data Solutions, Natick, Mass., specializes in building customized e-business and Web applications for both small customers and large enterprises. Kollmeyer and his staff found that many application-development tools and environments were too expensive and too high-end for even their largest customers. Then, Blue Edge discovered Allaire's low-cost, yet robust, JRun J2EE application server.

Blue Edge became an Allaire partner just a few months before Macromedia announced its plans to acquire Allaire in January 2001. The merger news caught some by surprise, but Kollmeyer was familiar with Macromedia and saw big potential. Blue Edge began using Macromedia Web-design tools, such as Flash, coupled with Allaire's back-end technology to build Web applications with rich user interfaces. "The merger was like those Reese's commercials with peanut butter and chocolate," Kollmeyer says. "There was an almost immediate synergy between the Allaire server engineers and the Macromedia tools developers."

Stanard said it took some time for VARs to see the value of the merger, including his own Webworld Studios. "A lot of partners on both sides were baffled by the Allaire deal at first because they didn't see the synergy," he says. "We stayed away from Flash because we just associated it with annoying Web advertisements, but then we saw the combined product line [as a bridge between back-end development technology and the user interfaces."

Webworld Studios, like Blue Edge, began as an Allaire partner years ago and is loyal to its popular middleware products, ColdFusion and JRun. In fact, this year Macromedia wins the loyalty subcategory in the Web and Internet applications category. So, as the new Macromedia began to take shape, other partners began to see what Stanard saw: a true multimedia platform that stretched from application development all the way to the user interface.

"We had a vision years ago that Web content and application development would come together," says Dominic Gallello, executive vice president of Macromedia. "Allaire was the missing piece to the puzzle."

MX Factor

When Macromedia announced a new integrated product family, dubbed Macromedia MX, last spring, it was the culmination of months of product and technology integration since the Allaire acquisition. The MX initiative retooled Flash, Macromedia's Web content-design tool and one of the most dominant desktop technologies in the world.

Few companies can boast the sort of installed customer base Macromedia enjoys with Flash,more than 95 percent of desktop computers and PCs are shipped with Flash, according to most estimates. That's one reason why acquisition rumors have swirled around Macromedia lately. So, while common users may still think of Flash as a "Skip Intro" annoyance, those in the software business,Microsoft, IBM, etc.,see its value.

Nearly six months after the MX launch,which included ColdFusion MX and Flash MX,others are catching on. "The thing that has us really excited is Flash MX," says Kollmeyer, who hosted a Flash MX seminar at Macromedia's Newton, Mass., office earlier this month. "Every person who's come out of the training sessions says, 'Wow.'"

Flash MX may be Macromedia's finest invention to date, according to partners. The company shrewdly transformed Flash from a simple Web page-design product to a powerful development tool that can build more dynamic sites, as well as Flash-powered Web applications. Gartner analyst Lou Latham wrote in a recent report that Macromedia is leading the charge for next-generation Web graphics and applications. "Traditional application-development technologies, including Java and dynamic HTML, have failed to provide PC-quality application interfaces on the Web," Latham stated. "Flash offers the interface richness that Microsoft and the Java development leaders (e.g., IBM, Oracle and Sun Microsystems) have not delivered through the browser."

Customers are beginning to see the value as well, building some high-end Web projects with Flash and other Macromedia products. Macromedia recently built a "virtual dressing room" for the Victoria's Secret Web site; ColdFusion delivers personalized data and content to users via Flash Player without having to refresh the page.

Molecular, a Boston-based solution provider and Macromedia partner, recently built a Flash-powered interface for Yankee Candle that lets users customize candles on its Web site.

"Flash has as much ownership of the desktop as any technology, but people used it for annoying banner ads and Web-site intros," says Darryl Gehly, vice president of corporate development at Molecular. "Would you walk into a Staples retail store if you had to sit and be bombarded with commercials before you could enter?" he asks. "Now, people can build and run applications across Flash MX, and that's a pretty powerful proposition."

Let's not forget about the back-end technology, either. Some critics felt acquiring midrange middleware products, such as ColdFusion and JRun, was a waste of money for Macromedia because the company would be going up against the likes of BEA Systems, IBM and Oracle in the highly competitive application-server space, which had already knocked out smaller application server players. But Macromedia instead positioned its middleware as affordable, yet powerful, development environments that complement the customers' application-server platforms.

The idea worked; Macromedia has recently formed alliances with IBM and Sun to integrate ColdFusion MX with their respective application-server platforms. Gallello describes the scenario as a win-win-win for big application-server vendors, Macromedia and the customers.

"A lot of enterprises wanted to standardize on a particular application-server platform, but we saw ColdFusion and JRun as rapid application-development environments that could really add value to the middleware stack," Gallello says. "Customers can still standardize on Sun ONE or WebSphere, but get a low-cost, robust development environment as well."

Eyes On Enterprise

One of the key elements behind the successful Allaire merger and Macromedia's survival in the past year has been the channel. Mendels says his company saw the combined channel programs as a major asset. Both companies had strong reputations with developers and even had many solution providers in common.

After some rocky times around the merger, partners now say Macromedia has as good a channel program as any vendor in the business. "We're a small company, and we don't drive a whole lot of revenue for Macromedia, but someone always returns my calls," Blue Edge's Kollmeyer says. "It's one of the best, if not the best, partner programs out there today." The ARC results bear that out: In both categories in which Macromedia was a player, the company placed first in postsales support and solution-provider program criteria.

During the past six months, Macromedia has begun flirting with the enterprise market. The company's new MX strategy is appealing to larger corporations, and enterprise-focused VARs are beginning to gravitate toward Macromedia. "Larger integrators and solution providers are definitely more interested in us now," Mendels says.

Seemingly, everything is in place for Macromedia to succeed and ascend to the elite rank of software vendors: a powerful technology, the right partner program, a loyal developer following and a strong customer base. So what's missing?

Perhaps the only obstacle holding Macromedia back from greatness is its business direction. Enterprise adoption has consistently eluded Macromedia, partners say. The company, like Allaire before it, has a software developer's mentality and has traditionally aimed to capture the hearts of software engineers with innovative, but low-cost, products. Partners say it's time to aim higher and sell to top-level execs to win more of the enterprise.

"JRun, for example, is a fully J2EE-compliant, version 1.3 server," Gallello says, "and it's only $900."

Inexpensive products can lead to a plethora of users, but also low revenue. While financially sound, the company's revenue for the first quarter fiscal 2003 came in at $84.2 million,meager results for a premier software vendor with a formidable product line.

Macromedia has begun to set its sights higher, revamping its pricing scale to target larger corporations and getting more salespeople on the street to help generate leads for partners. Instead of dot coms and e-tailers, the company is now honing in on brick-and-mortar enterprises looking to expand through the Web. Macromedia has also established a solid following in the government market with ColdFusion,Webworld Studios, for example, is currently working on a ColdFusion project for the Federal Aviation Association. The trick will be repositioning Flash in the market and selling it to CIOs.

"We're move from simple department projects to larger corporate deals, such as online banking, where user experience is crucial," Gallello says. "We're new at this, so a lot of enterprises are still feeling us out and looking at us for the first time."

With Flash MX, Macromedia will be hard to miss.