Microsoft is spinning out its Software Licensing and Protection Services unit, forming an independent Dublin-based company called InishTech. Created through collaboration between Microsoft’s IP Ventures program and the Enterprise Ireland trade association, InishTech will be run by veterans of one-time Irish dotcom star Baltimore Technologies, a now defunct Internet security company.
Microsoft first entered the software licensing and protection services business in 2007 when it acquired an Israeli start-up called Secured Dimensions. The software giant formed its own in-house unit which competes against start-ups such as Nalpeiron. The unit offers security applications which protect native code from manipulation by end users and technology which allows the management of software licensing based on a variety of models, including time usage. Microsoft stopped taking on new customers in October of last year, leading to speculation about the unit’s future.
Under a deal announced June 9, Dublin-based InishTech will take over Microsoft’s existing customer base, acquiring all rights to SLP Services and licensing related intellectual property. Microsoft will take an ongoing minority interest in the company and will continue to offer product service and support to customers for an initial period to ensure a smooth transition, the company said. Financial terms of the deal were not disclosed.
“We think, following an internal strategic review, that the SLP technology could be better developed by an independent company with a 100% focus on this area,” says Claire O’Halloran, head of emerging business, international, for Microsoft.
The company will take over Microsoft’s 120 existing customers, which include both large and small companies, and a small number of Microsoft employees will be transferred to the Dublin-based start-up, says InishTech CEO Aidan Gallagher (pictured on Informilo’s home page). He said the new company expects to raise venture capital.
InishTech will participate in Microsoft’s BizSpark program, which was launched in November 2008 and is aimed at convincing start-ups the world over to run their businesses on Microsoft’s tools. It’s an aggressive move by Microsoft to ensure that start-ups consider using its tools when they build their infrastructure rather than open source alternatives.
The use of open source software is becoming pervasive, with 85% of companies currently using such software in their enterprises and the remaining 15% expecting to use it in the next 12 months, according to a survey conducted by technology consultancy Gartner Group. The survey was conducted in May and June of last year and included 274 end-user organizations across various countries and markets in Asia-Pacific, Europe and North America. Respondents were evenly distributed across manufacturing, education, financial services and service companies and included a cross section of small, medium and large organizations.
Still, the BizSpark program appears to be making inroads. In just seven months more than 4,100 start-ups in Europe have signed up to become part of the BizSpark program, making it the largest region outside the U.S. according to O’Halloran. In Ireland alone 213 start-ups have enrolled with 42 network partners, she says.
InishTech is the most recent company to be launched under Microsoft’s IP Ventures program, yet another avenue for Microsoft to engage with start-ups. The IP Ventures program was started in May 2005 to help Microsoft better leverage some of its intellectual property by spinning it out to start-ups. Last year, for example, another Irish company called Zignals, which provides online investing tools to traders, was launched through a collaboration between Microsoft and Enterprise Ireland, the enterprise development agency of the Irish government.
Enterprise Ireland introduced the three executives now charged with running InishTech to the Microsoft IP Ventures Team. Gallagher, InishTeh’s CEO has over 30 years experience in the global tech sector, primarily in leading the sales and marketing operations of global software companies. He served as executive vice-president of Similarity Systems, now part of Informatica Corporation (Nasdaq: Info). During his tenure quarterly revenues grew over 20 fold in six quarters. From 1997 to 2002, Gallagher was executive vice-president of Baltimore Technologies, whose spectacular rise and fall epitomized the boom and bust of the dotcom era.
InishTech’s head of engineering, John O’Sullivan, is another Baltimore Technologies veteran, serving as that company’s executive vice president of product development. O’Sullivan also worked for Japan’s CSK Group and held senior technical management roles in the Irish Defense Forces, where he designed and implemented several large internationally recognized IT projects.
David Smyth, InishTech’s chief operating officer has 20 years of financial operational and commercial experience, including positions at Similarity Systems. He also worked as investment director of Mentor Capital, a venture capital firm investing in early stage IP driven tech companies.
Gallagher says he joined the start-up because he sees huge potential in the markets the company is targeting: software protection, which combats piracy and software licensing. “Customers now want to manage their licenses by user, feature and time and that is the problem we are addressing with services and products,” he says.
Expect more spin-outs like InishTech, says Microsoft’s O’Halloran. “While we don’t have additional announcements in the short term we expect to ramp up and potentially increase the IP Ventures program and our relationship with other trade agencies,” she says. “With luck, we will be able to announce some more spin-outs in future.”