The Contenders : Irvine Accounting Software Firms Lead Field

They can see each other from the windows of their headquarters buildings in the Irvine Spectrum business park.

Competing engineers at State of the Art Inc. and neighbor Platinum Software Corp. are toiling to make sure that their companies thrive in the accounting software industry’s biggest technological transition.

Analysts say that the two companies, as well as Great Plains Software in Fargo, N.D., are the main contenders for the title of industry leader in a multibillion-dollar business.

The companies “see the promise of a new generation of computing,” said Peter Rogers, an analyst at Robertson, Stephens & Co., an investment bank in San Francisco.

Aiming beyond its regular personal computer market, Platinum is delivering an accounting system sophisticated enough for multinational companies that now use high-cost centralized computers. The Platinum software runs on low-cost computer networks known as client-servers, which consist of PCs--clients--hooked to a revved-up workstation--a server--that performs common tasks.

State of the Art, for its part, has conjured up Momentum, its second-generation accounting system based on easy-to-use, graphics-oriented software such as Microsoft’s Windows environment, which allows division of a computer screen into various “windows” to do multiple tasks at once.

While other software companies have released Windows-based products, high-end accounting software companies are just starting to do so. That’s because only with the release of Windows version 3.1 and the upcoming Windows NT have PCs had the power to do sophisticated tasks such as zooming in on screen objects.

State of the Art, whose Momentum is aimed at businesses with annual sales of $1 million to $100 million, is one of the first (along with Great Plains and Solomon Software in Findlay, Ohio) to announce its leap to Windows 3.1 and Windows NT. Later, the company plans to launch versions for other operating systems: Apple Macintosh System 7, IBM’s OS/2 2.0 and Unix.

“There has been no moment in the accounting software industry as important as this,” said David Samuels, chief executive of State of the Art, which went public in May, 1991.

Both companies have created so-called scalable programs, which can be customized to a corporation’s taste, for customers who want to create splashy graphics, perform multiple tasks simultaneously and access data in networks of computers in a seamless fashion. They expect to leap-frog over dozens of competitors that are slower to adapt to Windows and client-server computing.

“In the area of software applications for computer networks is where we will see the next major software companies develop,” said Rogers of Robertson, Stephens. “These two companies are easily in the running.”

In the fall, State of the Art announced its intentions to launch a library of applications for Momentum during 1993’s first quarter.

In October, meanwhile, Platinum launched its software, called Sequel to Platinum.

“This leap was technologically the most important investment we’ve made,” said Gerald Blackie, chief executive of Platinum, which raised $22.5 million in an initial public offering in October.

The two companies have worked on the new programs for years, and they continue to pour resources into development. Samuels said State of the Art has about 180 employees and hopes to have 300 by the end of 1993. Blackie said his company could grow from 230 employees now to 500 next year.

State of the Art’s Momentum project is its biggest investment yet, Samuels said, largely because the company had to create software development tools before it even got started on the new accounting applications. Those new tools should enable the company to launch its library of 21 accounting program modules within the next two years, he said. The previous version, MAS 90, included 18 modules and took more than six years to complete.

Likewise, more than 60 Platinum employees labored for more than four years to create Sequel to Platinum, the company’s second-generation accounting software. The company has launched four modules of the software so far of the 15 or 20 that it is planning.

Platinum’s software can access data kept on large corporate computers, which run software from an older generation of minicomputers made by companies such as MAI Systems Corp. in Tustin. Its selling point is that it allows companies to downsize from expensive computer systems to the less expensive networks of PCs.

Analysts note that Platinum’s bid to move upscale is fraught with risks, however, because the company has to develop an entirely new channel for distributing its product.

“It’s too early to tell whether they are getting companies to downsize,” said Bruce Lupatkin, an analyst at Hambrecht & Quist, a venture capital company in San Francisco. “They do have the right product, right now. Everybody else is planning such a product, but the operative word is ‘planning.’ ”

While many of their competitors are moving more slowly, State of the Art and Platinum have already raised substantial sums from retained earnings and their public stock offerings to invest in the new generation of software.

Neither Blackie nor Samuels wants to make too much of any rivalry between their companies. Neither has raided the staff of the other. And the two chief executives meet in social settings as leaders of the local software industry.

“I’ve dined with Gerald Blackie, and I respect him,” Samuels said.

What’s more, the companies are not competing directly at the moment. State of the Art will need at least another year to launch a version of its software based on the SQL (pronounced “sequel”) language, which enables PCs to access banks of data stored on large corporate mainframe computers.

Platinum, by contrast, is already shipping its SQL software, but it hasn’t announced plans to compete directly with State of the Art in the lower end of the Windows market.

Yet, given the ambitions of State of the Art and Platinum, they could eventually clash as each seeks to become the accounting software industry’s titan.