Home | About | Recent Issue | Archives | Events | Jobs | Subscribe | ContactBookmark The Sterling Report


Will the enterprise market spend significant IT budget on Windows Vista in 2007?



CEO Spotlight: Dave Mitchell, webMethods, Inc.

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

Angel Mehta: What stage was webMethods at when you first joined?

Dave Mitchell: I left McAfee, which was the first big company I had ever worked with and where I really learned about the Silicon Valley culture, to join webMethods in Virginia when it was basically a seed stage venture. I was the 10th employee… started in December of 1997, to run sales… so it was a complete blank pallet to start from.

Angel Mehta: What were the early challenges?

Dave Mitchell: What you'd expect, Angel. We messed around with the technology a bit, met with many different prospective customers, and then Hewlett-Packard decided that the technology could be useful in integrating their suppliers real-time into their manufacturing and inventory forecasting systems. That's when we hit upon the idea of B2B integration over the Internet as an alternative to what traditional EDI infrastructures offered at the time - real integration that could be done at much lower cost. The Internet standards, particularly around XML, made the transactions reliable and, quite frankly, it was in the bubble, so customers were incredibly interested in the promise of new technology.

Angel Mehta: Was HP your first big break?

Dave Mitchell: In a way, but I'd say the real turning point for webMethods was when SAP decided they had to have integration capability offered to their R3 customers. In other words, the ability to have suppliers and customers integrate into the R3 application. It was probably in the 1998-99 timeframe and they tried building it themselves, while evaluating our product. After several months of diligence, they chose webMethods and started offering the tool as a free download to customers.

Angel Mehta: That must have been explosive for you…

Dave Mitchell: Explosive is right. It validated our strategy. SAP, as you know, is and was the world's largest ERP provider… they were the standard, so to speak… and it also exposed us to a huge channel of manufacturing customers who wanted the integration capability. All these customers now had an endorsement from SAP… So our sales really started to kick in and ramp up significantly to the point where we started to figure out how to take the company public. We took the company public early in 2001, and it was a pretty successful offering. It got a great deal of attention and fanfare. Right at the height of the bubble, things got a little exuberant in terms of valuations for certain companies.

Angel Mehta: A LITTLE exuberant?! (laughing)

Dave Mitchell: We certainly enjoyed the hype and really continued to execute in terms of building our business even after the public offering event. The benefit of the inflated stock price that every company had at that point is that it gave you currency to expand… we negotiated a merger with Active Software… they were the leader in the Enterprise Application Integration market. We were the leader in B2B integration and our vision was to combine the two capabilities into a seamless platform so that a Global 2000 customer could get end-to-end integration requirements. That turned out to be dead on in terms of strategy.

Angel Mehta: Integrating the two technologies must have been a nightmare, no?

Dave Mitchell: The integration was a lot of hard work, but look, everyone wants to do acquisitions that create a 1 + 1 = 3 scenario… and most acquisition activity leads to NEGATIVE value… but the active / webMethods merger was probably most of the one successful mergers of all time, in high tech. We went from a $20m - $30m run rate to a $30 million to a $200 million run rate literally overnight. I can't even remember hitting $100 or $150 million. I remember hitting $200 million.

Angel Mehta: How did you manage to survive after 9/11? webMethods struck me as a company that seemed to hold its own during that time, whereas other companies seem to shrivel and die...

Dave Mitchell: We held onto that $200m annual revenue run rate primarily because our customers trusted us. We had technology that worked - not just a concept elaborated on PowerPoint. Of course, the world changed dramatically for all of us in the industry at the end of 2001 and 2002; and the economic cycle went into a significant downturn. The weaker business models of companies that tried to grow up during the Internet craze started to prove experts correct in terms of those that doubted it, and, sure enough, many companies started to fail. But the value proposition of our technology was never in question - customers DID need what we had, and we did our best to make them successful.

Angel Mehta: What were some of the things that changed culturally after you took over as CEO?

Dave Mitchell: A key discipline we just did not focus on in the early years was generating something that most investors care about somewhat: profit.

We were all about marketshare and shipping product, early on. But from my perspective, we were shipping a product that essentially has a 99% gross margin. You download it over the Internet. We don't even print out a manual for it. The customers give out millions of dollars for it. How can we not figure out how to make money from it? But early on, it wasn't important to shareholders or to us internally. It did, however, become important to customers - they didn't want to bet a major part of their infrastructure in a company that was losing money and showed no signs of being viable long-term. Nobody wants to install plumbing that you are going to have to remove in 3 years.


President & CEO:
Dave Mitchell

webMethods, Inc.

  • Favorite movie: Patton
  • Least liked movie: Any musical
  • Favorite place on earth: Grand Cayman
  • Favorite game: Rugby
  • Favorite food: Greek
  • Least liked food: Most vegetables
  • Most admired person: There are several
  • Favorite color: Sky Blue

  Home | About | Recent Issue | Archives | Events | Jobs | Subscribe | Contact | Terms of Agreement
© 2006 The Sterling Report. All rights reserved.