February 6, 2008

iRise, a provider of front end visual simulation tools used during the requirements phase of software development, has drawn $20 million for a third round of funding. It’s also released the next version, 6.5, of its Studio product, carrying a mix of usability and performance tweaks.

Like most third stage funding, the company is primarily investing in sales and marketing as part of an ongoing push to go downmarket towards the midmarket space, which numbers over 25 million companies if you count between zero and $500 million revenue. Of course, most third round funding tends to anticipate IPOs, but given the current climate, that C money will have to be rather patient.

Since debuting its product, initially for engagements averaging $250k five years ago, iRise has gotten its price point down to $6000. And it claims a trial foray into telemarketing was successful last year, indicating the company plans to more actively tap SMB sales going forward.

The highlights of the new version 6.5 of iRise Studio include integration with LDAP directories for providing single sign-on support; support of IDOCs (an intermediate text document format used by SAP for exchanging data without going through a database); and addition of a comments pane that looks like the comments that are displayed at the bottom of a Word document. While iRise Studio previously supported comments, this is the first time that all are gathered in one place. Finally, the new version supports the latest generation of 64-bit processors.

Like many software products, iRise Studio is the outgrowth of a tool for client engagements developed by the company when it was a consulting firm. Since introduction roughly five years ago, iRise has largely had the market to itself since introducing the tool about five years ago and has grown to a roughly 160-strong customer base, primarily among the Fortune 500. Other than an offering from Serena, and on again/off again rumors that somebody like IBM Rational might roll its own, iRise has faced little or no competition. It has a partnership with IBM Rational, although only a tiny number of customers actually integrate the tool with IBM’s ReqPro requirements product.

In retrospect, it’s kind of surprising that iRise has had the market largely to itself all this long because its value proposition is pretty simple: show the business what the application will actually look like before you get software developers to carve things in stone. Although it is not uncommon for developers to generate screen prototypes, with iRise Studio, you can craft the full navigation and then export that shell to an IDE or modeling tool where it can get fleshed out.

But until recently, this has been a rich man’s market. iRise’s challenge is scaling to the point that it could support channels sales to a wider, but more down market, clientele. Significantly, trends that are taking the rest of the software industry by storm, like subscriptions and Software-as-a-Service, are not exactly top of the agenda in iRise’s space. According to marketing VP Mitch Bishop, iRise customers have voted with their wallets for traditional perpetual licensing. As for SaaS, Bishop says the company is keeping its eyes on it, but he believes that SaaS plays are best suited for more mature markets.

In all likelihood, the lack of competition reflects the reality that application lifecycle management (ALM) has not been exactly the hottest sector of the software market. But part of it may be the fact that enterprise mashups could accomplish some of the same goals: namely, reducing risk of development. However, iRise and mashups represent starkly different approaches: while its tooling makes it easy to gin up web page flows quickly, mashups let you develop composite, rich web pages that are apps from the get go, but often disposable apps at that. Not surprisingly, Serena, which made an abortive play at the application simulation market, is now pursuing enterprise mashups.

iRise’s strategy is to raise awareness of its target market, which is primarily business analysts. While efforts are afoot to elevate the BA profession in a manner similar to that of projects managers (with certification and a body of knowledge), iRise is taking a more informal track in contributing seed money and sponsorship of a new organization called Catalyze. Maybe it’s not an “officially” sanctioned body like the IIBA (which is supposedly developing the precursors to formal certifications), but over the past year it’s drawn about 2500 members and has provided a convenient place for iRisers to blog topics like the importance of “design thinking.”

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