Station to Station

Profile and analysis of a start-up software development company.

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It's a race against time. Can Howard Smith establish Clarity Software as theworkstation standard before high tech's giants mount their inevitableattack on his growing market?

The beauty of computer software is that it can be developed by just a handful of people. If it's a winner, there's very little overhead to siphon from the profits. But with the computer revolution now in middle age, it isn't easy to come up with a product that hasn't been thought of before. Even tougher is getting the attention of enough users to make a unique program a best-seller. There's simply too much competition.

Occasionally, however, someone does come up with an idea so simple, so elegant, that the market sits up and takes notice. Howard Smith, a tall and animated mathematician cum software engineer, is betting that the product made by his new company, Clarity Software Inc., fits that description.

Two years ago Smith, then 49, was contemplating a well-deserved sabbatical from his employer, Silicon Graphics Inc. (SGI), a Mountain View, Calif., maker of computer boards for three-dimensional graphics. He had come aboard in 1984, when SGI was a $5-million start-up. By 1989 revenues had climbed to a heady $400 million. Smith wanted a rest and had decided to take all of 1990 off.

But no sooner had his wife started collecting travel brochures than Smith became absorbed by a nagging issue at the office. As head of SGI's software products, he oversaw a group that developed complex software for workstations -- expensive and powerful computers that can make several million computations a second and are perfectly suited to engineers. They even use a special operating software, called Unix, that controls the computer's internal instructions. Still, Smith's group was having enormous difficulty communicating with the rest of SGI, which had begun using personal computers.

Deftly outlining the problem on a board at Clarity's modest offices, Smith takes a crimson marker and circles PCs, then Macintoshes, and finally, a large block labeled Unix. "Our group was an island," he recalls. "We'd have to print out copies of what we were working on from the Unix machines and walk them upstairs and reenter them into the other computers. I knew SGI had a problem to which there was no easy solution." And the problem was only going to get worse as SGI continued to grow.

In typical fashion, Smith began tinkering with some potential solutions and finally decided that a new form of software was needed: One that would link Unix workstations to the rest of the computing world. One that could "launch," or facilitate, the use of any popular Unix-based software program such as Lotus 1-2-3 or WordPerfect, convert documents from one application to another if need be, and then send the finished document to another computer, whether it was an IBM machine or an Apple. An engineer preparing a document should also be able to pull into it a spreadsheet, a photo, or even a piece of sound (such as a colleague's comment), and then shoot it off to another department.

Luckily, Smith knew of advanced software programs, developed at a handful of universities, that accomplished some of those tasks. The most sophisticated of them allowed software designers to combine fax, graphics, text, and sound. Better yet, since they were developed at universities, they could be commercialized for small royalty payments. Those programs served as the basis for the type of easy-to-use software Smith would eventually develop.

By November 1989, with his leave approaching, it was clear to Smith that his software idea wasn't something that fit into SGI's product offerings; it had much broader applications. Moreover, there were only two programs available on the market that came close to what Smith was envisioning, and they were quite expensive. With the blessings of SGI's CEO, Ed McCracken, Smith began to talk to outside engineers about what it would take to write his proposed program. "I got absolutely committed, and my sabbatical disappeared," he says. Smith broke it to his wife that, instead of taking a vacation, he might be developing an idea for a new company. A romantic tour of Italy could wait. He took a deep breath and lent his start-up, Clarity, $100,000 from his savings.

Smith was sure he was tapping into an exploding market, and the numbers have borne him out. Dataquest Inc., an industry-research company in San Jose, Calif., figures that workstation sales hit $8.8 billion in 1991, up 19.7% from the year before. That far outstrips the growth rate in PC sales, which suffered a stunning 8% decline over the same period. Meanwhile, there's been a shift in who is buying these powerhouse computers. Traditionally, workstations have been used mostly in the technical market; in other words, they tend to be found on the desktops of engineers and scientists. But according to International Data Corp. (IDC), the biggest surge in demand is in the commercial marketplace: new markets are popping up everywhere, from Wall Street, where brokers use workstations to track stocks, to factories, where workers use them to track inventories. By 1994 IDC expects more than a third of new buyers to be in the commercial world, versus just 8% last year.

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