The Magic Story

There is a global company which originated in Israel that, over the last 20 years, has been reinventing itself often with great success. Magic Software Enterprises is a leading provider of business integration, application development and deployment tools. Well-known names from diverse industries such as Boeing, Burger King, GE Capital, Nestle and Panasonic, are customers. In terms of partnerships, Magic Software has strategic partnerships with IBM, SAP and Salesforce.com. The company has over 500 employees worldwide. The company’s headquarters and R&D facility are located in Israel. Regional offices are located in the USA, Japan, Thailand, the UK, Germany, the Netherlands, France, Hungary, India, and Israel. In June 2008, I was given a briefing by Avigdor Luttinger, Vice President of Corporate Strategy.

The story starts in the 1980’s when the company began life as a spin-off from an Israeli company who distributed microcomputers. The new company moved into software development and specifically the development of an Application Generator. The first major innovation was to move from code generation to the use of an underlying meta model that allowed the company to offer application deployment for most operation systems, using a configurable engine rather than compiled or interpreted code. During the 80’s the company grew based on its sales to the DOS and UNIX platforms. The GUI was all done for X-Windows.

In 1991, Magic Software became the first Israeli software company to go public on the Nasdaq. It was during this period of their life that they developed their close relationship with IBM System i (or for those of us with longer memories, AS/400!). Luttinger admitted that it was during this period that they had their first hiccup, as they focused on X-Windows and missed the Microsoft Windows adoption wave. By the time the company completely redeveloped their platform for the Windows architecture, they missed the market window ending up as a niche company offering a product where speed and portability were the key requirements. eDeveloper is a graphical, rules-based, and event-driven framework based upon:

• A pre-compiled engine suited for database business tasks
• A declarative programming methodology
• A repository of basic application modules for easy reference and re-use
• A rich complement of generic services and functions configured and invoked at run-time that reduce the time it takes to test and deploy code

What made the company a viable proposition was the large number of solutions built by ISVs (2500!) for Magic’s platform. Magic Software had developed a global channel and ecosystem which today covers more than 50 countries. Luttinger told Bloor that today around 35% of their sales revenue comes from the Americas, 40% from Europe, 20% from Japan and the remainder from the rest of the World.

At the end of the 90’s Magic developed a Linux version of eDeveloper. This was initially developed for a client server environment and the next twist in the story was the move to a multi-tier architecture building their own integration broker. They raised some $100 million in capital on the success they had. The company looked to use this capital investment to integrate into the application market by purchasing some of their ISV partners, but this proved not to be a good strategy. 2002 was the crunch year, Linux did not gain the expected market share and the general market contracted with the dotcom crisis. The company shrunk its workforce by more than half to 500 people. A reassessment of the company was done. This reassessment looked at how and where the company’s software was being used. It was found that the product was often being used for Application Integration and was seen as having a price differential for what it offered compared to some of its main competitors.

Within 6 months, Magic Software added additional layers to eDeveloper for graphical design, process management and integrations features that came out as the first release of iBOLT in mid-2003. iBOLT simplifies the design and integration process by separating business logic from integration technology. Using wizards, drag-and-drop options, and tables, users are able to connect with enterprise applications deployed on any hardware, operating system, or database technology. iBOLT was initially targeted at the small medium enterprise market or, as Luttinger described it, for < $300k projects (which was underserved at the time). By targeting the SME market, Magic Software learnt that prospective clients really did not go for application integration off-the-shelf, what they needed were tailored versions that fitted into their vertical or with major software packages that they used.

In 2006, the company released eDeveloper V10 which was rewritten to support SOA and XML, and made available in three editions:

• eDeveloper Discovery: supports the development and deployment of basic Windows client and Web application, and distributed as shareware.
• eDeveloper Xpress: supports the development and deployment of small- to mid-scale desktop and Web applications that are based on either Pervasive or MySQL tables
• eDeveloper Enterprise: supports the development and deployment of large-scale client/server or Web applications, as well as SOA-enabled enterprise applications

So comes the penultimate twist in the Magic Software story. Having understood this, Magic developed a tailored version of iBOLT for SAP Business One. This was launched in 2005 and they now have some 300 Partners in their SAP centric ecosystem. In 2007, Magic extended the capability to cover all the other versions of SAP. Last year also saw Magic Software develop a similar programme for JD Edwards integration for AS400 customers, and this year Magic have built a similar partnership with Salesforce.com.

At the beginning of July 2008, Magic will release a brand new product, uniPaaS. uniPaaS has been built upon both eDeveloper and iBOLT. It is targeted at the delivery of rich internet applications; these are applications which have the solidness and security of desktop applications with the flexibility, agility and user experience of the web. Luttinger told me that this combination was a big technology challenge with high functionality and high user interaction, but with nothing installed on the client! Luttinger sees Magic’s competition as Microsoft’s Silverlight and Adobe’s Flex. He sees these products as being very consumer-focused, but less productive for business applications. Magic Software focuses uniPaaS on organizations which want to take advantage of the paradigm but are more concerned with using it for business transactions. Luttinger said that for Magic Software’s ISV partners solutions based on uniPaaS could be offered in a mix of on-premise and in-cloud. The key to Magic Software’s upbeat views on the success of this new venture are down to the platform that they started with at the beginning of their life as their platform takes cares of the architecture, resulting in developers only having to be concerned with the business logic and user experience of the application. Luttinger explained, “Applications developed 20 years ago and deployed on a Unix and X-Windows environment, can still be easily migrated to uniPaaS and with a minimal effort deploy as Rich Internet Applications in a SaaS model.” This is likely to be a big plus in Magic’s favour in Bloor’s opinion.

So, Magic Software have over the last 20 plus years become a flexible and agile company that has bent with the various trends in the IT marketplace but they have always stayed true to the core message that development has to be simpler and must work across a heterogeneous world in perpetual change.