RockySoft feels hard knocks of tech slump

FORT COLLINS — Three years ago, RockySoft Corp. incorporated with a product, private funding and acceptance into the Fort Collins Virtual Business Incubator.

The future seemed bright.

The company stepped into the corporate world with two big-name clients already hooked on its supply-chain inventory-management software. More than a dozen divisions of Hewlett-Packard Co. and Agilent Technologies were already using the technology on a client/server platform, as it was originally developed in-house for H-P.

The future of the company was based on turning the software into a Web-hosted solution, thereby expanding the clientele and the services provided.

Things were going well.

RockySoft banked contracts with other big names like Flextronics, Rockwell Automation and Honeywell.

Then the tech market tanked.

RockySoft’s revenues flat-lined. Growth did not meet the requirements outlined in the company’s business plan. Expenses outpaced income.

So founders Larry Watson and Bob Vinton took a hard look at the books and made a tough decision.

“Fundamentally, I laid myself off,” Vinton said. As the CEO of the company in charge of business development and marketing, Vinton said he and Watson examined all the alternatives, and decided they had to slash overhead.

“Having written the software, Larry was a key technical person, essential for day-to-day operations,” Vinton said.

So Vinton and two other employees were laid off, effectively slicing staff levels by a third.

“Percentage-wise, for a company our size, it’s a pretty big hit,” Watson said.

“Like a lot of other companies in the area, we’re finding that times are tough right now,” he said. “At the top levels, some people were drawing in some pretty big bucks, so we had to get rid of them.

“Now our expenses equal our outflows and that’s what it takes to survive through this kind of stuff,” he said.

RockySoft is making other changes in reaction to the market. “We’re having to chase smaller companies now and that means you have to get more of them,” he said. “We’re expanding our market to include distributors as well as manufacturers.”

And the company is pursuing partnerships that will position RockySoft to handle any upturns in the market without incurring the costs of additional employees in an uncertain market. “We’re planning to keep the employee base where it is, at least for the next year,” Watson said.

RockySoft also recently became a partner with Microsoft Great Plains Business Solutions, allowing its software to be integrated with the software giant’s solutions for small and midsize businesses.

Vinton will remain on the company’s board of directors, and both men agree that if things pick up, the door would be open for his return. But industry pundits, who once identified the second half of 2002 as the rallying point for the tech market, have now pushed those estimates back to mid-2003 at the earliest. A survey conducted by CIO Magazine in September showed that only 11 percent of executives surveyed plan to increase IT spending in 2003.

“They’re doing all the right things,´ said Kathy Kregel, executive director for the Fort Collins Virtual Business Incubator. “I do think RockySoft has been hurt by timing,” she said. “Just as they were building momentum their customers suffered this huge downturn.”

But Kregel said RockySoft is by no means alone in its need to make cutbacks in the current economic environment.

“This downturn is affecting everybody across the board,” Kregel said.

The uncertainty has affected how the Virtual Business Incubator guides clients as well.

“In terms of companies coming into the incubator, I’m absolutely making sure they have a Plan B,” Kregel said.

“They have to have the ability to grow revenue without substantial infusion from the (venture capital) world — it’s just so hard to get right now.”

While marketing is always important to maintain a company’s visibility, Kregel said in today’s climate “inexpensive and effective” should be the goal.

“Smart companies have been tracking what works best in their marketing efforts,” she said, “During the lean times they should focus on what works rather than just throwing it out there.”

Of course companies need to select and monitor their contractors closely or risk losing control and quality, Kregel said.

“It certainly was a lot more fun when companies were pulling in a million here, a million there,” Kregel said. “But all successful companies have had dark times when things were really on the line. I hope the small companies that are teetering right now keep that in mind and have the heart and tenacity to hang in there.”

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