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We’re Still Standing
Five Connecticut technology companies that made it through 2001
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Business New Haven
12/10/2001
By: Susan Cornell
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The year 2001 has been a difficult and challenging year for technology-based companies. Still, what strengths were displayed and what initiatives were undertaken to help survivors succeed? Executives from five top survivors share some wisdom.
Open Solutions Inc. (OSI), a provider of enterprise core data processing, Internet banking and e-commerce financial solutions for community banks and credit unions, was named as one of Connecticut's fastest growing technology companies in 2001 by Deloitte & Touche and the Connecticut Technology Council “Fast 50” rankings of the fastest-growing technology companies. Rankings are based on five-year revenue growth (1996-2000). Open Solutions has earned this award for four consecutive years. The company received a No. 9 ranking overall in the Connecticut Fast 50.
OSI Chairman and CEO Louis Hernandez Jr. credits hard work, vision and dedication on the part of the entire organization with the company's 1,884-percent revenue growth over the past five years. “Our company's sales growth is further testimony to the fact that Open Solutions and our enabling product suite have been truly accepted by the banking and credit-union marketplace,” he says.
OSI's third quarter 2001 revenues of $8.5 million (largest in company history) represented a 41-percent hike over the previous quarter. Year-to-date revenue growth is 53 percent. Open Solutions' client base continues to grow and to look to the company for additional services.
Hernandez says of his company's key success factors, “No. 1 in this kind of environment is being very client-focused and listening very carefully to what the demands of the market are, because you have less chance for error today. We're less into predicting market demands and more into listening to what we are hearing from the market, and responding and executing.
“The second thing,” Hernandez continues, “is hiring the best people. In these times, you need extraordinary people to do extraordinary things if you are trying to grow at the rate we're growing in the type of market were selling to. We're selling software to financial institutions which predominately don't like to make major software purchases.”
“We really are focused on execution right now - just execute well in everything you do,” explains Hernandez. “It's all about performance - from client service to the best products to high quality to better sales to effectiveness. We're asking a lot of everybody - getting the best team in here, and putting them in a position to win.”
Says Hernandez of 2001's principal challenges: “So far this year one of the macro-challenges from a strategic standpoint has been knowing where to invest. Our goals of growing quickly and continuing to serve the market well were overshadowed by the general economic climate. That caused more effort in making decisions on where we should invest. You have a lower standard deviation for errors available to you, so you have to have more right answers than wrong answers.
“One of the most difficult things for me as chairman and CEO is that I had to think very carefully about where are the best investments to help us meet our goals without putting the company and our shareholders at risk by overspending in areas that don't provide a return,” Hernandez explains. To overcome those challenges, Hernandez advises, “Hire the best people. Hire people that are innovative and leaders in their own right.”
Other tech companies have struggled or failed, Hernandez says, because, “The overall spending environment for technology has softened quite a bit. If you didn't anticipate that or come to that realization quickly enough, some people who had been spending heavily on infrastructure in anticipation of strong demand [found that], when that demand didn't materialize, it's easy to run out of money very quickly if you didn't stay close to the market or realize that the shift was occurring as fast as it has. The other key thing [is that] there was such tremendous hiring going on over the past four to five years. You were forced to hire people with less experience in particular areas. If you didn't make sure you were diligent in combing through your employee base and only retaining top performers, when times turned bad it had a dramatic impact on some of these companies.”
Next year's challenges, Hernandez says, will include a slowdown on the tech spending through mid-2002. “Stay diligent and dogged on making good decisions on traditional business metrics to key decisions and stay extremely close to your market and know where the market cycles are moving and where people are spending,” he advises.
Danbury-based ATMI, named one of Fortune magazine's 100 fastest-growing companies in 2001, sells materials used in the manufacture of semiconductor chips.
In 1986, five scientists saw a market opportunity in chemical vapor deposition (CVD) technology, which is widely used in semiconductor manufacturing. The founders built a company that would provide devices, equipment and materials to support this rapidly growing market segment. They incorporated a company and named it Advanced Technology Materials; now known as ATMI Inc. (NASDAQ: ATMI).
Today, ATMI is pioneering new frontiers in the industry with innovative engineered solutions. The company focuses on the semiconductor industry by combining knowledge of materials technologies and industry processes. ATMI creates innovative products and solutions that contribute significantly to the industry's technology and growth and builds long-term partnerships with customers, based upon their key requirements: increased productivity, improved yield and lower costs.
The company's forward-thinking research and process knowledge provides customers with new products and services that keep them ahead of the technology curve.
ATMI is leveraging global investments to sustain profitable growth. Since the company's IPO in November 1993, ATMI has sustained a record of rapid growth and delivered strong returns to shareholders.
A fundamental element of ATMI's business model is growth through strategic business alliances. The company has offices in Asia, Europe and the U.S. As well, ATMI aggressively pursues partnerships with other technology leaders, providing customers with complete technology solutions and expanding distribution networks.
Explains ATMI's head of investor and public relations, Dean Hamilton: “The overarching challenges for ATMI are not the depth of the current downturn, which is far, far worse than anyone anticipated or forecast. Instead, it is becoming a critically important company to customers as the comparatively new semiconductor industry works through the normal maturation process where multitudes of companies consolidate into handfuls.
“By understanding our markets and customers, and stepping back to identify the longer-term trends and forces in our industry, ATMI actively updates its business strategy and tactics to allow it to be not just a survivor, but a winning competitor.”
Says Hamilton, “The key success factors for ATMI have been its focus on creating products to fulfill existing customer needs - which means that product ideas must be commercially viable from the start. A neat idea doesn't do much good if it isn't something that solves a problem for customers. If customers aren't interested, it's not a product.
“ATMI has also worked hard to create strategic partnerships - with customers, the government, universities, and peer companies - to leverage development skills and talents without expending huge sums of money,” Hamilton adds.
“ATMI's competitive advantage is its intellectual property,” he says. “By identifying customer needs and creating novel products that improve customers' production, we are creating innovations that can be patented. These give ATMI an opportunity to offer specialized products at prices that are set at a level near the value they add to customers. Specialty products at specialty prices. Limited competition because the products are protected by patents.”
Hamilton feels that ATMI's future - looking out to, say, 2005 - is promising. “In June we held an investor conference,” he says. “There, we showed our plan to turn ATMI into a $1 billion revenue company by 2005. The basics remain in place.” He acknowledges, however, that “We may not reach our goal as soon as we had envisioned, given the dire straits the industry is in this year.
FlexiInternational Software Inc. designs, develops, markets and supports Internet-enabled financial and accounting software for mid-sized to large businesses. Headquartered in Shelton, Flexi is a leading provider of Internet-enabled financial and accounting software and services. Flexi operates in the U.S. and Europe and has approximately 300 sites worldwide with clients including Norwest, McKesson HBOC, Citibank, Unitil, Control Data Systems, Netstock.com and Mutual of America.
Flexi's products support a variety of hardware platforms and databases; all products use industry-standard tools and languages. According to industry research and benchmark testing, Flexi products have a lower cost of ownership and outperform other products tested under identical database and hardware configurations.
The decade-old firm was founded to design, develop, market and support software for developing technologies. Since 1991, it has served clients in a myriad of industries. Recognizing a growing trend in outsourcing accounting operations, the company introduced its outsourcing service in 2000. According to its investors' brief, Flexi is an industry leader in profitability per employee.
Explains founder, chairman and CEO Stefan R. Bothe, “Flexi's technology allows our accounting products to be implemented at less cost than any other competitive solution and it also allows our products to be easily integrated with third-party products.”
The challenge faced in 2001 was a business climate that “improved slower than we anticipated, requiring us to control cost tightly and reduce staff,” Bothe explains. At the same time, he says, the company invested in sales and marketing to grow revenue and pay special attention to clients.
In the coming year, says Bothe, “Flexi needs to manage the investments required for [our] new outsourcing business while supporting its traditional clients.” Additionally, “We need to assure that the first clients are a success on which to build the growth of this business.”
Technology companies failed, in Bothe's opinion, “because the dot.com hype set unrealistic expectations. They were not based on a sound business model of building a profitable business, but rather spending money as fast as they could on the basis 'We spend and they will come'”
Beyond that, he says, “Traditional technology companies like telecommunications companies or technology-infrastructure companies failed because their success was mostly driven by the unlimited spending of dot.com companies and when that dried up they had nothing to replace that revenue stream with or they failed by just plain missing market shifts.”
The name of Trumbull-based CYA Technologies evokes curiosity. Its mascot, Sidney the Purple Dragon, draws amused smiles. CYA (Capture Your Assets), though, has achieved extraordinary market acceptance, attracting clients including Bayer, DuPont, Hewlett-Packard, the U.S. Mint and the Pentagon. The company is a provider of application-aware software solutions that provide Fortune 2000 companies with disaster-recovery and high-availability solutions to protect mission-critical content.
CYA Technologies is a privately-held company, established in 1998. It is its CEO's third successful business - yet Elaine Price encountered resistance to early appeals to venture capitalists. The company received its first round of funding in July 2000 and is currently seeking additional venture partners.
Five of the top U.S. pharmaceutical firms use CYA products. Last month CYA unveiled its CYA Command Console Suite, a new approach to disaster recovery. Explains Price: “The events of recent weeks have significantly raised awareness about the vulnerability of mission-critical content. [Organizations] are planning for worst-case scenarios and looking for areas of weakness in their strategies - and that's where they realize they have a big hole.”
Adds Price, “2001 was an extremely difficult year with many challenges. However, it many ways it was also a very good year as it brought everything full-circle by redirecting the value system in the business community. People are looking for stability, and the security of companies that have that old-fashioned business model based on strong business ethics. The world could not maintain the pace of the 'me' attitude that existed in the technology sector and business overall could not support this, as a business must be profitable to grow.
Price finds that it takes “several approaches, a tremendous amount of flexibility and perseverance to succeed in today's environment. Growing businesses require a lot of attention from people who know how to work together and pick up the ball when required.”
Price says that many other technology companies struggled or failed this year because, “They may not have had a clear vision, products or the level of management and commitment required to succeed. In addition, I think that in the late '90s too many companies were funded very early on with little or no proof of concept.”
SNP Technologies of Hamden is a privately-held company that offers creative Web development and network and integration services to help clients actualize their vision, turn their passions into reality and add sustainable value to their businesses.
SNP started its operation in July 1989 supplying computer hardware customized to customers' needs. By 1993, SNP began to provide networking services. In 1995 SNP began to offer Web design services, expanded offerings the following year to offer custom application development as well. After that SNP began to de-emphasize product sales in favor of focusing on design, consulting, system integration, application development and Internet- services.
SNP is a 12-employee company. Four engineers specialize in infrastructure, local area networking, wide area networking, security, disaster-recovery planning and related services. Four other professionals specialize in application development, Web services, Web design, etc. Two other staff members provide services related to automated information/data gathering-services and information delivery using fax and e-mail.
Explains CEO Prakash Parikh: “We have grown every year except in the years 1992 and '93. We grew this year and we expect our growth to continue next year as well. We are too small to have a significant market share in any one area. We currently service about 125 clients.” Although he declines to reveal sales figures, he offers that, “We are profitable.”
“The key to our success is our philosophy,” says Parikh. “Our relationship with our clients is long-term. Their success through effective use of Information and Internet technologies is our goal, our mission. All of us at SNP strive to understand our clients' business. We care to understand their vision, their needs and their goals.”
This year, says Parikh, the company's challenge “was to communicate to our clients on how to leverage our services, taking advantage of our broad base of knowledge and realize a value in a 'total' solution. The challenge was to make clients see beyond immediate needs, especially when economic forecasts were gloomy.”
How were these challenges overcome? “We remained focused on client's interests - both short- and long-term,” says Parikh. “We continued to offer a 'total' solution, bringing to the table complimentary skills of our team. We continued to find time to educate ourselves to remain current with technology. We researched industry trends our clients were in so that we could advise them on how to leverage technology.”
Parikh says that many other technology companies struggled or failed this past year because they “missed the point.” SNP is in business, he says, “to serve the clients - not the technology. Many of them were deploying technology, hoping that it will solve problems, or satisfy some customer needs, or thought that the me-too thinking of the late '90s and year 2000 will also work this year. Many companies do not recognize that only if you understand your clients' business, understand their needs, collaborate with them, then only technology can serve as a means to achieve those ends.”
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