Indicative’s growth reflects well on future

Armed with a $40 million technology when it was founded in 2003, then backed by a $6 million venture capital investment in 2004, Indicative Software Inc. was set up for a banner year in 2005.

It didn’t disappoint.

The Fort Collins-based enterprise management software company ballooned to 30 employees – double the staff it had in mid-2004. CEO Lacy Edwards said Indicative will have 60 employees by mid-year.

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“We’ll just continue to grow from there,” he said.

The company seems to be operating proof that small technology companies can step up to fill the employment void in a sector that’s struggled mightily in Northern Colorado.

Indicative had a good base to start from. The core technology – which monitors a client’s system performance, tracking issues such as online transactions – was developed at Agilent Technologies and then licensed to Indicative. Many of the company’s founding executives migrated from Agilent, where they worked on the technology or in related areas.

Indicative’s growing staff is indicative of its successes in gaining new customers and distribution partners.

At the start of 2005, Indicative had what Edwards referred to as only two effective distribution partners. The company now has more than a dozen worldwide with big plans to grow that number.

“Our goal in Europe is to have 22 distribution partners by third quarter,” he said.

Increased distribution partners leads to increased visibility, which in turn results in more customers.

Indicative targets medium to large businesses, selling them enterprise licenses to the company’s software product. In March, Indicative won a contract with Atlanta-based Worldspan LP. Worldspan offers travel technology services to travel suppliers, travel agencies, e-commerce sites and corporations.

An Indicative press release indicated that Worldspan is the world’s largest transaction processor for online travel agencies, processing almost two out of every three flights purchased through Web sites.

Indicative’s software runs hundreds of performance tests on Worldspan’s system to ensure that it is running optimally. As corporations add online services, and as they increasingly use a variety of software, Indicative’s technology becomes more critical.

Challenges and successes

But Indicative’s business isn’t without its challenges. Indicative is a very small company competing with industry giants, according to founding president and CEO Tilman Schad. Schad, a former Hewlett-Packard Co. executive, currently consults for a number of local and worldwide companies.

He said there are two market extremes for new technologies. The first is the disruptive technology that completely replaces an old technology. Disk drives are a good example of disruptive technology: How many people are still using any size of floppy?

On the other side of the spectrum is the existing market. There technologies must compete to replace similar products that potential customers might already have.

If the technology doesn’t solve an urgent issue, customers often wait for their current supplier to follow the lead of the smaller company.

“For a small company in a huge market, finding the right niche is very important,” Schad said.

Indicative doesn’t limit itself to any particular industry, but the company is finding successes in certain fields.

“We’re doing really well in health care right now,” Edwards said.

In truth, the company is doing well in many fields right now. Edward said the company, which ended its fiscal year on Jan. 31, experienced third quarter sales last year that outnumbered the entire annual sales of the previous fiscal year.

With growth like that, Indicative might soon capture the attention of its larger rivals. Edwards said the concern of an exit strategy – most likely as an acquisition target – doesn’t affect how the company is run.

“You build companies to last forever,” he said.

He concedes, however, that software companies are often targeted by their larger competitors.

“Statistically, I know the chances are greater that someone will come in and offer more than its worth,” he said. He added that if the company feels the growth potential is high enough, it will likely turn down such offers.

“My philosophy is that you don’t build companies to sell,” he said.