A New ImageA New Image

Macromedia Inc., whose media-playing software runs on a half-billion PCs, wants a bigger role in business computing. The software company this week begins promoting an upcoming release of its Flash player, along with upgraded development tools and server software, as an integrated package for building and running everything from self-service Web apps to visually sophisticated information dashboards.

It's a first step in a broader strategy tied to Adobe Systems Inc.'s pending $3.4 billion acquisition of Macromedia, meant to expand the combined companies' reach as couriers of documents and multimedia to PCs, PDAs, and cell phones. The move carries a big risk, however, putting Macromedia's approach on a collision course with Microsoft, Google Inc., and other vendors that have their own ambitions in the burgeoning market for "rich" Web applications.

"When you say 'Flash,' a lot of people still think that's the thing that does banner-ad animations or the intros on the Web that I usually skip over," says Kendall Whitehouse, senior IT director at the University of Pennsylvania's Wharton School, which uses Macromedia tools and servers to build classroom apps that can simulate managing a stock portfolio or negotiating oil prices. "But when you look at Flash and the tools around it, you're now really looking at a platform that can deliver on-demand Internet apps" that combine local processing and up-to-the-minute data from the Web. "This is the beginning of a huge change in the way software is delivered," he says.

Macromedia is trying to correct its image problem. This week, the company will preview new versions of its Flash Player and Flash MX development tools, expected to be available late this summer. Using the new player, code-named Maelstrom, and authoring tools that target it called 8Ball, programmers can create Web apps that draw on-screen graphics in record time, add traditionally CPU-hogging effects like shadows and color washes with minimal overhead, render text in crisp fonts, and layer high-quality video footage without eating up lots of bandwidth.

The company will launch a marketing campaign meant to convince designers, developers, and IT pros that its Flash Player, Flex presentation server, programming tools, and servers for online slide shows and videoconferencing fit together as an integrated platform. Macromedia also is joining the open-source Eclipse Foundation and developing a version of its programming tools based on the Eclipse code. "The best architecture uses local processing power," says Macromedia executive VP and chief software architect Kevin Lynch. The alternative is to run all application code on a remote server, but it's a bandwidth-intensive approach. "People are awakening to the fact that this is a better way of doing things."

Count Macromedia's competitors among them. Microsoft's next version of Windows, code-named Longhorn, will include a vector graphics player and set of APIs called Avalon, and a markup language called XAML for creating Internet apps that combine local processing power with Web serving. Google is taking another approach, combining Dynamic HTML, JavaScript, and other Web technologies in its Gmail and Google Maps applications, which give users the ability to navigate through messages and zoom around a North American map, down to street level, with uncanny speed for the Web.

Macromedia can't match those companies' influence, but it does have this advantage: Flash already is pervasive, while Avalon won't appear until the end of next year, and Google's apps are still in test mode. To deliver Web pages that refresh in an instant with snappy graphics and video that don't bog down PCs, Macromedia's architecture divides processing chores among Web servers and desktops, and uses efficient vector graphics that encode pictures as math instructions, instead of communicating information about every pixel over the Net.

In addition, Macromedia's vast installed base, quick dissemination of Flash updates, and cross-platform capabilities mean developers don't have to worry about rewriting code for different operating systems and browsers, or holding back features because users don't have the latest technology. According to market researcher the NPD Group, 98% of Internet users, or about 570 million people, have the player on their PCs, either through bundling deals with Microsoft and Apple Computer or by downloading it when a site demands. When Macromedia releases a new version of Flash, 80% of Flash users have it within a year. About 90% run the company's most up-to-date version 7.

Businesses are starting to buy in. During the 2004 holiday season, retailer TJX Companies Inc. launched Flash- and Flex-enabled Web sites for its T.J. Maxx discount apparel stores and HomeGoods housewares stores. Running parts of the site in Flash collapsed lengthy checkout procedures to a single screen and cut the number of abandoned shopping carts in half, says Don Cosseboom, director of research and development at Molecular Inc., the software-development shop that built the sites. "Ubiquity and quick penetration is Macromedia's greatest asset," he says.

Jeremy Bruck, chief technology officer at MfgQuote Inc., an online marketplace that links engineers at Boeing, General Electric, and NASA with specialty manufacturers, is revamping MfgQuote's Web site with Flex, which can turn software written in the MXML markup language into Flash files. He's also testing the forthcoming Maelstrom Flash player to sharpen text for customers reading online documents in Chinese and Arabic. The company hopes to boil down a procedure for finding, reading, and awarding quotes from 600 HTML pages to a single Flash page. Subscriptions to MfgQuote's service average $5,000 a year, and when customers believe a sophisticated application is part of the deal, "that changes the value perception," CEO Mitch Free says.

Flash and related products generated 60% of Macromedia's $436.2 million in revenue in fiscal 2005. Adobe CEO Bruce Chizen has made it clear he's buying Macromedia as a growth engine, looking for ways the two companies together can expand their markets.

Two plum opportunities are cell phones and big companies. Macromedia's product portfolio includes a Flash Lite player that's installed on about 30 million cell phones and growing quickly. And more than 300 customers have bought Flex, including Citigroup, Eastman Kodak, Fidelity Investments, Morgan Stanley, and Pfizer. Adobe's omnipresent Acrobat software already can run Flash apps in a PDF file, and Macromedia's Lynch says the area is ripe for more work. Adobe also has contracts with large companies Macromedia hasn't yet cracked, and both vendors have deals with SAP, which give them an entrée into more IT shops. "It's easy to envision building low-cost workflow applications," says Yankee Group analyst Tom Dwyer. "Companies can make processes available as icons users can drag onto a smart form, with the workflow code behind it."

Still, Microsoft will attack Adobe with the same technology it plans to use against Macromedia. Longhorn's Avalon will include a portable document format called Metro that could rival PDF.

Sitting in his office in San Francisco's formerly dot-com laden South of Market district, Lynch, who'll become chief software architect for the combined companies, acknowledges Microsoft's accomplishments in 3-D graphics and ease of programming. "The ongoing differentiation here is Flash reaches more people," he says. "Avalon will run on Longhorn, plus Windows XP for users with good-enough machines. We're cross-platform. And we're first."