Kahn the Barbarian : Technology: Philippe Kahn’s Borland International has made a fortune by snubbing traditional ways. But some say success may dull the software company’s competitive edge.
Borland International Chairman Philippe Kahn was reading a dense history of Central Asia a few years ago when it struck him that many of the nomadic tribes of the steppes were actually far more ethical and disciplined than the European “civilizations” they were confronting.
They were austere and ambitious, eager for victory but not given to celebrating it. They were organized around small, collaborative groups that were far more flexible and fast-moving than the entrenched societies of the time. They were outsiders and proud of it. They were barbarians.
And Kahn wants “Borlanders” to be like them. Barbarians not bureaucrats, as the high-flying software company’s unofficial slogan proclaims.
To a remarkable extent, Kahn himself has succeeded in living by the barbarian code. He’s the consummate outsider, a French mathematician of Jewish origin who was an illegal alien when he launched Borland in 1983. Both personally and professionally, the motorcycle-riding, saxophone-playing Kahn has broken all the rules, carrying out a legendary series of outrageous stunts even as he came up with some of the most important technical and marketing innovations in the software business.
And to the amazement of critics who once dismissed Kahn as “that crazy Frenchman,” Borland is now an industry powerhouse. With the acquisition of Torrance-based Ashton-Tate last year, Borland became the third-largest company in the PC software business, with annual revenue of about $500 million. To Microsoft Chairman Bill Gates, the emperor of PC software, Kahn and Borland are suddenly a major competitive threat.
Yet the very success of Borland poses an important challenge to the carefully crafted barbarian culture. Too many victories, as the barbarians of Eurasia discovered, can breed hierarchy and complacency. Borland must now maintain the ethos of the scrappy outsider even as it evolves into a market leader.
On a more mundane level, the $440-million Ashton-Tate acquisition brought some costly surprises. Borland took a $103-million restructuring charge--considerably more than the $80 million initially anticipated--to cover the cost of absorbing Ashton-Tate and shutting down the Torrance headquarters.
In addition, Borland is now grappling with the tricky task of integrating Ashton-Tate’s key product--a program for managing large amounts of information on a personal computer--into its own product line, which already includes a database package called Paradox. The company has committed to supporting both products while building bridges between them.
Finally, Borland is racing to complete a series of new products--including databases and a financial spreadsheet that work with Microsoft’s Windows software program--that it hopes will bolster the lackluster financial results of recent months. Though early reviews of the products have been very favorable, they will arrive months later than expected.
“They have a lot of challenges in front of them right now,” says Nancy McSharry, an analyst with International Data Corp. “A lot of people are looking at these new products as bellwethers for where the company is going.”
For the 39-year-old Kahn, a bear of a man whose girth belies his devotion to sports, such challenges are the stuff of life. He concedes with a shrug that Ashton-Tate, the once-dominant database software vendor that began to spiral downward several years ago, was in even worse shape than he thought, but remains convinced that it was a good acquisition.
Kahn also brushes off any suggestion that Borland’s rapid growth might prove difficult to manage, or that control is too centered in his hands. (Kahn is president and chief executive of Borland as well as chairman.) As for the idea that Borland might be getting too entrenched to play the barbarian, well, he doesn’t have to worry about that as long as there is a Microsoft.
“Absolute size is one thing but it’s relative size that really makes a difference,” he says in his slightly lilting English. “Microsoft is, what, six times . . . five times bigger than we are? They’re very large, so you’ve got to be better, you’ve got to be leaner, you’ve got to move faster.”
Microsoft, in fact, is a defining presence for Borland. While Lotus Development Corp., Borland’s rival in the market for spreadsheets, is regarded with thinly veiled contempt in Scotts Valley, Microsoft is admired for its technical and managerial competence even as it’s loathed for allegedly unfair business practices.
The similarities between Microsoft and Borland are striking. They are the only major firms in the PC software business that have competed effectively in more than one product category. Both pride themselves on their technical acumen and corresponding ability to attract and keep engineering talent.
And both are lead by relatively young, extremely intelligent, intensely competitive men who have demonstrated the rare ability to build a company from scratch and then manage a large and complex organization. Kahn trades barbs with Gates in public, yet he has consciously modeled Borland in Microsoft’s image.
At the same time, though, Gates and Kahn are very different personalities who play different roles in the close-knit PC industry. Gates is almost ascetic in his devotion to the software business, while Kahn--who is married and has three children--still finds time to play the saxophone, fly airplanes and sail his 50-foot racing yacht.
And while Gates is considered the most powerful--and feared--man in the PC industry, Kahn remains the willful upstart. Industry pundit Esther Dyson recalls seeing Kahn and Gates talking privately at an industry conference. Kahn was shaking his finger and Gates was looking pained. She said the scene reminded her of Russian President Boris Yeltsin publicly scolding Mikhail Gorbachev.
Kahn has been battling the establishment since childhood. Kahn’s parents were Jewish immigrants with few roots in France, and he was raised on the fringe of the fanciest neighborhood in Paris, forced to compete with the rich kids in school even though his family wasn’t wealthy.
“I really worked hard at being good at stuff because I couldn’t compete in any other way,” he says.
He credits his mother, an Auschwitz survivor who died when he was 13, with instilling in him a powerful sense of “personal discipline,” a will to work hard and achieve in all pursuits.
Kahn’s father was a mechanical engineer and a die-hard Socialist. When the near-revolution of May, 1968, swept through Paris, the 16-year-old Kahn was already well-schooled in the writings of the left and self-confident enough to argue philosophy with Jean-Paul Sartre at the students’ encampment at the Sorbonne.
But Kahn was ultimately drawn to mathematics and computer science, not politics. As a student in Zurich, he studied with the legendary computer science professor Niklaus Wirth, inventor of the computer language called Pascal. Kahn later taught mathematics at a French university.
The stultifying bureaucracy of French academia proved too much for the budding barbarian, however, and in 1982 he set off for Silicon Valley. Kahn says he had no desire to be an entrepreneur--he came to the United States looking for a job. But he lacked a critical credential--a green card--and ultimately decided that his only alternative was to start a company.
In a typically crafty move, Kahn called his nascent consulting firm Market in Time, figuring the acronym MIT would at least persuade people to open the mail. When the real MIT caught on to the trick, he took the name Borland--deep forest in ancient Celtic--which some Irish friends had used for a former company. In 1983, he began peddling a version of the Pascal language that he had written, using imaginative ruses to get equipment and advertising space on credit.
To his amazement, his Turbo Pascal language quickly began selling well via advertisements in trade publications. A little later, he developed a personal organizer called Sidekick and sold that the same way.
By 1985, Borland International was on its feet, and Kahn was building his bad boy reputation. He sped about in a white Porsche, threw a raucous company party which he attended in a toga, buffaloed reporters with funny but untrue stories about how Borland was founded, and generally had a good time with his newfound fame and fortune.
Some now view these shenanigans as a shrewdly calculated means of getting publicity for what was still a very small software company. But in many ways they were really just boyish mischief-making, an expression of Kahn’s ebullient and contrarian personality, his colleagues say.
As Borland got bigger and the stakes got higher, though, Kahn began to mellow--especially when the company suffered losses and layoffs in 1988 as a result of being spread too thin.
“He started out thinking it was all a big game--he had great parties and thought it was fun,” says Stewart Alsop, author of the P.C. Letter. “But at some point he realized that he could do something bigger than just have fun, and he was a smart enough guy and a big enough guy to realize that.”
Kahn admits that he’s grown up a bit. “These pranks, internally I might feel like doing them, but I stop myself.”
In one of the most notorious incidents, Kahn arranged for copies of a negative magazine article about Lotus chairman Jim Manzi to be slipped under the hotel room doors of executives attending an industry conference. He says he would not do such a thing today.
Then he adds with mock seriousness: “I would never do that. It would be silly.” He pauses. “It would be fun, though.”
In Kahn’s eyes, business is still something of a game, but it’s one he plays with deadly seriousness. And competitors and financial analysts have finally awakened to that fact. Borland’s stock has climbed steadily from $12 at the beginning of 1990 to about $75 today. The language products, which other software developers use to write programs, dominate their niche. The Quattro Pro spreadsheet program has made a significant run at Lotus 1-2-3 and Microsoft’s Excel.
And in the database arena, Borland now has Dbase and its own Paradox products, as well as a high-end system from Ashton-Tate called Interbase. Analysts believe the company is poised for substantial growth, especially after new versions of the products ship later this year.
Borland’s philosophy, Kahn says over and over again, is a commitment to “software craftsmanship,” to building “best-of-breed” products in every category, and to being closely tuned in to the needs of customers.
A key factor in achieving these goals was an early commitment to so-called object-oriented programming, in which chunks of software code that perform specific functions are reused in different programs. Borland was one of the first to see the importance of this technology, now regarded as central to future advancements.
Borland was also an innovator in the marketing arena, pioneering the use of direct mail and inventing the hugely successful “competitive upgrade,” in which customers of other companies are offered Borland products for a fraction of their regular retail value. At the same time, Borland has proved adept at making acquisitions and absorbing technologies developed elsewhere.
“Very few people are able to innovate more than once,” says Scott Cook, president of Intuit Software. Yet Kahn and Borland, he says, have been able to innovate repeatedly. Cook likens Kahn to “a chess genius playing 12 games at once.”
The perception that Borland is a one-man show rankles Kahn--the barbarian credo, after all, holds that the group bears responsibility and no one person can hold himself above others. The company prides itself on a flat, non-bureaucratic structure, which is made possible in part by heavy use of electronic mail to facilitate communication across traditional lines of authority.
Borland’s organization is unusual in that product development is kept separate from product management and marketing. All the development groups report directly to Kahn, while the product management organizations are divided into three business units--a structure that was put in place after the company stumbled in 1988.
Some say that Borland lacks “depth of management.” Wordstar President Ron Posner, who sold Ansa Software to Borland and worked there briefly, credits Kahn with doing a remarkable job, but adds: “He has not surrounded himself with a strong management team. Philippe does not like to be challenged.”
Yet others insist this is not the case, and that business unit heads are not only competent, but often prevail in disputes with the chairman. Kahn is argumentative by nature and aggressively forces people to defend their positions, yet he’s apparently willing to implement the ideas of others. The business unit structure, for example, was actually Borland Vice President Eugene Wang’s idea, agreed to by Kahn after a three-hour argument at a company retreat.
Clearly, Kahn inspires a great deal of loyalty. Holding a senior position at Borland means more than a professional relationship with the hyperactive chairman: It means late-night dinners, veritable forced marches through the hills of Scotts Valley and long discussions about lots of things other than software. Yet turnover is low--4% to 5% a year.
That loyalty is inspired not only by Kahn’s personality, but also by his passionate commitment to building quality software. He’s recognized as being among a small group of executives who have an intuitive understanding of computer software, a gut sense of what customers will want and the technical knowledge to carry it out.
And he has the drive to push his vision, a drive that comes from a strong belief in the value of the products and the desire to help steer an important industry. “What we are doing is in the interest of progress, and progress is ultimately good for humankind. Software is the next frontier.”
But the drive also comes from a more elusive source, one that makes him practice scales on the saxophone an hour a day or insist on traveling to a restaurant on his motorcycle one recent evening even though it was pouring rain.
“It’s crazy, isn’t it? I drive my motorcycle in the rain,” he says. “Why the hell do I do that? I could have a driver and be driven here in a Rolls Royce. I’m wet. I’ve been wet for the whole dinner. Why? I enjoy that. I don’t enjoy the easy way.”