Once-floundering ParaSoft finds success lies in bugs.

Five years ago Monrovia-based ParaSoft Corp. saw the market for its standard-bearer software all but disappear, its revenue stream slow to a trickle and its staff size cut clean in half.

Looking back, ParaSoft officials say, the crisis was the best thing that ever happened to the company.

After a period of soul searching and restructuring, ParaSoft has for the last three years experienced roughly 100 percent annual revenue growth, pulling in $3.5 million last year and on target for $7 million in 1997.

The key to the success, according to company co-founder and Chief Executive Adam Kolawa, has been bugs. More specifically, identifying and helping programmers eliminate software bugs.

"I don't know how long we can sustain this (growth)," Kolawa said, "but for now it's a very good business to be in."

Founded in 1987 by four Caltech graduate students, the company enjoyed early success writing systems software for parallel computers. At the time, parallel computing was considered an up-and-coming technology, with the potential to set the performance standard in high-end machines.

"We really thought parallel computing would take off and we founded the company to capitalize on that," said the 40-year-old Kolawa.

The concept behind parallel computing is that instead of relying on one, super-powerful chip, dozens or hundreds of weaker-but-cheaper chips can work in unison to produce more impressive results.

In such processing, a complex problem is broken into many smaller tasks that the chips individually tackle. ParaSoft wrote programs that helped pull the various results back into a cohesive solution.

"But by '92, '93, it became obvious that parallel processing was not going to go very far," Kolawa said.

The trouble was that while component chips continued to grow more powerful and affordable, the communications software that let the chips speak to one another didn't keep up, Kolawa said. The result was performance bottlenecks that diminished the technology's speed. As a result, its attractiveness to commercial users petered out.

With dwindling orders for its software, ParaSoft laid off half its 18 employees, and scrambled for a new product to market.

Initially the company threw its resources behind a program to automatically translate normal, sequential software into programs that can operate on parallel machines.

The company won a grant from the Department of Defense to develop such an application. but "there was no real commercial market for auto-conversion," Kolawa said. "However, we found that what you do in auto-conversion is not far away from what people do when they try to find bugs."

Software debugging is the process by which developers remove coding defects from a computer program. Like auto-conversion, it requires an understanding of how different software components work together and a mastery of system resources, especially memory allocation, Kolawa said.

Using some of the same algorithms developed for the Department of Defense. Kolawa and his staff set to work on software tools that could be used by programmers to detect and correct coding defects in software as they write it.

Other applications already existed that could go through a program once it had been written and look for bugs, but none did so on the fly, or in "run time," Kolawa said.

The difference is something like a spell checker that goes through a document once it has been written, and flags misspelled words. ParaSoft's products, called Insure and Code Wizard, were the equivalent of a spell checker that corrects mistakes as they are made.

"We introduced the first version to market in the middle of 1993," Kolawa said, and called "literally everyone," from aerospace manufacturers to banks, anyone, in short, that developed in-house software applications.

In the four sub-sequent years,ParaSoft has sold about 15,000 licenses for the program to about 1,700 companies. The software itself sells for between $300 and $2,000, depending on the number of expected users. An optional annual support contract costs about 20 percent of the sales price, per year.

Kolawa would not say how much revenue such service contracts generate.

One company that purchased Insure early on and has continued to upgrade over subsequent years is Lockheed Martin Corp., which uses it in developing flight simulator software.

"Being engineers rather than trained programmers, it's helping us find problems in our software before our users do," said Lockheed's Mike Yokell, who oversees several teams working on flight simulator programs and other programs at Lockheed's Tactical Aircraft Systems division.

Beyond traditional corporate customers, ParaSoft has a new crop of customers clamoring for business-related programming to exploit the soaring popularity of the World Wide Web. Versions of Insure and Code Wizard that operate in Java, C++ and other computer languages popular among Web programmers are seeing the fastest sales growth, Kolawa said.

ParaSoft plans to release several new products this fall that should expand its revenues further.

"Platforms are changing, modes are changing and we have to keep up," he said.