A blast from the past, just for fun ...
RICHARD T. BROCK - FIRSTWAVE TECHNOLOGIES - (FSTW)
CEO Interview - published 11/13/00
RICHARD T. BROCK is President and Chief Executive Officer of Firstwave Technologies, Inc. He was named one of the 10 Most Influential People in CRM by Sales and Marketing Automation magazine. Mr. Brock founded Firstwave Technologies, formerly Brock International, Inc., in 1984 to answer the call of businesses needing a solution to automate their sales, marketing and customer service processes. The founder of Brock Capital partners, a capital investment firm, and a Director of Datastream Systems, Inc., a leading provider of maintenance software, Mr. Brock also served as the Chairman of the Technology Association of Georgia. Prior to starting Firstwave, he founded and served as Chief Executive Officer of Management Control Systems, Inc., now a division of Research Institute of America. A Certified Public Accountant, Mr. Brock received an MBA from Louisiana State University and a BS from Spring Hill College.
Sector: Application Software
TWST: Could you start with a brief overview and profile of Firstwave Technologies?
Mr. Brock: Firstwave is the next wave of customer relationship management (CRM). We define ourselves as “The Relationship Company,” which describes both how we do business with our customers and how our customers use our product. Our 16 years of experience as a pioneer in the CRM market is reflected in both our business model and our product. We have learned from our more than 1,000 customers what it takes to be successful in installing and utilizing CRM applications. First, we must provide them with the best software on the market. However, it takes more than just great software to make a CRM application successful. Firstwave’s approach to its customers is summed up in our business rules. Rule No. 1: If we don’t take care of our customers, someone else will. Rule No. 2 doesn’t exist. Our commitment to our customers is to do whatever it takes to make their implementations successful and to make sure that they win.
TWST: What brought you into the company, and today what are the levels of excitement that keep you in?
Mr. Brock: I founded this company 16 years ago, and I’ve been in the software business for over 25 years. I can truly say that I have never been more excited. I’ve never had a product that is so strong in the market and is so much fun to talk about. I get excited to see how much of a difference it makes in how people do business, and about the way today’s technology allows us to develop new ways to solve old problems. Today all of our customers are excited about our award-winning technology, and more importantly, about the eRM with u.Dialog product that launched October 17, 2000.
TWST: Could you give us a summary of the product portfolio today and of the direction that the portfolio is taking?
Mr. Brock: Our eRM with u.Dialog product is the culmination of an intense, 18-month development effort. This moves Firstwave from the best first-generation, Internet based CRM product, to the only second-generation, Internet-relationship management product. When you speak about relationship management, you are talking about a product that communicates with somebody else — a relationship. We call it eRM, which is Internet Relationship Management; it is a step beyond CRM. Traditional CRM software keeps track of how you relate to your customers. That was good, but it’s not enough. Firstwave eRM extends the concept beyond the sales, marketing and customer support modules, which are the hallmarks of a traditional CRM application, to include your entire extended enterprise — all employees, partners, and prospects. The u.Dialog component goes a step further and transforms CRM from a record-keeping tool into an action-based system that initiates actions and dialogs with customers and prospects to increase effectiveness and efficiency across the organization. Firstwave eRM with u.Dialog is truly the next wave of CRM for several reasons. I would like to outline the significant components of this new product and its architecture. First, chameleon technology. Firstwave eRM with u.Dialog conforms to how you do business today and how you will need to do business tomorrow. It adapts to your evolving business needs. You buy the product once, and you can use it forever. Our roll-forward technology means that all of the changes that you make in our product automatically roll forward to future releases. We have developed this technology not simply for the sake of developing technology, but to apply to business problems that our 16 years of experience has shown us must be addressed. The second component is our zero installation capability. I’m exaggerating slightly; it’s not installed in zero time, but next to none. It takes somewhere between two and five minutes to install eRM on the server. So you round that down to the fact that while someone went to get a cup of coffee, it was completed. To load the product on the server, the customer answers three simple questions, and then it is installed. The only remaining task is to identify how the users will be able to view and otherwise use the system, which is a simple click-the-box function. The company’s IT staff looks like geniuses and are revered as heroes. It is installed in the morning, and it’s ready by lunch. The third important component is one that only an Internet-based application can deliver, and that is instant deployment to users. In this case, it is truly instant. There is no software to be installed on the user machines. Users are automatically up and running as soon as the server is installed. Just tell them the URL, the ID number and their password. It’s truly that easy. The CFO loves the quick return on investment without any huge implementation expenses associated with yesterday’s client server technologies. Perhaps even more importantly, our zero implementation, instant deployment and other technologies give us a real advantage in the ASP market. Because of the zero installation, instant deployment and our ability to support multiple companies on the same server, we are the first ASP-optimized CRM application. ASPs are going to play a big role in the next wave of CRM applications, and we plan on being the leading ASP offering. The fifth component is our ability to stream CRM information to users wherever they are. This is the hallmark of u.Dialog. Our technology goes beyond recording CRM transactions — it initiates relationship management activities in real-time. We provide our customers with the critical information they need to know, before they know they need it. The sixth notable aspect of our technology, especially in today’s Internet world, is converting click streams to dollars. We integrate the customer’s Website into Firstwave eRM with u.Dialog. Today many companies ask about their Website visitors: “They came, they saw, they left — now what?” With our direct marketing and automated customer support capabilities, we answer that question by initiating the appropriate follow-up activities to translate these click streams into dollars. The seventh point I would like to make is that our second-generation Internet technology opens up the whole world of wireless Web appliances to our customers. Because our interface is native HTML, we are compatible with any of the wireless appliances that are coming to market. We are at an important apex where the technology of the wireless appliances is coming together with the bandwidth to support it. So today our customers get access to their CRM information anytime, anywhere, anyway — whether it’s desktop, laptop, wireless PDA or the upcoming WAP phone — which is going to be very important in extending the value of CRM applications. The eighth technology approach that makes Firstwave eRM with u.Dialog totally unique and truly invaluable is the use of XML, Extensible Markup Language. XML erases the line between one application and another and makes integration with a company’s legacy applications a breeze. Finally, our datamart of information turns a company’s sea of data into meaningful information that today’s business executive can truly and easily see.
TWST: Could you give us a profile of who you see as the target client? How is that profile or target universe going to change or evolve over the next two to three years?
Mr. Brock: We are focusing on middle market companies. But we have a very competitive offering to any size company that wants to install applications, and we have several large companies that are using our product. But, as I said, Firstwave’s main focus is on the middle market. The middle market is more competitive than the high end because middle market companies make decisions based upon the best technology. The middle market is also more sensitive toward the relationships built with a vendor. In other words, they value a partnership where you roll up your sleeves and do whatever it takes. You might say that the middle market is more discerning. As well, the middle market is bigger than the high end of the market. From an investor’s perspective, it’s a better market because you don’t bet a quarter on a single, large deal. With regard to small to mid-market companies, one fact to consider is how the Internet is dramatically changing the competitive advantage for smaller companies. In the past, only the larger companies had the ability — the people, human resources and capital — to install truly competitive information systems that gave them competitive advantages. With the Internet and the ASP model, the mid-market companies are now able to implement these same high-end systems and reduce the competitive advantage that the larger companies have enjoyed. It is a rough time for the larger companies because companies in the middle market are assailing them. The market is truly becoming global, and the Internet is making it happen. If you combine the Internet, with its ubiquitous access and easy implementation, with the fact that smaller budgets can get the same horsepower in a technology solution, and add to that the willingness of the application service providers to take the IT burden off of the smaller companies, it is a whole new and bigger market. I believe that the middle market is going to really balloon up. The total CRM market is growing at 40% per year compounded annually. It is huge, and it’s very attractive to everybody who is in there. The Internet is going to eliminate the client server applications. There have been some defining moments recently. Until the wireless Web was a practicality, a client server application that was Web-enabled could compete. With wireless, only totally thin client systems can compete. The tough questions are being asked because people are running these applications on things other than just their laptops. They want their PDA and WAP phone to have access to all of the up-to-date information from their CRM system (contacts, appointments, travel schedule, etc.). So it’s a whole new shift. It’s like the sun is coming up and in the bright light of day, client server is going to be an endangered species and only the true Internet, core-centric applications are going to be the players of the next several years. Firstwave was the first in the Web-based market, and we are the first with the next wave of that market.
TWST: How will this change your marketing and distribution? Are there new channels that you have to approach? Are you using partners to define the clients that you have just described?
Mr. Brock: Just a few days ago I attended a partner conference with Sage Technologies, a UK-based company. Sage controls 33% of the accounting market and 48% of the legal market with its timeslips package. The nearest competitor in the accounting market has 4%, and in the legal market only 6%. “Our initial partnership with Sage is that we are the technology delivering their front office CRM application for lawyers and accountants. It integrates seamlessly with their back-end timeslips billing package, with which they have been so successful. They chose our technology to be the front end to their one million US users. This is an exciting partnership because Firstwave gets a percentage of the revenue that Sage generates from these customers from the initial sales and Firstwave gets a percentage of the ongoing sales. So it’s a long-term partnership with Sage customers. What is even more exciting to us, besides the glow effect of having a leading company select our technology for their core product, is the fact that we may have up to one million of their current users using our product on a daily basis. They will be a tremendous source of referrals for additional business. We will be the interface to how the lawyers and accountants run their businesses. Firstwave expects a tremendous flow of deals for our CRM application as Sage customers consult with their clients who are struggling with CRM applications. They’ll say, “Why don’t you do what I did!” and there couldn’t be a better referral than that. There is also the Sage Dealer Channel that, just in the legal market, consists of 800 dealers. We recently trained 95 of them, and they were ecstatic about our technology. They will all be a good source of referrals of our CRM application as they go about their business working with customers. That explains one angle of partnership. I also want to point out another, and that is the ASP market. One of our current partners was in the office the other day, and he was talking about another application that he was hosting and the headaches that it was causing him because it was not designed for an ASP model. ASP is a pivotal part of the future of CRM and Firstwave.com with u.Dialog is optimized for ASP environment. Years ago, I started with a computer service bureau, and I understood the concept of sharing computer resources, like having multiple companies in one database, the appropriate security settings and the ease of remote customization. What has happened is that the ASP market arose because they could do this, allow people to access applications over the Web. And immediately, overnight, there was an ASP market. If you look at the ASP market, some have had good success, but for some the success has not come as quickly as they had thought. I think the reason is that they were missing a critical piece — the software that was really key for their business model. In a lot of Web applications, you browse all the time, and each time you change screens you have to download the entire view data, which is huge when you consider the size of the graphic files. Firstwave eRM is on the Internet, so if you are going from one contact to another, or one account record to another, why would you download the view, why wouldn’t you just change the contact information? That’s what our architecture does for us. What does that mean for the ASP and user? It means that an ASP can generate revenue off of a dial-up, 28K modem, and the user can run our product very effectively off of a 28K modem. Today some companies are saying, “Oh sure, if you have a T1 connection you can use our package.” Well, that doesn’t work. The ASP market is going to be ours. Firstwave has traditional technology partners, like Sage, that are resellers, the ASP model and the systems integrators. Firstwave expects that more and more systems integrators are going to be coming to us as strategic partnerships because they like the way that we do business and they like our technology. It allows them to make money. It is so easy to implement and install. And they get paid full value for the time that they spend with the customer. This is strikingly different from the client server applications that require so much time to install and are so complex that often the systems integrators don’t get their full, billable rates because the customers run out of time or money or patience or all of the above. So that is how our business strategy is going to evolve in the near future.
TWST: Give us a frank assessment of your top management team as you look at the next two to three years. Do you anticipate any changes or additions, and do you have the bench strength and the right skill sets on board?
Mr. Brock: We have been upgrading our management team over the last 18 months. This excitement is contagious. Our employee morale is so high that they are starting not only to give the extra effort themselves, but bring in their associates. There’s a word called “momentum” and we’ve got the “Mo.” The “Mo” is allowing us to attract even better and more qualified people. That’s going to continue. When you have a hot product, word gets out.
TWST: What do you see as the opportunities for merger and acquisition growth with this company, and what criteria are you using as you access those opportunities?
Mr. Brock: There’s certainly an opportunity for us to participate on several levels. The relationship with Sage is a technology partnership. They have acquired our technology as a core technology. It is, in effect, a merger of interests. We are bound together for an indefinite period of time, which is a wonderful relationship, based upon the quality of our product and commitment. But in effect that is a merger of interest. I think that you are going to see more of these virtual corporations, like with these ASPs. We won’t need to acquire an ASP to have them become our partner where they are exclusively representing our product. We will grow by creating virtual mergers or virtual corporations with our business partners. We would not want to acquire an ASP because that would be one ASP, and it would exclude the other ASPs. So it limits our desire to acquire other companies. As things come up, we will continue to acquire products to integrate with our products and tangentially expand our offering. I say tangentially because we have the core of CRM totally under our belt, but there are some tangential products that we will be addressing in the future, such as e-commerce. E-commerce is an area that we are actively exploring. We have some capabilities there now, but we are exploring relationships with the strong e-commerce vendors to create that seamless link that will allow us to offer our customer a total solution, from end to end.
TWST: What specifically is on the agenda when you look out over the next 12 to 24 months, and what would make that time frame a success for your company?
Mr. Brock: Over the last 18 months, we have worked closely with our customers, as true partners, to develop a killer app for the Internet application of CRM, the true next wave of CRM. Now what has transpired over the last 18 months is that the company has been exclusively focused on research and development. When I came back to the company 18 months ago, I reduced our marketing and PR expenses because we needed to tune our product and work with our customers to really get it right before we started to blow our horn too loudly. To give you some perspective, I would suggest that very few companies spend less than a multiple of their research and development dollars in marketing. For example, most software companies spend $4 to $6 or even $8 to $10 in marketing expenses for each dollar of research and development. If you look at the last 12 months, we have spent $0.48 on marketing for every $1 of development. Now that we have released eRM with u.Dialog, we will put more focus toward sales and marketing. Even my own time has been mostly internally focused, involved with the technology very closely, which is something that I enjoy. Firstwave will now start to dramatically increase its market presence through various marketing channels. So I expect some pretty dramatic growth in our software licenses and in our ASP hostings, as we get our message out to the world. You might say over the last 18 months that we have been sharpening our ax, and over the next 12 months we are going to be cutting wood, and we think that we have the best ax in the market.
TWST: What would be that essential message that convinces our audience to buy in?
Mr. Brock: Firstwave is recognized as the pioneer in this market. We have 16 years of experience in understanding what is needed, both from a technology standpoint and a relationship standpoint. We are committed to delivering the technology and the relationships to make our customers successful. We have a superior technology, which is going to allow us to dramatically gain market share in a highly fragmented market.
TWST: Thank you. (DA)
RICHARD T. BROCK
President & CEO
Firstwave Technologies, Inc.
2859 Paces Ferry Road
Suite 1000
Atlanta, GA 30339
(770) 431-1200
(770) 431-1201 - FAX
www.firstwave.net
e-mail: investor@firstwave.net
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