Two Philippine software startups show how to go global

Michael Alan Hamlin

Posted on June 4, 2008

And keep talent at home

Last week, two local software startups made major announcements demonstrating the impact they are having globally on the software industry – and on software engineering talent here in the Philippines.

On May 26, Gurango Software announced that it had exceeded first-quarter revenue goals by 10%, recording global revenues of over P36 million. The next day, Morph Labs announced in Manila that it has launched a new infrastructure service that allows developers to create applications for the popular Facebook social network in just five minutes.

Both companies were founded by successful technology entrepreneurs. Joey Gurango founded Gurango Software following a stint at Microsoft that came about when Microsoft acquired Great Plains which had earlier acquired MatchData, a software firm Gurango founded. Last year, Gurango Software acquired operations in Australia, Singapore, and South Africa and has partners in the Middle East and North America.

Morph Labs was founded by Winston Damarillo, known in the software industry for founding three successful startups. His Gluecode Software was acquired in 2005 by IBM and its products were incorporated into IBM’s Websphere application server. LogicBlaze, a provider of open-source, service-oriented architecture technology, was acquired last year by Iona. Another Phlippine-based startup, Exist Global, was named to the Red Herring 100 Asia in 2006.

Both Gurango Software and Morph Labs are planning initial public offerings (IPO). According to Damarillo, the Morph Labs IPO should take place sometime in the next 90 days, making it the first pure-play Philippine software startup to go public. Gurango told me last week that his company’s IPO is likely to take place late this year or first-quarter 2009. (Full Disclosure: Both Gurango Software and Morph Labs are clients of my firm, and my firm in an investor in Gurango Software and plans to become an investor in Morph Labs.)

Aside from being founded by successful Filipino software entrepreneurs and being software firms, the companies are unalike in most other ways. Gurango Software has tightly integrated its product and service offerings with the “Microsoft ecosystem.” In the first quarter, revenue from the sale of software licenses increased 10 fold. Gurango Software sells Microsoft Dynamics NAV, an enterprise solution for mid-size corporations, and implements it for clients.

Aside from its success as a Microsoft partner, Gurango Software develops its own applications to license and implement. SmartHR and Dynamic Pay comprise a suite of robust and localized human resource management solutions. Forum is a suite of applications that is used by associations and event management companies to organize memberships and meetings.

Morph Labs operates on the other side of the software spectrum, focusing on the development of open source software-as-a-service (SaaS) infrastructure, or platform-as-a-Service (PaaS). The company recently made international headlines when it launched Morph AppSpace, a pre-built, virtual automated data center that allows SaaS developers to set up the backend infrastructure for their applications in minutes – without having to make large upfront investments or actually own web servers or other hardware.

Initially, Morph AppSpace – accessed via the online Morph eXchange – was set up for developers using Ruby on Rails, a popular development environment for SaaS applications. Early last month Morph Labs announced the launch of a new Morph AppSpace platform for Java application developers. The new platform was developed in collaboration with Webtide, which developed the jetty:// open source server.

The fact that two Philippine software companies are attracting international attention is an important development on a number of levels. The impact on the firms themselves is obvious. Columns and news features appearing in the industry’s top global publications are validating the revolutionary intellectual property that Morph Labs is creating in its Cebu development center.

As a result, the MorphApps user base is growing rapidly, and the company is attracting significant investor attention. These developments, Damarillo said last week, provide validation from users and investors alike of the company’s products and services. Gurango software, on the other hand, has harnessed the synergy of a small but growing global organization to dramatically increase revenues and attain visibility in key markets.

But the impact of their accomplishments is really much broader in scope. While the Philippines is widely acknowledged as a major contact center and business process outsourcing provider for backend administrative processes, the value-added work – both Gurango Software and Morph Labs are creating real intellectual property – software companies do here has received much less attention.

These two companies are changing that. As perception of the Philippines grows as a generator of intellectual property – rather than another software services provider – it will create enormous opportunities for other software entrepreneurs. But not just the entrepreneurs – for engineers and programmers as well. It is fundamentally significant that both Gurango and Damarillo say that a significant component of their mission is to create conditions that allow engineers and other IT experts to prosper at home.

Their work creating value in the Philippines provides the psychic income these bright minds need – and the stock options every employee is provided provides the financial income to justify doing their work here.

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