B.4.1 Company Description

At the beginning of its ATP project, Intermetrics, Inc. was an established, privately held firm, founded in 1969 in Burlington, MA.  In February 1998 Intermetrics merged with Pacer Infotec to form AverStar, Inc.  AverStar was purchased by Titan Corporation in June of 2000.  As of February 1, 2001, Hewlett-Packard entered into a 1-year agreement with Titan to become the sole licensee of the technology that was developed using ATP funds.  At the end of the 1-year agreement, both parties have the option to continue the agreement or dissolve the relationship.  Interestingly, given all of the changes in corporate ownership, the research team that received the ATP award has stayed relatively intact with the key group of 8 to 12 Intermetrics employees currently working at Hewlett-Packard.

B.4.2 Technology Description

Goals of the ATP Project

At the start of the ATP project, Intermetrics hoped to accomplish two goals.  First, the company wanted to develop a diagnostic tool that would capture and display all of the software component interactions that occur within an e-business transaction performed across a system containing multiple platforms (for example, COM and CORBA).  This tool would let the company know where any bottlenecks, slowdowns, or faults were within the system.  This information would improve transaction time for existing transactions and let the company identify problems and bring its applications back online as soon as possible following a system crash.  Second, the company wanted to integrate the diagnostic tool with evaluation capabilities.  This achievement would have created a product that could provide more diagnostic feedback regarding the operations of an e-business transaction. 

Once their resulting product had been developed, Intermetrics had planned on licensing the product to an original equipment manufacturer (OEM) that would in turn sell it within that company's product.  Intermetrics lacked a large enough distribution and sales force to effectively sell the product on its own, so they thought working in a consulting role rather than as a direct seller would generate greater returns.

Technical Accomplishments

Intermetrics effectively accomplished the first goal:  they developed the technology supporting two products.  In a licensing agreement with Mercury, Intermetrics released a product called eWatch in 2000.  After that relationship ended, and with the new relationship with Hewlett-Packard, the ATP-funded technology is expected to be incorporated into a product called OpenView. Approximately one-third of the technology used in OpenView is the ATP technology; the rest is technology previously developed by Hewlett-Packard.  Consequently, we considered two potential analysis scenarios.  If the ATP technology was only responsible for one-third of the benefit from the products, only one-third of the benefits should be considered in the economic returns of the ATP project.  Alternatively, the products might not have existed without ATP's help; if this is true, all of the benefits from the technology should be considered.  Maintaining our bias towards conservative estimation, we attributed only one-third of the benefits of the products to the ATP project. 

Intermetrics did not achieve the second goal of integrating their tool with evaluation capabilities, and they do not anticipate achieving it in the future.  The Intermetrics group working on the technology decided that the challenges of accomplishing the second goal were too great and that they needed to focus on turning the technological accomplishments that they had achieved into a marketable product.

Customer Use of the Products

The ATP-funded technology was incorporated into eWatch, a product for Mercury and is expected to be incorporated into OpenView, a Hewlett-Packard product, very soon.  Once a user has purchased eWatch, two options are available.  First, the users of the product can run tests on an entire e-business transaction application (e.g., the software, the routers, the switches) and determine where the bottlenecks are within the application.  This testing allows the user of the technology to create faster, better, and cheaper e‑business applications.

Second, if an e-business application crashes, system programmers could apply the product to the application to pinpoint the exact location of the error or fault.  This approach would significantly decrease the amount of time required for a company to get their e‑business application up and running again.  This benefit could range from simply saving a few transactions that would have been lost to saving an entire business that cannot afford to lose any transactions.

Future Products

If the relationship between the Intermetrics team developing the technology and Hewlett-Packard is successful, Hewlett-Packard is expected to incorporate the ATP-funded technology into future versions of OpenView.

 B.4.3 Project Performance

In this section, we estimate economic performance measures for the ATP-funded Intermetrics project.  We gathered information on product life spans, actual and projected sales, and total project costs.  Based on these estimates, we calculated the net present value, benefit-cost ratio, and internal rate of return for the ATP-funded project.

Competing Technologies

Based on discussions with Jeff Rees, principal investigator at Intermetrics, no competing technologies that exist now are similar to the ATP-funded technology.  However, he believes that a similar technology would have been developed within the next three years if ATP had not invested in Intermetrics.  Based on this information, the effect of the ATP project will be a 3-year acceleration of the benefits from the products that incorporate the technology.  Again maintaining our bias towards conservatism, we assumed the window of market opportunity is constant at three years, and the only effect is an acceleration of the benefits by three years.

The closest competing technology is an application response time metric (ARM).  This intrusive technology gives software users the ability to estimate the total time an e-business transaction takes, but it fails to provide any of the necessary information to improve the transaction or provide any information to get a Web page application functioning again.

R&D Expenditures for the Technology

From the project's inception in 1997, Intermetrics spent close to $3,000,000 of internally-derived capital.  ATP provided about $1,650,000 in funding, mostly in calendar years 1998 and 1999.  We used the schedule of payments provided to us by ATP in our benefits calculations, and estimated smooth spending of the internal funds from 1997 through 2001.

Estimation of Performance Measures

To estimate the consumer and producer surplus from eWatch and OpenView, we assumed that the marginal costs of reproducing the software are so close to zero that they are negligible, and the only costs that are important are the investments in R&D.  Because R&D costs cannot be separated into investments in eWatch and investments in OpenView, the individual product benefits were also combined.  The table below presents the various performance measures calculated.

B.4.4 Qualitative Benefits Attributable to ATP

General Impacts of ATP Funding on the Company

ATP funding had several qualitative impacts.  Intermetrics frequently uses the fact that ATP funded them as a way to establish the company's credibility in marketing its products.  Intermetrics also said that one of the major benefits from ATP funding was that ATP truly understands the research process.  ATP was flexible when the company's goals changed based on the information they discovered during the R&D process.  This flexibility to refocus the enabling technology in a way consistent with ATP criteria allowed Intermetrics to come up with better technology faster.

General Impacts of ATP Funding on the Market

In addition to accelerating the commercialization date for OpenView, Intermetrics believes that the ATP grant effectively accelerated the entire market for similar products by at least 1 year.  The potential surplus generated from this acceleration could be very significant.

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Date created: December 3, 2002
Last updated: August 2, 2005

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