Software group tipped to join the world's elite

By ADAM GIFFORD

Peace Software director Jerry Murdock claims the Auckland developer of energy utility billing systems will be one of the world's top software companies within four years.

Mr Murdock heads Insight Venture Partners, a US fund with $3 billion under management.

Other Insight-financed companies include Illuminet, recently acquired by Verisign for more than $US1 billion ($2.3 billion), and database utility maker Quest Software, which is now worth more than $2 billion.

"I think Peace will be worth over a billion," Mr Murdock said.

"Peace will be in the software top 100 in anything from two to four years - $100 million US gets you into the software 100.

"Growth is like a network, you need critical mass. Critical mass happened last year.

"The enterprise software market shrunk by 20 per cent, Peace grew by 150 per cent."

He said Peace's success would have significant spin-offs for the New Zealand software industry.

"If we continue as we are, you will see in two to three years dozens of millionaires created out of Peace, you will have capital and a knowledgeable base of people which will here in Auckland create many more companies," Mr Murdock said.

"It happened in Redmond - people used to say you could not have a software company there, then Microsoft came along."

Insight and Kinetic Ventures, which invests on behalf of a group of major utilities, put money into Peace in 1999 as it began its assault on the North American market.

Their involvement gave the company a credibility boost that helped sales.

Mr Murdock said Insight invested only in firms making enterprise software, and unlike other venture capitalists it did not wait for entrepreneurs to offer pitch business plans.

"We found Peace because we decide which markets to invest in, research out the best company in that market and try to make an investment based on the value add we provide," he said.

"We found Brian Peace on the internet and called him."

Insight was looking for a retail billing provider for utilities, and judged that Peace's experience in the deregulating markets in Australia and New Zealand would give it a head start.

"We look for mundane solutions which are big hard problems to solve.

"There is nothing harder than billing," Mr Murdock said.

"A lot of big companies have tried to do it. Peace had a unique thing which was a lot of software - most companies in billing are more services companies."

Mr Murdock said the Nasdaq slump, which Insight in the main managed to avoid, was bringing clarity and discipline to the venture capital market.

The collapse of energy trader Enron should help rather than hinder Peace, even if it slowed the appetite of states to deregulate their power and gas markets.

"The evolution of the energy business was driven by deregulation, now it will be driven by greater operational efficiency, and to do that you need data to populate your best-of-breed applications," he said.

"There may be a slowdown in deregulation but Peace has passed that. Peace is on the next wave, to utilise the CIS (Customer Information System) as a platform for business process innovation, drive down costs, innovate your business.

"The most important systems in energy utilities this year will be the CIS and enterprise risk systems, as firms at the corporate strategic level say 'we've got to get control of this, we've got to know what these traders are doing, we've got to understand this.'

"You can't have effective risk systems without access to CIS data."