Rainbow Goes Where the Software Pirates Are: China Select Software Signs Licensing Deal With IBM

Orange County Business Journal, Mar 30, 1998 by FRIED, IAN

It's a classic rule of business: Go where the customers are.

So if you're Rainbow Technologies, the Irvine-based maker of equipment that prevents software bootlegging, you go where the pirates are. One of those places, officials say, is China, where they estimate the software piracy rate is about 96%.

Last month, Rainbow officially opened a three-person office in Beijing, three years after the company signed its first Chinese distributor. The office, in Beijing's version of Silicon Valley, puts Rainbow right next to key clients there - Microsoft and Autodesk - as well as OC names such as Western Digital and AST Research.

Rainbow's hardware keys - which prevent the making of unauthorized functional copies of software - are popular among developers like Microsoft, who see their products in wider use than their sales figures would show.

Rainbow, which now has three distributors in China, has seen sales double each year and the company now claims a market share of around 30%, with the rest of the market dominated by local offerings.

The Beijing office is considered a representative office, meaning to sell its products Rainbow will still have to go through distributors, but Asia Pacific manager Humphrey Chan said the office could lead Rainbow to set up a Chinese subsidiary down the road "It's like a beachhead," Chan said. "You get in there, so when there are new business opportunities you (are there)." While revenue from China still accounts for only a small fraction of the company's $94 million in annual sales, Chan said China is seen as a top area for growth for Rainbow, which also has offices in Germany, the United Kingdom, France and Belarus.

"In the next century - maybe in the next decade - the Chinese software market will be the biggest in world," Chan said. "We're early in the game so I think we have a very good potential."

Irvine-based Select Software Tools announced a deal to license its component management tools to computer giant IBM. Under the deal, terms of which were not announced, Select's technology will be incorporated into the San Francisco initiative, IBM's move to provide the next generation, Java-based business software framework.

The collection of software tools, set to be released later this year, is supposed to offer about 40% of the tools commonly needed for business software - things like order processing, general ledger and inventory management. That would leave software developers free to work on industry-specific customization, and theoretically allow different software packages to better work together, since they are based on a common framework.

Select CEO Stuart Frost said the deal, which follows an earlier agreement by Select to provide component modeling tools, is a big boost for the company.

"It's a really great endorsement," Frost said.

Costa Mesa-based Marrich Inc. is scheduled this week to release a CD-ROM with information on memory upgrades from more than 800 vendors. McCauley's Memory Upgrade Directory, which covers a variety of computer platforms, is the creation of Martina Wetmore.

While working at a Tustin-based electronics firm, Wetmore became somewhat of an expert among her friends by letting them know which SIMM they needed to take their computers from 2 megabytes to 4 megabytes. But in January 1997, the company was bought and Wetmore laid off. That left her with two problems. First of all, she had obtained the information for her friends by asking co-workers in her firm's memory division. More importantly, she was out of a job.

Wetmore solved both by launching Marrich. Now, she says, she is getting calls from total strangers who want to order computer memory. Call the contact number listed for each manufacturer, she advises.

The CD-ROM costs $29.95 and includes one month's access to the McCauley's web site (www.mccauleys.com), which offers updates on the fast-changing memory upgrades.

Irvine-based Virgin Interactive signed a deal with Interplay OEM, the subsidiary of Irvine-based Interplay Productions that represents gaming software companies looking to bundle their products with hardware offerings. Virgin was Interplay OEM's first client when the division was established in 1992, but Virgin has been handling OEM deals in-house since October 1994.

Bits:

Microsemi Corp., Santa Ana, said it has a long-term agreement with Shanghai, China-based Gulf Semiconductors, for exclusive North American and non-exclusive global rights to sell Gulf's SuperRectifier line ... Simulation Sciences Inc., Brea, formed a separate business unit to handle the company's AIM process information software and OpenYield yield accounting software ... The EagleEye Control Software subsidiary of Irvine-based New Dimension Software Ltd. signed an $882,000, three-year licensing agreement to provide security management software to a large, unnamed LA-based food company ... Irvine-based Wyle Electronics said it plans to enter the government market, offering Intel-based servers, processors and desktops along with hard drives from Quantum and IBM.