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Key To the (Info) Highway
How an Internet self-service pioneer reinvented itself as a software company in order to survive
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Business New Haven
9/01/2003
By: Mitchell Young
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This is much more than a business cycle correction for technology," says Alexander Richardson of the technology industry meltdown. "This represents a fundamental change in how people buy IT technology from vendors."
How so, exactly? "Customers are now in charge, and responsiveness and flexibility are the name of the game," Richardson asserts. "It has to be driven by what people need - not by what is possible. That's one reason we've survived.
"The only way for a technology company to succeed is to develop skills at listening, and to develop a sophisticated understanding of customers' industries. Everything else is secondary."
Thus spake the founder of self-service software developer Netkey, of Branford.
Before most Connecticut business people knew what the Internet was, Alexander Richardson's company, then known as Lexitech, was developing applications to access the World Wide Web via self-service terminals.
As early as 1985 the company Richardson founded in 1983 in the basement of the Yale School of Management was providing text-based kiosks to a variety of clients. By 1995 Lexitech was developing Web-enabled applications for the U.S. Postal Service, Aetna and Travelers, among others.
So early was Lexitech into the Internet game that the author of a 1996 BNH story on Richardson's company felt the need to explain what the Internet was to help describe the company's products.
"Within minutes at the computer terminal (said the story), we reached an Internet site called Yahoo, containing links to information from thousands of companies, organizations and individuals from around the world. We typed 'electronic marketing' and it returned 90 companies and organizations engaged in or reporting on electronic marketing."
Within "minutes," indeed.
But in 1996 Lexitech was still a service company, developing kiosks, Web sites, databases and sometimes connecting them all together. When the company invented its Netkey software to help build self-service applications, Richardson decided it was time to take his concept of "Turning the Monitor Around" to the next step. Thus he turned his company and himself around in a whole new direction.
It took several years of additional development and raising capital, but in 2000 Richardson introduced his reborn company as Netkey, an enterprise software company. Netkey software is used to design and power interactive self-service terminals and the network systems that run and manage them.
According to the company, Netkey software helps users "design and deploy" systems - from a single self-service terminal in a farmer's market to hundreds of dealers across the country. Potentially it can manage tens of thousands of terminals in a global network.
Netkey is a platform technology whose tools are used to develop a wide variety of applications. At Target stores it takes job applications. At BMW it's a virtual sales location. At Borders Books it connects "browsers" to an online inventory of books.
New Haven's Hospital of Saint Raphael uses the Netkey system to give employees self-service access to human-resources information. One improbable user of this 21st technology is Bishop's Orchards, the century-old Guilford farm that now has the "touch" in more than just agriculture.
Bishop's uses Netkey software as part of a wireless kiosk in its farm store as well as to allow customers access to its Web site and to sign up for the customer loyalty program.
So-called enterprise software and the customers that use it are typically big businesses. Thus Richardson's new company potentially counts among its competitors the likes of IBM and NCR.
"It takes a lot of great people and engineering to build enterprise-level software," says Richardson - and that means raising capital. "So we went out kissed a lot of frogs." The first to invest was Zero Stage Capital out of Cambridge [Mass.] and Cyberstars in Atlanta.
Today there are eight VC investors that have put more than $20 million dollars into the self-service visionary's company. Last year - one of the toughest for raising capital - Netkey raised an additional $5 million.
Other investors include Connecticut Innovations Inc., Fleet Bank, Hudson Ventures in New York and Christian Timbers Access Ventures in Ohio. In 2002 Lexitech attracted a new investor, Updata Capital a top technology M&A firm as well as a VC.
Meanwhile, Netkey's customer base has expanded to include companies like John Deere, Disney, Fidelity, BMW and Target.
Explains Richardson: "We had to make the software scalable, secure and reliable, to meet the needs of these large multimillion-dollar companies or someone like Bishop's [Orchards]. The new systems perform transactions, take job applications, they need to be a reliable as their point-of-sale devices. And that takes a lot of money."
Today Netkey has completed development of its software, which has spiked sales more than 40 percent over the past 12 months to approximately $10 million. Netkey today employs about 40 workers.
That growth trajectory, which has defied the tech implosion, is based on a stable of world-class customers making six figure software purchases. But even traveling in such swank circles hasn't turned Netkey into the major enterprise software player that Richardson would like to see.
"I've said I could have done this myself, but it would have taken us 68 years," says Richardson of the decision earlier this summer to pass the CEO baton. "When you go from an entrepreneurial company to a worldwide enterprise software company, you need a lot more [management] skill than I had. So I went out and sought some coaches."
Richardson notes that investor Zero Stage "has done this before; they like to say they've seen this movie before. I haven't, but I've worked for some big companies and I've always had a boss. At Lexitech we had great clients like Travelers and Microsoft, so I'm used to taking orders from other people. We're all in the service business, so we all have bosses. We may not agree all the time. We haven't hired a lot of yes men, but we have a lot of strong personalities."
Thus Netkey will now depend on a new strong personality to take it to the next level. On July 17 Netkey's directors announced that V. Miller Newton would replace Richardson as CEO (BNH, August 4). Newton was previously chairman and CEO of Boston-based Lavastorm Technologies. Before that he was executive vice president of sales and marketing for TMP Worldwide (now Monster.com, the online job board). Newton was a key figure in taking TMP public. Monster was acquired by TMP as part of an acquisition of recruitment advertising firms by TMP. The acquirer nearly closed that visionary model, but in the end didn't and it took off under Newton's sales direction to become the monster that Monster is.
Newton's biggest surprise since coming on this summer has been a positive one. "I was expecting that we would have to do a lot more missionary work, but I'm finding that a great number of companies are involved in trying to create self-service applications," he says.
For now, Richardson will become the "official" visionary as Netkey's chief technology officer and vice president for business development in the company he founded to compete in an industry he himself helped to invent.
Richardson hopes to be sharing his vision more widely. For example, browsers at the Netkey terminal at Borders Books may soon come across a listing for a new book on self-service: Turn the Monitor Around, by none other than Alexander Richardson.
We'll take the hardcover.
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