A tale of two Year 2000 specialists
The Denver Business Journal, 01/22/99
Tava Technologies Inc. and Accelr8 Technologies Corp. confront Y2K challenge
For most businesses, the Year 2000 Problem means an extra column of costs in the ledger book. But for two Denver-based
companies Y2K has expanded revenue opportunities, opening the door to new clients that will affect business long after the new
year's champagne corks and the confetti are swept away.
Targeting the Y2K sector wasn't in the initial business plans of either Tava Technologies Inc. or Accelr8 Technology Corp. but this
situation has already changed the landscape at both companies and will surely influence the way they do businesses in the 21 st
century.
"For us, Y2K has been a major boost to business," said John Jenkins, Tava's CEO. "In the short term the significant advantage is
to allow us to grow dramatically. And the longer view is we've forged stronger ties with new clients that we'll be able to leverage for
future business partnerships."
Although Tava has been practically reborn as a result of its Y2K work, the company has been in the information technology
business for nearly 25 years. The transition into serving the Y2K compliance needs on the manufacturing floors of its Fortune 500
clients came on the heels of a major acquisition campaign.
"We acquired four companies and when the last deal closed in March of 1997 it gave us a national presence and we immediately
saw the opportunity for a Y2K adjunct business," said Jenkins. "By July of 1997 we started doing our first work on the project and
at that time no one was addressing this part of the market."
Tava has made a name for itself by targeting the control processes of major manufacturing plants with a client list that would make
the father of the assembly line, Henry Ford, beam ... namely: Kraft Foods, Chevron, Cyprus Minerals, Bristol-Meyers Squibb,
General Motors and Johnson & Johnson.
Although the second half of 1997 may seem like a late entry to the Y2K sector, Jenkins said the company had little to no
competition when it came onto the scene. The Y2K issue was discovered by people in financial industries and others in PC
dependent atmospheres who were plugging in dates only to face error messages. Unfortunately, these cubicles were worlds apart
from the shop floor, which was virtually ignored until Tava addressed the market.
"For a while, there we were preaching the gospel and no one was listening," said Jenkins. "We just spent a lot of time and money
pounding the drum but people just weren't getting it. Then all of the sudden it all happened at once last January."
For all intents and purposes, the acquisition campaign made Tava a brand new company and Jenkins attributed Tava's nimble
navigation of the marketplace to this rebirth. Not only did the addition of more than 100 employees provide an army ready to attack
the problem, but the company didn't carry the heavy ballast of history.
"I believe the reason a company of our size could do so well, so quickly in recognizing the problem and getting a product to market
was because we didn't have a lot of intra-organization scar tissue," he said. "Everybody saw this as a major opportunity to
jump-start the fundamentals of the businesses that we had just completed welding together."
But Y2K is not the end of the story for Tava, which plans to leverage its close relationships with its new customers and their
systems as it enters the business software category of Enterprise Resource Planning, or ERP. Tava already is making inroads
toward implementing business software systems that would connect manufacturing process data to its clients' other business
systems such as accounting or purchasing and the rest of the supply chain.
"I think it's a great strategy," said Russell Welty, senior research analyst and a principal at Hanifen, Imhoff Inc., a Denver- based
investment banking firm.
Welty added that today's major ERP systems are more involved in supply chain management without a real link to the production
floor. He expects customers to demand real-time information joining the manufacturing processes to the rest of the business
computing systems.
For the year ended Sept. 30, 1998, Tava reported $48.4 million in revenue, a 31 percent increase for $36.8 million in fiscal 1997.
Although 1998 brought a $310,000 net loss to Tava, orders for the company's PlantY2K One tool already hit record numbers in the
first quarter of fiscal 1999. The company's stock trades in the $8 dollar range, although it reached as high as $14 last April.
"Wall Street isn't paying attention to Y2K right now," said Welty. "But my sense is no one knows what will happen in 12 months.
There is a lot of uncertainty out there and a lot could happen in the next nine months."
Accelr8 tackles problem
Another Denver-based company embroiled in the Y2K uncertainty is Accelr8 Technology. Founded in 1987, the company's initial
mission was to build a software bridge to help companies with massive investments in legacy mainframe computers move into an
open systems environment. Many of these customers had custom software programs filled with vital data that they weren't ready to
sacrifice simply to work in a client/server network. Accelr8 created a tool that could help the mainframe system work with open
systems technology.
"The Y2K work sort of fell into Accelr8's lap and now it represents a majority of their revenue," said Stacy Forbes, a research
analyst at Denver investment firm Janco Partners Inc.
Accelr8's customers didn't want to migrate code that wasn't Y2K compliant so the company listened to their customers and took a
leap into the Y2K sector. Like Tava, Accelr8's Fortune 500 clients with legacy DEC/VAX systems were long ignored by Y2K
systems integrators.
"We never really intended to get into this sector but customers told us they needed our help as early as 1996," said Tom Geimer,
chairman and CEO of Accelr8.
Beginning in April 1996, Geimer's team developed the Navig8 2000 tool and brought it to market by the year's end. While Tava's
works with its clients as partners on Y2K compliance, Accelr8 sells license agreements to companies and outside service
providers who then go forward and handle testing and remediation on their own. Geimer points out that this means his firm won't be
tied to labor constraints when it comes to picking up new business as the 21 st century draws nearer. And while Geimer sees
business holding steady between now and June, he believes the human nature to procrastinate will bring a lot of business his way
later this year.
"We expect the second half of the year to be extremely busy," said Geimer. "And while we have the potential for adding to our
staff, our business model of licensing the tool to service organizations will enable us to handle unprecedented demand."
Accelr8's latest service for its clients is Internet access to its tool set. The company just launched its Navig8 2000 Enterprise
product that will allow clients to transmit code over the World Wide Web for testing and remediation. With services beginning at
just 20 cents per line of code, Geimer expects visits from both companies that are only beginning remediation, along with
companies testing code they believe is already been fixed for the new century.
"We decided to put this on the Web so that people could check out their code without having to ask the boss for $100,000," he
said. "We'll let the customer sell the tool to himself."
Geimer is adamant that the given the degree of denial in the country's private and public sector, the Y2K problem and its business
will stick around far longer than the New Year's Day hangover.
"The biggest issue we have today is denial," said Geimer. "But we fully expect this problem to extend well into the new century,
even as far out as 2005.
But when that day comes that the Y2K well runs dry, Accelr8 is positioned to aid its expanded client base with its core business
of systems migration.
"I believe that the relationships Accelr8 has forged with Y2K clients means these companies will also turn to Accelr8 for
migration," said Janco's Forbes who sees the migration market for DEC systems alone in excess of $7 billion. "It makes sense
because the person who handled your Y2K already knows your code."
As it stands, Accelr8's client list includes some of the world's dominant firms including Ford Motor Co., Citibank, Chase
Manhattan, Dow Chemical, Corning, Digital Equipment and Boeing.
For the year ended July 31 1998, Accelr8 reported $6.3 million in revenue up from $1 million in fiscal 1997. The company is
profitable with net income of $2.8 million. And while the stock is at $7, down from a high of $24 this time last year, Geimer remains
confident.
"I look at the Year 2000 as a catalyst for our core business which is the modernization of legacy systems," said Geimer, who is
quick to point out his firm maintains cash assets of $ 10 million and operates debt-free. "Our mission is still the same as it was in
1987 - to help people get out of their old platforms and access new systems."
Tom Geimer, chairman and CEO of Accelr8, developed the Navig8 2000 tool to help companies with the Year 2000 Problem.
Tava Technologies Inc. CEO: John Jenkins
Major clients: Kraft Foods, Chevron, Cyprus Minerals, Bristol- Meyers, General Motors and Johnson & Johnson
Reported revenue for 1998: $48.4 million (year ended Sept. 30)
"Everybody saw this as a major opportunity t o jump-start the fundamentals of the businesses that we had just completed welding
together."
- John Jenkins
Accelr8 Technologies Corp.
Chairman and CEO: Tom Geimer
Major clients: Ford Motor Co., Citibank, Chase Manhattan, Dow Chemical, Digital Equipment and Boeing
Reported revenue for 1998: $6.3 million (year ended July 31)
"I look at the Year 2000 as a catalyst for our core business which is the modernization of legacy systems."
Tom Geimer ****** Copyright American City Business Journals Jan 22-Jan 28, 1999
(Copyright UMI Company 1999 All rights reserved.)
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