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Replicon’s husband and wife founders, Raj Narayanaswamy and Lakshmi Raj (KEN CHAN)
Replicon’s husband and wife founders, Raj Narayanaswamy and Lakshmi Raj (KEN CHAN)

CASE STUDY

Software firm's defence against downturns is in the cloud Add to ...

THE CHALLENGE

In 1996, husband and wife team Raj Narayanaswamy and Lakshmi Raj co-founded Replicon Inc. , a Calgary-based provider of cloud-based time-tracking and resource-management software.

What started as a content-management company went through several iterations before settling on its current model. The couple then enjoyed a decade of growth selling software that benefited from the sales of licences and annual maintenance fees.

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Until, that is, the financial crash hit in 2008. Then, customers cut back on purchasing new licences, opting to stick with their current versions of the software.

Replicon’s challenge became how to get the company back on its growth trajectory by developing a revenue stream that was less susceptible to economic downturns.

THE BACKGROUND

In 1996, Mr. Narayanaswamy and Ms. Raj were young, recently married, with no children and working full-time for software companies when “both of us felt something was missing,” Mr. Narayanaswamy says.

“As engineers, our gut told us that making software could be different, and we were itching to develop innovative ways to build and deliver software.”

The couple quit their jobs to create Replicon and tried a couple of ideas, including an online content-management solution that never progressed beyond the initial development stages, and a Web-based customer relationship management (CRM) product that failed because the company lacked the capital needed to build a complete and robust product.

By the time they decided to give up on their CRM initiative, they had close to $80,000 in credit-card debt. To pay it off, they started to do IT consulting work in the oil and gas sector.

Ironically, it was while doing this consulting work and having to bill for their time that they came up with their third product idea, leading to their current business.

They realized that most consultants were required to track their time on projects on paper or through Microsoft’s Excel spreadsheet program. “What we discovered was that companies had to pay contract employees and consultants within 30 days of completing the work, but compiling all the paper or Excel-based submissions was so time-consuming, it often took 45 days or more before companies could send an invoice to the end client for payment,” Mr. Narayanaswamy recalls.

That led Replicon in 1998 to launch time-tracking software that could be downloaded from its website and installed on a company’s intranet. “To promote what we had, we posted links to our software on a number of websites and, within three weeks, we had our first customer,” which purchased 150 licences.

Replicon was back in business. By the end of the 1998, the company was generating $35,000 in revenue a month and the debt was paid off. A year later, it was a 20-employee company when it made its first large scale enterprise sale to Kraft Foods Group Inc., which purchased licenses for more than 20,000 users.

Selling to large companies brought Replicon financial security but the big enterprises needed Replicon’s help to implement and customize the software. This meant fewer resources were available to continue the development of Replicon’s product.

Wanting to be more of a product company than a services company, in 2001, Replicon decided to give up the financial security that came from selling to large companies and refocus its sales and marketing efforts on small-to medium- sized businesses in professional services.

That paid off well; by 2008, Replicon was a profitable software company, generating $17-million in annual revenue.

But that year, the financial crisis hit. In 2009, Replicon’s revenue dropped 5 per cent. Fearing that trajectory would continue, Replicon’s co-founders began to reflect again on the financial security that large enterprises brought, but also recalled the memories of how selling to big companies consumed resources and slowed product development.

The challenge became how to find a way to sell to large companies while still serving the SMB market without the expense of an implementation and customization team.

That’s when Replicon decided it needed a different way to develop and deploy its software.

THE SOLUTION

In 2009, software as a service (SaaS) was becoming an accepted software delivery mechanism. Mr. Narayanaswamy researched how to convert Replicon’s on-premise software to a cloud-based product.

He liked the flexibility and scalability of the SaaS technology, recognizing that it could help Replicon deliver software to both large enterprises and SMBs without having to spend a lot of resources on implementation and customization for larger companies

Replicon decided to make a multimillion-dollar bet on making the switch. It stopped selling its on-premise software to new customers, and applied all of its development resources on a new SaaS-based solution.

Mr. Narayanaswamy and Ms. Raj knew that in order to speed the transition to SaaS, they needed to spend time in the heart of Silicon Valley, where such resources were more readily available and they could stay on top of the pulse of the SaaS movement.

In the summer of 2010, the couple headed to Silicon Valley. They intended to go for the summer but “quickly realized that we needed to spend more time in Silicon Valley,” Mr. Narayanaswamy says.

So, in the fall, they opened a U.S. office, hired a lead engineer and sales executive wiith deep SaaS expertise, and then started to deliver a cloud-based time-tracking and resource management solution that could handle millions of users and satisfy both markets’ needs.

By the spring of 2011, the cloud-based solution was up and running, and could handle the time-tracking needs of companies of all sizes, from small businesses to Fortune 500 companies.

THE RESULT

The turnaround was quick: By the end of 2011, Replicon had pushed its revenues above 2008 levels, to more than $18-million; in 2012, revenue bookings jumped by more than 47 per cent to $27-million.

Replicon has grown to more than 320 employees, with locations in Calgary, Toronto, San Francisco and Bangalore, and with plans to open offices in Sydney and London by this spring.

The company has nearly 8,000 customers and its cloud-based time-tracking and resource-management software serves more than 1.5 million users in more than 70 countries.

“I’m proud to say that customers value our SaaS-based time-tracking solutions because we’ve developed easy-to-use products that are accessible anytime, anywhere and can scale to fit organizations of any size without the need for expensive consulting services,” Mr. Narayanaswamy says.

Special to The Globe and Mail

Craig Elias is the founder of Shift Selling Inc. and an entrepreneurship instructor at the Haskayne School of Business at the University of Calgary.

This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Small Business website.

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