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NIST GCR 02-834
Benefits and Costs of ATP Investments in Component-Based Software


 B.7.1 Company Description

Graph-drawing theory is a rapidly growing academic discipline.  More companies are using algorithms and other analytical techniques to display large amounts of data as graphs for easier interpretation.  Tom Sawyer Software, a small company located in Berkeley, CA, was funded by ATP to develop component-based graphing tools.  Tom Sawyer develops information systems and software applications that companies can use to manage the flow of information throughout their company.  Specifically, Tom Sawyer focuses on developing graphs that biochemical, engineering, and financial companies can use to more easily and efficiently display information about their workflow, production process, or other flows of complex information. 

Company Demographics

Type of Firm

Small, Private

Founding Date


Company Size at Time of Award

Approximately 10 employees

Headquarters Location

Berkeley, CA

B.7.2 Technology Description

Goals of the ATP Project

The goal of the ATP project was to create automated graph layout technology that could become a "standard" component of large systems.  Tom Sawyer hoped to advance the state of the art in relational graph visualization.  Specifically, they hoped to set the standard for three types of graphing techniques:  constraint-based graphs, incremental layouts, and drawing of very large graphs (i.e., graphs that rapidly change or contain numerous items).  By accomplishing these technological improvements they would be able to advance the level of graphing capabilities, enabling improved communication of complex ideas.

Technical Accomplishments

Tom Sawyer has developed and marketed its first product, a combined graph toolkit and layout toolkit.  It took 6 years to develop the first product rather than the 3 years that Tom Sawyer initially thought it would take.  As a result, the current generation of the Graph Toolkit only incorporates some of the ATP-funded technology.  New product versions released this fall will fully incorporate ATP-funded technology.  The new generation of the technology is geared towards specialty markets such as biotechnology and other specific applications within industry.  In addition, Tom Sawyer has been able to develop Java and Microsoft (MFC and ActiveX) versions of their technology over the last 3 years to increase the number of market opportunities available for their products.



How Product is Sold

Graph Toolkit

Per seat

Customer Use of the Product

Tom Sawyer's customers can use the Graph Toolkit in two ways.  First, other companies can purchase the Tom Sawyer software and incorporate it into the visual displays that are generated from their products and systems.  For example, Cisco uses Tom Sawyer products to display how information is moving over a network system.  Users of the Cisco product are then able to examine their networks in an easily interpretable manner to get a better understanding of the efficiency of their network.  Other companies, such as banks, can use the Tom Sawyer software to better understand their internal workflow and learn what part of their operation is creating bottlenecks or inefficiencies.  In either case, customers can reduce cost by using the Tom Sawyer product rather than employing software engineers to generate custom programs for analyzing firm workflow.

Future Products

Tom Sawyer expects to continue using the ATP-funded technology in future products.  Their current expectation is to create more specialized versions of their product for specific industries.

B.7.3 Project Performance

In this section, we estimate the economic performance measures for the ATP-funded Tom Sawyer Software project.  RTI conducted a structured interview with the principal investigator, Brendan Madden, and gathered information on product life spans, actual and projected sales, and total project costs.  From this information, we derived demand curves for all products sold during their expected lives, and used these curves to estimate consumer and producer surplus and R&D expenditures.  Based on these estimates, we calculated the net present value, benefit-cost ratio, and internal rate of return for the component software project.

Product Life Spans

The first generation of Tom Sawyer products was released in 1998 and had a life span of three years.  The next generation of products is to be released this fall with an expected life span of an additional three years.  Because the first-generation product was roughly only half dependent on the ATP technology, we included only half of the estimated benefits of the product in our estimation.  However, the second-generation product is totally reliant on the ATP project, so the total benefits from the product are considered in our analysis.

Competing Technologies

Two French companies, Ilog and Loox, are trying to produce similar component-based products to Tom Sawyer's.  These companies have not reached the level of technical accomplishment that Tom Sawyer has and are not effectively competing against Tom Sawyer. 

R&D Expenditures for the Technology

Tom Sawyer has spent about $180,000 per year on developing the component-based software technologies and commercializing products for sale.  They expect this level of spending to continue for another two years at a minimum.  ATP contributed $2,000,000 of funds for technology development during the project's 1995-1998 time period.  As a result, about $3.4 million in R&D expenditures must be set against the economic benefits generated by sales of the graph development products.

Estimation of Performance Measures

To estimate the consumer and producer surplus benefits generated by Tom Sawyer's Graph Toolkit product, 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. 

We first generated a per-year consumer and producer surplus benefits from the technology.  R&D expenditures and benefits were adjusted to 2000 dollars to remove effects of inflation.  We estimated the benefit-cost ratio, net present value, and internal rate of return and present them in the table below.  As these results indicate, this was one of the most successful of the projects funded in the ATP component-based software focused program.

Measures of Performance

Benefit-Cost Ratio


NPV of ATP and Private Investment

$52 million

Internal Rate of Return


Producer Surplus

$37 million

Consumer Surplus

$19 million

B.7.4 Qualitative Benefits Attributable to ATP

General Impacts of ATP Funding on the Company

Tom Sawyer said that ATP funding accelerated the R&D that they conducted to develop their graph visualization technology by several years.  In addition, ATP funding greatly enhanced the quality of the resulting products.  ATP funding enabled Tom Sawyer to focus on R&D and good product performance, rather than on tracking down additional sources of revenue to stay alive (i.e., by moving a less capable product to market quickly).  As a result, the product that was released was a much higher-quality product, which is reflected in the price premium that they have been able to charge.

A second benefit of ATP funding was increased credibility.  Customers said that receiving the ATP funding was a signal that Tom Sawyer had high-quality technology.  The halo effect was a substantial benefit.  In addition, several customers identified Tom Sawyer based on the documentation and media attention from the ATP focused program on component-based software.  In essence, the ATP award announcement provides marketing value that new, small companies need to sell their products.

General Impacts of ATP Funding on the Market

Tom Sawyer believes that the market for components is driven by getting products to market sooner rather than by out-of-pocket cost savings.  By accelerating the R&D process, ATP was able to expand the component-based market.

Return to Table of Contents or go to next section in Appendix B.

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


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