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



CEO Spotlight: Phillip Merrick, webMethods
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Angel Mehta: How has webMethods evolved since it’s founding? Tell me about the different plateaus you’ve had to transcend, and what impact does each transitional period have on the organization? Has webMethods ever had to remake itself?

Phillip Merrick: When we founded the company we called the company, “webMethods” because we believed in technology that today we now call, “Web Services.” webMethods actually means Web Services, believe it or not. In fact, Microsoft uses the term ‘WebMethods’ to refer to Web Services in .NET. At that time, the things that we found interesting was very much focused with things like XML on documents to the extent it was being used or being accepted for integration with more for documents and document exchange. So we ultimately had to refocus more on integration as defined by the market at that time and so that took us down the path of document-based business-to-business integration and took us down the path of more traditional EAI - enterprise application integration.

We moved even further down that path with our 2000 acquisition of Active Software. It was at that point that we underwent a further transition from being very much focused on the B2B side of the market to being focused on the entire enterprise infrastructure. Now, you can argue that we’re in another transition, positioning ourselves quite literally as the industry’s first Web services infrastructure company. We call ourselves ‘the industry’s first’ because we were first to market these ideas back in ’96-’97. We developed the precursor to SOAP and WSDL back in the ’97-’98 timeframe.

We’re now actually coming back to that and we’re the first Web services infrastructure company because we’re the first to PROVIDE capabilities -- in the area of integration, portal, business activity monitoring, business process management -- all of these important infrastructure areas all on a solid Web services -oriented architecture base. So, again, you can argue we’re going through a state of transition right now. I view these things as being exceptionally healthy. The company has been, and I think you have alluded to this in your lead-in to the question. The companies that aren’t able to go through this process of either continual or periodic reinvention are not staying relevant to the market and they’re the ones that sort of grow up with the market niche and then die with the market niche. We’re fortunate in that the primary market we operate in is such a large part of the market because integration is such a big problem for IT across all kinds of organizations. But, nevertheless if we weren’t evolving with the market and, in quite a number of the cases leading the market, we become less and less relevant to customers and we can suffer the same fate. One of the things that I like to remind my management team is that software companies rarely die, they just fade into deep dark irrelevance and what we need to do is to stay vibrant and continue growing and continue thriving.

Angel Mehta: I’m always fascinated by founders that are still in leadership positions with their companies well after the enterprise has moved out of the startup state. So let’s talk about your personal transitions; how has your job as founder evolved? How have you had to remake yourself as a leader?

Phillip Merrick: Yeah, that’s a great question. Certainly, what I do on a daily basis is very different from what I was doing 8 years ago when my wife and I were founding the company. Certainly, in the earlier days I was able to be much more hands-on with things like the technology and product development and so forth. My background is engineering. I built products. I actually built our first prototype product when we were getting the company off the ground, which you just can’t do as CEO of a public software company. It would actually be a very bad thing if you did do that. I remember the day probably about 4 years ago now where our engineering team came to me and said that they’ve removed the last line of code that I had in any of the products. That was a sad day, but a highly appropriate day because you do have to evolve and change whether you come at things from the sale side or you’ve been a manager for some time or you’re coming at things from the engineering side. You’ve got to understand what the requirements are for you.

Angel Mehta: At what stage did you have the most fun?

Phillip Merrick: There were aspects to the job of founding the company that were not fun at all. As you put on the rose colored glasses of hindsight you think, “Gee you know it was a whole lot of fun back then” … but you forget that you spent a good part of a whole year doing nothing but trying to raise funds for the company.

Certainly, at that time there was a nice atmosphere of having just a few people in a small highly focused team; that was enjoyable. Today, the things that I dislike are having to sit through an intense meeting on what Sarbanes-Oxley means for corporate governance, for example. That stuff is necessary, but I don’t know many people who get excited about that. Maybe it’s not politically correct to talk about that in public circles, but it’s just not something that is fun if you’re an engineering-oriented CEO. I’d rather talk about our customers and how to help them. I get excited about our technology. That’s just the way I am.

So what are the things I enjoy? What is really fun is seeing major Fortune 20 organizations betting a large chunk of their business on our integration platform products. That’s enormous… just hugely satisfying to me and the people at this company. Being able to help those customers with their business based on the technology we’re delivering. We know there are lots of our customers who have been able to dramatically improve their businesses as a result of deploying our software -- that’s a high point. You only get a little glimpse of that when you’re a small start-up. It’s not until you’re a much larger company that the truly large customers, the General Electrics and Motorola and so on, are willing to bet a chunk of their business on your software.

So when you actually get to see a company through to the point where you’re helping large customers, it is enormously invigorating and makes up for all those boring or frustrating processes involved when you are managing a publicly traded company.

I also get a tremendous amount of satisfaction being able to provide some really interesting career growth for a whole bunch of people… people who in some cases have been with us for quite a long time… 6 or 7 years… to some degree, they’ve grown up with the company and seeing that up close is hugely satisfying also.

Angel Mehta: What is the most difficult decision you’ve had to make as CEO of webMethods? What was the hardest decision?

Phillip Merrick: The hardest decision is when you realize that you are going to have to let people go. I don’t think there’s a single company in software industry that has been able to avoid that over the last 3-4 years.

Angel Mehta: Have there ever been times when you’ve wanted to quit? I always wonder about people that manage to stay the course, sometimes through sheer stupidity perhaps, and come out better for it on the other side.

Phillip Merrick: I don’t know, although I really like the expression you use… ‘sticking with it through sheer stupidity’. I think that anyone who claims that they’ve never thought about doing something different is probably being less than generous with the truth. It’s a matter of understanding what value you can drive in society. I don’t want to talk in overly grandiose tones, but if you think your business has value and you think you can continue to bring value to the business, then the right thing is to just stick with it. Even in a very well run company with great opportunities there are certainly days that are better than others. Sticking to it is the important thing, and some people do give up too prematurely. Here’s a parallel for you. I firmly believed that what we were doing with webMethods back in ’96-’97 was going to lead to something very big. Maybe I wasn’t doing the best job of articulating that belief, because we got turned down all over the place for financing… but I was determined we were going to get the financing to drive the company forward. I just kept banging on venture capitalist doors until eventually we did land it. Ultimately the kind of funding that had previously been unavailable became available to us.

Here’s something else: One of the things I’ve noticed is, not quite as many founder CEO’s are out there as they used to be.

Angel Mehta: Not at all, you’re right… aside from the well known guys like Larry Ellison, Gates, etc.

Phillip Merrick: I think that quite a few people when the downturn hit in late 2000 early 2001 said to themselves, ‘Well, I’ve been lucky to make enough money here so I don’t have to do this anymore’… and they’d just bail out. You know what? People who did that missed out on an opportunity to really learn something about management because let’s face it; managing an enterprise in the high-tech world between 1996 and 2000 was a whole lot easier than it is now. There were a whole bunch of management lessons that were made available when the downturn hit, and the people that bailed missed out on learning.

Phillip Merrick is a 21-year software industry veteran and the architect of webMethods’ original product offering, which pioneered the concepts of Web services. Since founding the company in 1996, Phillip has provided both thought leadership and product leadership-defining and delivering business solutions for Global 2000 companies. -. Phillip has established webMethods as the leading vendor of enterprise integration and is charting new ground with Web services infrastructure software, earning widespread recognition among analysts, media and investors. Feedback on the interview can be sent to: phillip.merrick@webmethods.com

Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net


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