Sybase, Inc. History

Company Perspectives:

Sybase's products, combined with its world-class professional services and partner technologies, provide a comprehensive platform for delivering the integrated solutions businesses need to be successful.

Company History:

Sybase, Inc. is one of the ten largest independent software companies in the world. The company's main area of emphasis is in developing relational database management systems for network computer environments. Approximately half of Sybase's revenues come from the sale of its products, but the company also offers other services such as consulting and technical support. Founded in the mid-1980s in Silicon Valley, the company has grown steadily, establishing a strong market share and a worldwide network of customers.

Sybase's Beginnings

Sybase was founded in 1984 by Mark Hoffman and Robert Epstein. Hoffman had previously worked as an executive at a company called Britton Lee, which pioneered the field of database computing. He joined Epstein, who had helped to create an early relational program called Ingres while working toward his Ph.D. at the University of California at Berkeley. Together, the two set out to market a cutting-edge relational database management system (RDBMS), which would organize information and make it available to many computers in a network.

After gathering a corps of experienced programmers, the company spent more than two years working on its debut product. During that time, Sybase's activities were funded by a consortium of venture capital firms, including Hambrecht & Quist and Kleiner Perkins Caufield & Byers. In late 1986, Sybase shipped its first test programs, entering a market that others had pioneered five years earlier. In May 1987, Sybase formally released the SYBASE system, the first high-performance RDBMS for online applications. Rather than having a vast central bank of data stored in a large mainframe computer, the SYBASE System provided for a client/server computer architecture.

Client/server computer systems logically broke up monolithic applications into separate components that interrelated over a network for faster processing. The system linked hardware and software into a complex web in which information resources were distributed over multiple computer systems. Clients (individual desktop computers) and servers (databases) moved information and tools back and forth between themselves in order to most efficiently fulfill a company's needs. With the SYBASE system, companies could maintain the integrity of and control over information that a mainframe gave them, but could also make use of that information in a much more widespread and efficient manner.

The SYBASE system was based on Structured Query Language (SQL), a standard IBM computer programming language, and consisted of two parts--the DataServer and the DataToolset. The first component allowed an entire network of computers to gain access to a database at the same time. The second provided the building blocks for programs that developed applications, wrote reports, and performed queries. In its use of SQL, the company provided an advance in computer software that no other company had made.

In order to give its program the greatest possible capabilities, Sybase made the decision to limit its use to a small number of strategic hardware platforms. The company chose to market SYBASE for use only on DEC, IBM, and UNIX-based computers. Sybase invested heavily in training for its technical support staff to reassure its potential customers that they could rely on the company for help in using its products. Eschewing middlemen or software dealers, the company relied on direct sales to distribute SYBASE, establishing a network of sales offices across the United States and an office in London.

Success in the Late 1980s

In the first year after its release, Sybase's software formed some important alliances. In September 1987, the Pyramid Technology Corporation began selling its own hardware and Sybase software as a package deal. In October 1987, Sun Microsystems, Inc., another computer maker, bought 40 copies of the Sybase program for its own internal use. After seven months of sales, Sybase was able to report revenues of $6 million, as its product notched quarterly sales of $3 million. The company moved from losses to a profit in the third quarter of the year. At that time, Sybase also received an infusion of $3.3 million in capital from Apple Computer.

In January 1988, software giant Microsoft revealed that it had made an agreement with Sybase in 1986 that would allow Microsoft to license the company's technology. As a result of this agreement, Microsoft SQL Server for the company's OS/2 computer operating system was released. SQL Server retrieved information faster than similar programs, and was the first to update all outlying databases in a network instantaneously if the central databank was revised.

With this partnership, Microsoft helped to establish Sybase in the industry by codeveloping and selling versions of the company's products for use on its operating systems. The first arrangement of this kind came shortly after Microsoft's announcement, when the Ashton-Tate software company moved to release SQL Server for use on machines that ran on DOS, the IBM-standard operating system. This program was known as Ashton-Tate/Microsoft SQL Server, and was marketed both individually and in conjunction with the company's dBase product.

Within a year of SYBASE's release, the program had established a strong following in the corporate and government world. Due to its power, Sybase targeted its sales in part to customers who required online transaction processing--or real-time computer operations--such as banks.

At the end of 1988, Sybase formed Sybase Canada, and three months later the company also set up a French subsidiary. In March 1989, Sybase toyed with the idea of selling stock to the public in order to generate some working capital, but finally announced that it would postpone this step to a later date. Six months later, the company announced that it had, instead, received additional funding from the Lotus Development Corporation, a software company that acquired 15 percent of Sybase's stock.

In October 1989, Sybase released additional products, introducing the SYBASE Open Client/Server Interfaces--new software programs that provided generic client/server communication, allowing for greater connectivity within computer networks. With these new offerings, and its earlier system, Sybase notched sales of $56 million in 1989.

The Early 1990s

In January 1990, Sybase paid $3.5 million for D&N Systems, Inc., an integrated database consulting firm which it renamed SQL Solutions, Inc. Sybase increased its penetration of the government market in early 1990, when the company successfully marketed its products to NASA, the Army, and the Air Force's Military Airlift Command. These clients made particular use of the Sybase program's capacity to keep data secure and confidential. The company also expanded internationally, when in June 1990 Sybase formed a joint venture with HCL America, called HCL Sybase, to sell its programs in Singapore.

Despite this growth, Sybase's earnings had slowed in the late 1980s, and the company reported several quarters of losses. In August 1990, Sybase cut its staff by five percent, laying off 50 members of its 800-member workforce in an effort to cut costs. To shore up its returns, the company also began to seek out clients in the financial services field. Offering customers the ability to process transactions in real time, Sybase had lined up 20 of Wall Street's 22 largest brokers within the next few years.

Sybase also introduced new products that were designed to help IBM mainframe computers become part of a client/server system. These programs were the first to join local area network (LAN) technology to mainframe technology. In addition, Sybase introduced joint marketing ventures with its investor, Lotus, creating interface software for Lotus 1-2-3 and packaging the company's spreadsheet with its own SQL Server. At the end of the year, Lotus increased its ownership of Sybase from 15 to 25 percent by buying Ashton-Tate's shares in the company.

In March 1991, Sybase made its second acquisition, purchasing Deft Software, Inc. Five months later, the company made its initial public offering of stock. This move brought about a new accountability to Wall Street investors, and Sybase saw its European sales fall short of expectations. In an effort to redress this failing, the company set out to unify and upgrade its European operations, eliminating country managers and instituting other changes.

With its new infusion of capital, Sybase merged with SQ Software, Inc., in June 1992, and purchased Gain Technology, Inc.--a vendor of object-based, multimedia application development tools--in September of that year. Gain's principal product was GainMomentum, a software program that allowed different forms of data to be included in the company's client/server computer architecture. Two months after this purchase, Sybase announced its latest generation of software. Dubbed the System 10 product family, these programs were designed to provide a framework for companies to switch over their computer operations from older mainframe models to client/server systems. By the end of 1992, Sybase posted revenues of $265 million.

In April 1993, Sybase introduced the first component of System 10, called OmniSQL Gateway. This program connected the various parts of a computer network, enabling users at any point to gain access to changes being made anywhere on the system. This quality was known as "transparent interoperability." Building on the program of its acquisition, Gain Technology, the company introduced a family of products called "Momentum." These included Build Momentum and Enterprise Momentum, both of which were environments for building applications. With these tools, programmers could create visually appealing programs for corporate employees to use when negotiating their company's computer system.

In the summer of 1993, Sybase also completed a reorganization of its operations. With more than 2,000 employees, the company had grown rapidly, and it needed to better define its corporate goals. In order to do this, Sybase divided its activities into two groups, the Tools Technology Group and the Server & Connectivity Group.

Later that year, Sybase completed its rollout of the System 10 components, which included SQL Server 10 and Back-up Server; Open Client/Server APIs; and SQL Monitor and SA Companion, which were used to manage computer systems. In the next month, Sybase also released its Replication Server, which allowed computer users to build reliable systems to keep computer operations running for online transaction processing.

By the end of 1993, Sybase's revenue had reached $427 million, and earnings were $44 million. The company's growth rate was 61 percent, which made Sybase the world's second largest supplier of enterprise client/server RDBS software. With this gain, the company moved ahead of its competitor Informix, and came up on the heels of industry leader Oracle.

Sybase had achieved this growth not only through the consistent introduction of solid products, but also by emphasizing customer service and prompt delivery of new software. During the course of 1993, the company dramatically increased the size of its customer service and support divisions. Sybase also opened three new technical support service centers in Burlington, Massachusetts; Tokyo; and Mexico City. Including the employees hired to staff these outposts, Sybase increased its staff by 1,400 people throughout the course of the year.

Sybase's strong growth had also been driven by the company's rapid international expansion. After its successful revamp of foreign operations, overseas sales had doubled in 1993, boosted by 82 percent growth in Europe and an extremely strong 182 percent gain in Asia and Latin America. These operations accounted for more than a quarter of the company's revenues. Throughout the course of 1993, Sybase added new subsidiaries in Belgium, Italy, Spain, Switzerland, and Mexico. Overall, it had ten foreign subsidiaries and 39 international distributors.

On the first day of 1994, Sybase purchased Oasis Group plc, a British firm that helped companies choose and build computer systems. With this alliance, Sybase positioned itself as a provider of a complete range of services for customers upgrading their computer operations. Later in January, Sybase also announced that it would purchase MicroDecisionWare, Inc., a producer of networking software. With this merger, Sybase hoped to become the market leader in this field.

One month later, Sybase enhanced its software offerings to government agencies when it released Secure SQL Server 10, which offered secure and practical RDBMS applications. In April 1994, Sybase announced a new generation of software that would expand a company's computer network over telephone lines to take in other businesses and clients. Sybase embarked upon this project with its partner Tele-Communications, Inc., to produce programs to control the traffic over such large-scale extended enterprise systems. In addition, the company rushed to release its Navigation Server, a program that implemented the newest parallel-processing technology. Also in 1994, the company announced Enterprise CONNECT, an interoperability framework, and purchased Expressway Technologies, whose technology later served as the foundation for the Sybase IQ product and the Warehouse WORKS framework.

The Mid-1990s and Beyond

In early 1995, Sybase merged with Powersoft, the leading client/server tools vendor at the time. The merger created the world's sixth largest independent software company. Sybase then added to its scope in May 1995 by acquiring SDP, a French company whose focus laid in developing tools for data modeling. SDP's technology allowed users to design and reverse-engineer multiple databases. Soon thereafter, Sybase introduced a new family of database products called System 11. This was the biggest launch in Sybase's history.

In 1996 the company formed an agreement to merge again, this time with Visual Components, Inc. The merger led to the creation of a new Powersoft components division, with the express purpose of delivering reusable software such as spreadsheets, spell-checking modules, and charting tools. Around that same time, Sybase introduced web.works, which was a program that allowed business applications to be delivered on the Internet. The company broke the $1 billion mark in annual sales in 1996, achieving revenue of $1.01 billion.

Annual revenue decreased the following year, as a result of a surprising turn of events in Sybase's Japanese subsidiary. While completing its financial audit at the end of the year, Sybase found that its operation in Japan had committed serious violations of the company's rules for recognizing revenue. Thus, although the company had thought that it had achieved profits throughout the first three quarters of the fiscal year, in truth it ended up posting losses. The company's overall revenue in 1997 dropped to a somewhat disappointing $903.9 million.

Nevertheless, the company was pleased with what it had accomplished throughout the year. According to CEO Mitchell Kertzman in his letter to shareholders, "We dramatically improved our technology across all our product lines, we maintained a strong balance sheet .... Today, Sybase is the only enterprise software solutions company whose technology fully embraces the open standards of the software industry."

Sybase needed a turnaround, however, and thus hired John Chen to take over as president and CEO. For three years prior to his arrival, Sybase had achieved around a billion dollars in revenue, only to fail to make a profit. Chen set about the task of solving this problem. He decided that one of his favorite pastimes--golf--could provide an answer. As stated by Jamie Beckett in the October 20, 1998 edition of the San Francisco Chronicle, "Sybase was like a player on a difficult course who used the same club no matter what hole or hazard he faced."

Chen initiated some changes within the company that eventually led to some positive changes. For example, one of his first orders of business as CEO was to create a portable computer database software division, in order to capitalize on the ever increasing popularity of laptop computing in the late 1990s. Sybase also added web-based customer service in 1998. By mid-1998, the company had halted its continuous string of money-losing quarters with a break-even second quarter. Then, in the third quarter the company finally posted a profit--$2.2 million for the three months ending September 30, 1998.

With a loyal customer base despite its mid-decade slump, Sybase was firmly established in a field laden with opportunity as the 1990s drew to a close. The company's strong record of past performance indicated that it had potential to succeed in the competitive software programming market of the coming century. Its ability to continue generating profits and further its turnaround efforts, however, would determine its true future success.

Principal Subsidiaries: SQL Solutions, Inc.; Deft Software, Inc.; Oasis Group P.L.C.

Further Reading:

• Beckett, Jamie, "Turning Around Sybase: CEO Found Strategy Through Golf," San Francisco Chronicle, October 20, 1998, p. B1.
• Brandt, Richard, "Sybase Steps Out of the Shadows," Business Week, April 18, 1994.
• Davey, Tom, "Three Bay Area Companies Lead Pack in Database Race," San Francisco Business Times, June 17--23, 1994.
• Eisenhart, Mary, "Connectivity Solutions in Data Base Management," Microtimes, March 1988.
• Garner, Rochelle, and Houston, Patrick, "Inside People," PC Week, September 20, 1993.
• Houston, Patrick, "Learning from a Rival's Reorg," PC Week, June 13, 1994.
• Knowles, Anne, "A Software Start-up with Hardware Back-Up," Electronic Business, January 15, 1988.
• Siegmann, Ken, "Data Management Takes Off," San Francisco Chronicle, May 9, 1994.

Source: International Directory of Company Histories, Vol. 27. St. James Press, 1999.

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