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Stuart Garfield
Friday, January 16, 2009
Inside Fast Growth Technology Companies
Targeted, niche apps help some companies grow
By Bridget Botelho, Special to Mass High Tech
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How is the economic crisis affecting tech companies?
Everyone knows the U.S. economy took its toll on businesses throughout the country in 2008, with once rock-steady corporations like Lehmann Brothers Holding Inc. crumbling and others laying off thousands of employees just to stay afloat. But for some local businesses, 2008 brought nothing but growth.
For the most part, tech companies that grew in 2008 offer products or services that their customers deemed too valuable to cut out of their budgets — either because it increases their bottom line, saves money or adds some other undeniable value to the organization.
One such example is the Cambridge-based customer relationship management consultancy firm Innoveer Solutions Inc., which has existed as a stand-alone private company since separating from its parent, Akibia Inc. in 2005.
The 150-employee company has grown at a rate of about 15 percent per year since and grew 25 percent in 2008 as companies have continued to invest in CRM consultants like Innoveer.
“Companies have continued to invest in CRM because an investment in CRM pays itself back very quickly,” said Adam Honig, president and CEO of Innoveer.
“We are in the business of helping other companies generate clients,” Honig said. “The economy is a challenge; however, the industries we focus on have been a lot less affected. We had 52 customers last year, and only lost one.”
Honig admits that a 25 percent growth rate represents an excellent year, and he doesn’t expect to see that statistic again in 2009. “We are being prudent, but our health and tech sectors are doing well. At this point we are optimistic about our ability for growth in 2009.”
Another company thumbing its nose to the economy is Rocky Hill, Conn.-based Axsys Technologies Inc.; the company, which designs and develops high-performance surveillance cameras, imaging systems and defense-related technologies, reported third quarter 2008 sales of $64.8 million, up from $45.2 million in the third quarter of 2007, and their net income was $8 million, up from $4.1 million from the third quarter 2007.
Axsys’ camera and weapon sight lenses are used in sectors such as border security and military defense, said Scott Conner, president and chief operating officer of Axsys. For example, its technology allows photographers to film targets from helicopters so far away, the subjects don’t see or hear the helicopters.
“We are not really affected by the economy, because of the industry we serve — these are very expensive lenses, but the return on this investment is very high. What our product does is worth the cost,” Conner said. “The increased concern over terrorism has driven our growth…our infrared technology is being put on every soldier today…it is a technology that people live and die by.”
Axsys’ was also able to increase profit in 2008 because the cost of developing its infrared technology is now lower than ever for much higher performance, Conner said. Axsys added 100 new jobs at its Nashua, N.H., plant in 2008 and plans to add another 50 in 2009, Conner said.
While there are plenty of opportunities for Axsys this year, Conner expects growth to slow to about 15 percent.
Another company with a niche product that companies can’t seem to do without is Andover-based Copanion Inc. Its GruntWorx family of tax document automation software reads, classifies and extracts data from paper-based tax forms and PDF files that are scanned into a computer, making tax season bearable for CPAs.
When taxpayers bring a bundle of receipts and paperwork to their CPAs, those accountants normally have to manually enter the numbers off receipts and other paperwork into their systems. With Copanion’s software, launched in November 2007, that manual step is eliminated, said Copanion CEO and founder Steve Ladd.
“We aim this product at the 64 million people who bring a box of information to a CPA to have them do their taxes (and) it has caught on like wild fire; about 4,000 firms are registered to use the (GruntWorx) program so far,” Ladd said.
Ladd assumes his software sales have not suffered because it lowers the cost of labor for CPAs, and he is optimistic about sales for 2009. “We are growing rapidly; there are about a quarter million accountants that we can sell to — so we are in the beginning of a very steep growth curve,” he said.
Having software that users can easily access also helps, Ladd said. “There is nothing like having an efficient sales model that is Internet based, so the customer doesn’t have to go out and buy and then download the software,” Ladd said. “We do everything we can to make it easy to use, and it helps that our product solves a real problem.”
Another company that didn’t suffer in 2008 is Smithfield, R.I.-based New Directions Data Group; it grew during the first three quarters of last year thanks to a niche in IT consultancy services, according to managing partner Thomas Anderson. In the last quarter of 2008, New Directions’ growth started to slow to a “modest growth” pace, Anderson said.
“Many (of our clients) projects and initiatives that fall into the ‘wish list’ category were canceled, shelved or delayed,” he said. “However, we are expecting modest growth in ‘leave the lights on’ IT project initiatives as well as those projects that analyze corporate performance and can enhance the corporate bottom line.”
Even so, New Directions, which started in 2003, will probably grow 12 to 15 percent throughout 2009, Anderson said. “Our current economy requires all companies to run themselves smarter… (so) clients will look for greater technical and cost value from professional services firms.”
Anderson added, “We believe that many of the obstacles are out of our hands, however, positive signs from an incoming administration, glimmers of growth from the housing market, an increase in consumer confidence and rebounding stock market will turn 2009 from modest to good growth. Without those obstacles overcome, we believe 2009 will have a number of challenges.”
Out of the gate
Setting up a competitive atmosphere for website sponsors helped one young company grow in 2008, and positions it for expansion in 2009.
My Complete Event, a Boston-based website, competes with wedding planning sites like theKnot.com by offering free, online event planning tools to local users. The company was incorporated in September 2006 and brought its website (mycompleteevent.com) live a year later. The site, which currently caters to users in Boston, Cape Cod, and Maine, has about 8,000 users, said David Fuhrer, executive director.
“We were unprepared for the growth we experienced. Our projections were actually about half of our actual growth,” said Fuhrer.
The site now attracts about 33 new users each day as people try to cut costs by planning their own events, he said. “People are moving away from using dedicated event planners and doing things themselves because of the cost,” Fuhrer said. About 65 percent of My Complete Event’s revenue comes from wedding planning; corporate event planning makes up about 20 percent of the business, followed by holiday and milestone events, both at around 7 percent of the business, Fuhrer said.
As for revenue, the site is successful because of its vendor exclusivity; only 35 vendors are allowed to advertise per category, so all of the vendors appear on one page. The vendors listed in the top slots of a web page pay extra for that status, and because space is limited, Fuhrer said.
“We provide a higher level of exclusivity for our clients than other sites; our clients know they won’t get lost on page five of our website, so they get more value out of us. Plus, we cost less than the competition,” Fuhrer said.
As for 2009, Fuhrer said the company will “absolutely continue to grow” because it is expanding into Connecticut, New Hampshire and Vermont. “We hope to blanket New England, intelligently and one area at a time,” he said.
— Bridget Botelho
Bridget Botelho is a freelance writer in Warwick, R.I.
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