Dun & Bradstreet Software Services Inc. - Company Profile, Information, Business Description, History, Background Information on Dun & Bradstreet Software Services Inc.

3445 Peachtree Road NE
Atlanta, GA 30326

History of Dun & Bradstreet Software Services Inc.

Dun & Bradstreet Software Services Inc. is one of the world's leading distributors of software for financial, human resource, distribution, and manufacturing applications. The company has over 12,000 customers worldwide and serves approximately 75 percent of the Fortune 500 companies. Dun & Bradstreet Software derives revenue primarily from licensing its software products and from maintenance fees and consulting fees related to their use. The company began by offering software primarily for companies using mainframe computer systems. Mainframe applications remain a substantial part of Dun & Bradstreet Software's business, though the company is committed to bringing out new products to be used with smaller, personal computer-based ("client-server") systems. Dun & Bradstreet Software's products are installed on a range of computer hardware made by such principal computing companies as IBM, Digital Equipment Corporation, Fujitsu, and Hewlett-Packard. The company also works in partnership with such software firms as Microsoft, Powersoft, and Sybase to meet the complex computing requirements of its customers. Dun & Bradstreet Software also operates a worldwide customer support network, offering its clients 24-hour access to technical experts for assistance with product problems. The company maintains a European headquarters in Brussels and an Asia/Pacific headquarters in Sydney, Australia. Approximately 30 percent of the company's total revenues come from sales outside the United States.

Dun & Bradstreet Software resulted from the merger of two smaller companies, Management Science America, Inc., and McCormack & Dodge. McCormack & Dodge had been owned by Dun & Bradstreet Corp. since 1983. Management Science America (MSA) had been the principal competitor of McCormack & Dodge throughout the 1980s, and the two companies were major players in mainframe applications software. In 1989, McCormack & Dodge controlled about 12 percent of the market for accounting applications, whereas MSA held 15.5 percent, and the two companies likewise controlled about 7 percent and 14 percent respectively of the human resource management software market. The two companies were fierce rivals, and executives from both companies admitted at the time of the merger that their sales forces had frequently sabotaged each other with such underhanded techniques as canceling their competitors' hotel and plane reservations. Nevertheless, the mainframe application market was consolidating rapidly through mergers and acquisitions, and it seemed wise for the two enemies to work together. Management Science America turned down a $191 million buyout offer from another principal competitor, Computer Associates International, in 1988, but the next year it agreed to better terms from Dun & Bradstreet. Dun & Bradstreet offered $333 million for MSA, which came to $18.50 a share for stock that had been trading on the overthe-counter market for only $10 to $11. The transaction was completed in January 1990, and Dun & Bradstreet combined its two software subsidiaries into Dun & Bradstreet Software Services Inc.

McCormack & Dodge and MSA had similar product lines, both principally serving clients with IBM and IBM compatible mainframe systems. Dun & Bradstreet announced at the time of the merger that it would continue both companies' products and maintain two sets of headquarters, MSA's in Atlanta and McCormack & Dodge's in Natick, Massachusetts. The president of MSA, John P. Imlay, became chairman and chief executive officer of the new company, and his counterpart at McCormack & Dodge, Frank Dodge, was to become vice-chairman. However, shortly after the merger was officially completed, Dodge left to form his own new company, and a former McCormack & Dodge vice-president, John Landry, took Dodge's place at Dun & Bradstreet Software. Landry was responsible for research and development initiatives. By the end of the first year of the new company, software revenues had risen about 10 percent, to $538.6 million.

Nevertheless, by early 1991 it was clear that Dun & Bradstreet Software needed to make changes in order to maintain profitability. The company's president, Henry Holland, conceded in March that the U.S. market for mainframe products was saturated and D&B Software would need to focus on managing its existing accounts rather than depending on new sales. In an effort to restructure, the company fired 300 people, mostly in the Atlanta and Massachusetts headquarters, bringing its worldwide work force down to 3,400. When parent company Dun & Bradstreet Corp. suffered a 5.5 percent decline in net income in its 1991 second quarter, part of the blame went to sluggish sales at the company's software division. Shortly after the second quarter statement of revenues, Dun & Bradstreet Software announced that it was embarking on a major new design initiative.

The company decided to follow the growing trend away from mainframe computing and make its software compatible with cheaper and easier-to-use personal computers. Personal computers linked to accomplish what a large mainframe could was known in the computer industry as a "client-server" system. Much of the actual computing was done on the "client," usually a personal computer or workstation. The client computer requested information from a "server," which could be a mainframe, a midrange computer, or a powerful personal computer. This system had several advantages: the client-server system on the whole was cheaper than a mainframe, and many smaller or downsizing companies were interested in it for that reason. The client-server arrangement could also be used to automate many business procedures. For example, a financial manager might need to look over extensive weekly printouts using a mainframe computer, but with a client-server system, the server could send records directly to a personal computer at the manager's desk and note which records required immediate action. The personal computer could also be used as a traditional word processor and automatically send out letters to customers regarding late payments, for example. However, despite the new system's advantages, the software was extremely complicated and to a certain extent untested. Many customers were committed to their mainframe software, which cost between $100,000 and $200,000.

Dun & Bradstreet Software had the difficult task of pleasing its old customers while perfecting new software designs in an area in which the company admittedly did not have much expertise. The company contracted to work with a company called Powersoft to develop client-server software, meanwhile assuring its more than 10,000 mainframe customers that it would continue to support its traditional products. Dun & Bradstreet Software at first planned to bring out its initial client-server products in 1993, but the company pushed the deadline to 1992. The cost of developing the new technology dragged down profits, and in 1991 revenues rose less than 2 percent. The company enrolled Cognos Corp. and Sybase Inc. to help get the new software ready, and the company's chairman John Imlay announced that he expected client-server programs to totally replace mainframe systems as Dun & Bradstreet Software's major product over the next few years.

Dun & Bradstreet Software announced its new client-server product line in March of 1992. Its Smartstream, Financial Stream Analysis, and InterQ let mainframe users access information from a personal computer workstation, though the new products could not yet do everything that the traditional mainframe technology could. However, in the face of rapidly developing competition, releasing the first products was crucial. Small companies that focused exclusively on client-server software were quick to move into Dun & Bradstreet Software's market. A new company, PeopleSoft, Inc., made significant inroads in the human resource applications computing area with its new client-server programs, and other companies like SAP AG, Tesseract Corp., and Oracle Corp. also pushed ahead with client-server applications.

Dun & Bradstreet Software's president Henry Holland predicted in early 1992 that 40 percent of the company's mainframe customers would move to Dun & Bradstreet client-server systems over the next five years, but in the meantime revenues fell. 1992 sales stood at $533.5 million, a 4 percent drop from a year earlier, and profits dropped by over $24 million, to $18.7 million. Sales of mainframe applications were declining not only in the United States but in Canada, the United Kingdom, and Australia, though sales in Latin America, Europe, and the Asia/Pacific area offset this somewhat. Because fewer staff members were needed as mainframe sales shrank, the company laid off another 400 employees in 1992 and closed two of its development laboratories. The company also sold a subsidiary company targeted to the education market, Information Associates Inc., in order to focus more tightly on building client-server applications.

In 1993, Dun & Bradstreet Software stepped up its new product shipments to keep pace with the increasing number of competitors. The company brought out a new wave of financial application software in February and introduced new human resources tools and decision support applications in the next few months. As new companies, such as Walker Interactive Systems and The Dodge Group (headed by former McCormack & Dodge chairman Frank Dodge), rolled out more client-server products, Dun & Bradstreet Software tried to hold on to its established customers by offering them an easier path from mainframe to the new technology. The company announced in May 1993 that it would incorporate some software from Microsoft Corp. into some of its client-server systems, which was expected to yield a superior product. To upgrade its product for the manufacturing market, the company decided in February 1994 to work with a small Atlanta company, Industrial Computer Corp., on its Manufacturing Stream software. In May 1994, Dun & Bradstreet Software announced the availability of its new SmartPath program, a software system designed to ease its customers' transition from mainframe applications to client-server networks. SmartPath was able to automate 75 percent of the effort of migrating from the old system to the new, which could amount to significant customer savings, both of time and money.

Dun & Bradstreet Software initially planned to charge customers a usage fee for SmartPath as part of its professional services offering, instead of licensing it outright. Some customers complained, according to an article in ComputerWorld magazine, that the company should be offering more free assistance with the migration to client-server. However, many companies in the industry were unsure how to negotiate this tricky area, which only emphasizes the uncertainty surrounding Dun & Bradstreet Software's future fortunes, embarking on such a new direction in the computer industry.

The company named a new president and CEO in June 1994, when R. Douglas MacIntyre succeeded Henry Holland. MacIntyre claimed to see tremendous revenue opportunities for the company in the next few years as Dun & Bradstreet Software continued to improve its client-server offerings. Although revenues dropped slightly each year since the company was formed, it does not seem unreasonable to predict that as client-server technology becomes more entrenched, Dun & Bradstreet Software will achieve growth in years to come.

Additional Details

Further Reference

Ballou, Melinda-Carol, "D&B Software to Cut Staff by 13 Percent," ComputerWorld, December 7, 1992, p. 117; "Microsoft, D&B Align on NT Applications," ComputerWorld, May 3, 1993, p. 8.Bulkeley, William M., "Computers: D&B to Change Software Design to Use PC More," Wall Street Journal, July 30, 1991, p. B1.Cafasso, Rosemary, "Migration Costs Stoke User Angst," ComputerWorld, May 16, 1994, p. 1.Cortese, Amy, "Merger-Weary Users Turn Wary," ComputerWorld, December 4, 1989, p. 1.Cusack, Sally, "D&B Pitches Client/Server Plan," ComputerWorld, March 30, 1992, p. 20; "D&B Software to Increase Services," ComputerWorld, December 17, 1990, p. 95; "D&B's Direction Focus of User Concern," ComputerWorld, January 27, 1992, p. 29."D&B Swallows More Software," Business Week, December 4, 1989, p. 42.Hooper, Laurence, "D&B to Acquire Software Maker for $333 Million," Wall Street Journal, November 21, 1989."Is D&B a Late Guest at a Crowded Party?," Datamation, December 15, 1992, p. 31.Margolis, Nell, and Amy Cortese, "D&B Unites Software Rivals," ComputerWorld, November 27, 1991, p. 1.Nash, Kim S., "Financial Applications to Do Battle," ComputerWorld, February 15, 1993, p. 12.Ricciuti, Mike, "Dun & Bradstreet Software Services Inc.," Datamation, June 15, 1992, pp. 121--22; "Dun & Bradstreet Software Services Inc.," Datamation, June 15, 1993, p. 101--2; "Dun & Bradstreet's Big Play in Client/Server," Datamation, December 15, 1992, p. 29--34.Stedman, Craig, "D&B Software to Play Manufacturing Odds," ComputerWorld, February 7, 1994, p. 20.

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