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| Home - CEO Spotlight - Dec 02 Issue |
CEO Spotlight with Dennis Ryan, CEO, Allegis |
By Angel Mehta, Managing Director, Sterling-Hoffman, Management Consultants
Sterling-Hoffman: Tell me a bit about the history of Allegis. Where and how did the concept originate?
Dennis Ryan: Allegis was announced publicly in December 1998. We began working on the technology about a year before that, and at that time, we simply announced us as a company, the type of business problems we were solving and notified the marketplace that we’d come back a year later.
The core premise of the company was that the most prevalent forms of selling, marketing and service products were when manufacturers performed these activities through indirect channels and distribution. Most commerce that occurs in the world at that time, as far as we could see, occurs by a manufacturer selling their product through indirect forms and distribution via a reseller, broker, agent and distributor. The core premise and belief in the company in 1998 was in building Internet-based applications that connect the manufacturer with their sell-side partners, we can enable companies to more effectively manage those relationships and gain analytical metrics in terms of how that business is performing.
Sterling-Hoffman: Were you a co-founder?
Dennis Ryan: The Company was founded by 3 or 4 software engineers and I joined about 9 months after that. They began working on the technology platform and the initial set of applications and I joined as CEO. We formalized the plan of attack, what the strategy was, and then we went out and proceeded to raise capital and put the whole company together.
Sterling-Hoffman: So it had not been financed yet?
Dennis Ryan: That’s correct. It was self-financed by the original founding team and then I joined to help formalize the plan and go out and procure capital to take the company forward.
Sterling-Hoffman: Was there any personal history between you and the founders? How did you get to know them?
Dennis Ryan: One of the software engineers and I had met at an incubator we both worked at for a few months. Neither one of us decided to stay at that early stage company; we went off and did other things. He ended up teaming up with the other couple of software engineers that started Allegis and when they had a need to get someone with my type of skills they said “I met this guy, Dennis Ryan, at this other company I was thinking about doing. It didn’t pan out so let’s get in touch with him he might be a good fit here”. We were both in the mode of trying to create a company and were in a circle of people in the San Francisco Bay Area that were experimenting with different ideas of what we could create a company around. Our paths crossed and the second or third time it stuck.
Sterling-Hoffman: Tell me about the thought process in the early stages just in terms of trust. If you didn’t have any personal relationships with these guys was there any thought given to ‘can I work with them?’ ‘What types of people are they?’
Dennis Ryan: Issues of character and ability to work together as a team is our core foundation and is why we ended up together. It’s actually the reason why I am in the job that I’m in. I fundamentally believe in the value of teamwork, in terms of people getting together to produce something of value, whether that happens to be in the form of a business or a sports team or a music ensemble. So recognizing that shared principle was something that drew us together because those are values that weren’t necessarily true at the incubator we came from and were some of the reasons that each one of us decided independently to leave.
Sterling-Hoffman: I noticed you did a stint at GO Corporation, of ‘Startup’ fame…how do you feel about the prospects of pen-based computing today?
Dennis Ryan: I was at EO, EO was the hardware and software company that spun out of GO, GO was the operating system provider. EO was an innovator in the Pen computer market. What Microsoft is doing today with the PC tablet is what we were attempting to do 10 years ago. The vision was right, the ability to deliver on the business value with the constraints, costs and otherwise that customer needed all the pieces were not entirely there yet at that point. Ultimately, EO as a business failed and the key reason for that was the technology in the pieces weren’t in place to deliver what needed to be delivered to have the product be successful.
Sterling-Hoffman: This company (Allegis) was sort of born in the bubble, and a lot of venture partners have had to look at their portfolios and ask themselves if certain companies are still good ideas. How about Allegis - is it still a good idea? Would you have joined the same company in today’s market had it been presented to you?
Dennis Ryan: Yes. The principle of Allegis has nothing to do with the bubble that started after Netscape Browser evolved to E*Commerce and Business-to-Consumer Commerce. The business models and the business propositions that were at the foundation of the bubble were very dissimilar to what Allegis does. For better or for worse, we never participated in the bubble. We are a more stayed business application provider in the model of how business application software has been done historically. The best indicator of that, at a macro level, is companies continue to sell products through indirect forms of channels and, in fact, that form of model is increasing in propensity rather than decreasing. We have also been able to grow our business 95% on a compounded annual basis in 2000 through this December time period. There are not many companies that you can say that.
Sterling-Hoffman: I had lunch with an ex-Broadvision exec. The other day and he commented that seemingly every process that could possibly be automated, at least at the enterprise level, has already been done. What do you think?
Dennis Ryan: I think there is a lot of business process automation that has occurred inside a company’s four walls, internal operational processes around human resource management, manufacturing management, financial management. Business processes that have NOT been automated are business processes that span the enterprise, the extended value chain of one company to another company to another company. So our focus is on the extended value chain and the business processes that exist between companies and that level of automation is still in the early stages.
Second, independent of the degree of automation business process, the key value that the company wants from automating that business process is two-fold. Certainly, they want the ability to become more efficient through that automation but they also want the ability to become more quantitative and analytic. What types of metrics and insight can one gain by managing business processes across the enterprise?
Sterling-Hoffman: What about a threat from companies like Siebel who are building extensions to their existing applications? How much have you found that to be a problem?
Dennis Ryan: That would be the third category of related competitors; internal build, best of breed providers like Channel Wave and then larger enterprise players in the CRM and ERP space that expand their solution to address issues of channel management. What’s happening is customers are viewing what Allegis does as an extension to their core ERP systems and CRM solution and are integrating what Allegis does in terms of channel management with their existing stuff. In practically every deployment that we do there’s at least one integration with an ERP system where there’s often integration with a CRM solution.
A point of reference for Allegis within the enterprise is really the ERP solution. What we’re doing in terms of managing channel-based business processes and channel-based metrics such as product sell-through, sell-through price, channel inventory levels are a logical extension of your internal ERP systems more so then they are a logical extension of your CRM solution. The most common reference point for Allegis in the eyes of the customer is back-office ERP solutions and improving their ability to manage their extended enterprise operations then it is as an adjunct to CRM. The best proof point to that is we integrate with an ERP system in practically every deployment at 90%; CRM might be closer to 50%.
Sterling-Hoffman: At least with CRM, there seems to be so much shelfware – partially because companies went out and purchased huge numbers of licenses and then downsized like crazy. Are you finding that that is a barrier to you in selling situations with CIO’s where they say, “We just want to focus on what we have we’re not doing any new projects.” ?
Dennis Ryan: Seventy-five percent of our customers are active today with new phases of deployment compared to their original purchase. Our average initial deal size is somewhere between a ½ and ¾ of a million dollars initial commitment. Most of our companies have since doubled or tripled down that initial investment after the initial deployment for additional products or to expand the deployment to include additional geographies or business units. So the question one has to ask one’s self is “Why has Allegis software not only got deployed but customers come back and purchase additional software and services?” It’s because of the demonstrable ROI in that initial deployment.
One of the key contributors to shelfware is companies can motivate themselves (or did motivate themselves) to purchase a software license but couldn’t find a value relative to the cost of getting it deployed. For us, the equation between software license and deployment is a lot more favourable then some of the companies who have bigger prevalence of shelfware. It’s one of our core values to the customer is they can purchase software and we can get them deployed in a short time period within 90 days and demonstrate ROI within 6 to 12 months and doing that has lead to our customers, on average, doubling down their investment if not tripling or quadrupling down their investment in Allegis within the 24 months post the initial deployment.
Sterling-Hoffman: I read an article in Fortune Magazine about how poorly some of the venture funds are performing. Given the fact that so many portfolios are in trouble right now, are you finding that your Board remains as eager to help out day-to-day with different instructions as they were before? You guys are presumably past the stage of which your viability is the question. How involved does the board get nowadays?
Dennis Ryan: I would definitely say that compared to the early days starting up, the Board is less involved week in and week out operationally then they were 3 or 4 years ago and that’s relative to introductions to potential customers, introductions to people we might want to hire and strategic opportunities. I think the week-in and week-out level of engagement of investors I would say your observation is definitely true that there’s definitely less regular interaction with them on the operational issues of the business then there was when we started out. I think it’s a function of two things. One, we’re a little bit more mature then we were when we started. Second, people are working on a lot of issues in portfolios.
Sterling-Hoffman: Tell me about your earlier experiences. How did IBM and Apple contribute to your management style?
Dennis Ryan: IBM, Apple and Claris the first three companies that I worked at were strong contributors to my belief that teamwork is the core ingredient for success. Each in their own way those were strong elements of how these companies operate internally as well as how they operated with their external constituents. It was a core value, a core principle of those work environments; they were all very team-oriented.
Second, would be the types of people I had to work with whether it was from a peer group point of view or from a manager-superior point of view there were people who contributed ideas to me and helped in a very formative stage in my career. Leadership style and the inclusiveness of enabling groups of people to work together was a couple of key contributors in those early experiences.
I was at those companies during periods of time where they were all very successful. IBM’s PC was coming out; Apple and MacIntosh were coming out. Apple backed Claris, from the day we were formed until we were purchased. I was fortunate to be at those companies during successful stints of those organizations. I think how employees worked with one another and the ethics that they held with people on the outside were two of the key things that were part of the success.
Sterling-Hoffman: In your mind did the people make the market or did the market make the people?
Dennis Ryan: When you say the ‘market’…
Sterling-Hoffman: Success. The way you almost framed that is there’s a difference from some of the other people that I’ve interacted with that would take credit for the success the company created versus they were fortunate to be there when the company was successful.
Dennis Ryan: I happened to be there when those companies were going through successful periods in their history so the learning that you were able to see derived in those environments I think was a positive experience.
Most long-term successful companies are based on the ability of the people. In the broader context of looking at companies that are successful for a very long period of time there are very few companies that make it with a hit product because of the timing being right, the market being right and being able to continue over the decades thereafter. The important thing is having people adapt to the market situation and the depth of business to discover the right opportunities and to grow the company in the right way. It’s all about the people transforming events in terms of accelerating growth driven by hitting the market at the right time. Certainly, a company that is successful for a very short period of time, a few years rather than 10 or 20 years, could be based on hitting the market right. Really those long-term companies that build value in a marketplace through ups and downs are ones that have the right people.
Sterling-Hoffman: Sounds like you are a fan of “Built to Last”….Do the concepts presented in “Built to Last” still hold water? Are they relevant to companies at your stage?
Dennis Ryan: Jim Collins who wrote, “Built to Last” and “Good to Great” yes I am a fan of him; the research that he’s done at looking at what makes companies successful over the long-term. He co-authored another book before Built to Last with Jerry Porras where they talked about core values. I think one of the interesting observations they make is that you can’t create the culture, you cannot create the values of company - it is what it is. The values of a company are based on the people that are there very early on and that’s not something that you can change. You can make it more explicit, you can expose it more effectively and make it more prominent and those are all good things to do but you can’t create the culture, you can’t create the values because it’s inherent to the people that are there.
Sterling-Hoffman: So is an implication of that then, in your mind, is that the larger a company gets the more the values can be diluted?
Dennis Ryan: It can, although I think that’s why it’s important to expose them and make them explicit because what happens is it almost becomes a self-selection process of potential new employees. If you make them explicit then people and what you talk about with potential new employees, what they read about the company….then I do believe there’s a little bit of self-selection that happens. People say, “Do I really identify with those people?” “Do I want to go someplace else?” The exercise of defining your core values as a company and what the culture is, is not important from the point of trying to manufacture what it is but it’s important in terms of trying to expose it and make it explicit so that the people that you deal with, including potential new employees, can help you in deciding whether or not it’s a place they want to join.
Sterling-Hoffman: How high a priority are maintaining and enforcing organizational values today? Don’t you have bigger problems to deal with from a time perspective?
Dennis Ryan: I would say it’s a strong priority and something that we’ve built enough momentum around that it takes care of itself; I’m not the shepherd of that. In the beginning, we didn’t place a lot of focus on defining our values. When the four founders hired me they didn’t say, “Here’s our values do you want to join?” Even when we’re 15-25 people, we didn’t do that. It was probably when we got to around the size of about 40 or 50 people that we said, ‘We’re going to be going through this hiring spree let’s go through this exercise of writing down what it is we believe our core tenets for people who are here’. We ended up defining or discovering what the core values were and so we put effort into that to make that happen. It’s taken care of itself since and now we have quarterly awards based on who exhibits the values most effectively in the company.
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