Quitting a secure corporate job to start a business when you have only $2.11 in checking, three young children, a mortgage and no savings might sound crazy.
That’s what most everyone thought when Michael Swanson left Blue Cross and Blue Shield of Minnesota in 1996 to start a consulting firm, Information Systems Asset Management (ISAM), with no less a goal than changing the enterprise software industry.
Crazy, that is, to everyone except his wife, Colleen, then staying at home with their kids, ages 1, 3 and 5.
“It looked absolutely foolish on paper,” said Swanson, 50, of his entrepreneurial leap. “My wife was the one who first said, ‘I think you should quit your job and do this.’ She knew how much I would love it.”
Fifteen years later, ISAM has a roster of blue-chip corporate and other clients and a reputation as a national leader in software asset management, analysis and cost benchmarking.
ISAM has four employees in addition to Swanson. All are part owners and they operate virtually, with everyone working from home offices.
Swanson’s crazy idea, based on his experience as a financial analyst at Blue Cross and Northwest Airlines, was to create a Blue Book of sorts for the enterprise software industry. His hope was to bring some sanity to the industry’s often-inscrutable pricing practices and give companies more leverage in negotiating terms with software vendors.
Enterprise-level software runs on mainframes and servers, the high-end, back-room hardware that processes everything from bank transactions to insurance claims to airline reservations.
A handful of large vendors — Oracle, IBM, CA Technologies, Symantec, Hewlett-Packard and BMC Software — accounts for three-quarters of the enterprise software Swanson sees on corporate data center hardware.
But unlike consumer software for laptops and desktops, there is typically no retail list price on enterprise software. Instead, companies and vendors typically negotiate prices, which Swanson said can vary widely from deal to deal.
Transparent pricing is the goal
About 5 percent of corporate spending goes to technology, Swanson said. And while companies closely scrutinize spending on hiring and hardware, software spending goes all-but-unexamined, he said.
“That’s my mission, to make it more transparent and better managed,” Swanson said.
Helping to answer that question is ISAM’s Software Intelligence Database, a confidential collection of millions of data points on software, pricing and hardware gathered from more than 1,000 of the country’s largest corporations, municipal, state and federal agencies and universities. All are past or present ISAM clients.
The database, Swanson said, can help companies negotiate more favorable software prices, determine whether they have the right amount of the right kind of software for what they do and benchmark costs against industry norms.
“There’s not a company in the world that has a database that’s remotely close to ours,” Swanson said.
In Swanson’s vision, ISAM’S top priority is maximizing the value of its database, the better to position it for acquisition, which has been his ultimate goal from the start. Revenue at ISAM peaked at $4 million in 2005, Swanson said.
Sales fell as the financial crisis in late 2008 morphed into the Great Recession of 2009. Businesses cut capital spending budgets for hardware and software, among other things, to ride out the storm.
State of California is a client
Swanson declined to specify the company’s 2010 revenue, but he projects that ISAM will meet or beat its 2005 revenue peak this year or next, given increasing business from new and returning customers. To increase ISAM’s exposure and attract new clients, Swanson has been working to develop partnerships with some national consulting firms.
One prominent client willing to speak about ISAM is the state of California’s Department of General Services. The company helped the department save more than $25 million since the company began evaluating transactions with major software vendors in recent years, said Roger Anderson, the department’s section chief for acquisitions and contracts management. Anderson said his office handles about 80 percent of statewide spending on technology contracts.
“The differentiator with ISAM is that they understand the pricing strategy software vendors use to maximize their profits,” Anderson said. “They’re giving me the keys to the kingdom and that helps me capitalize on it and maximize my savings.”
Patricia Cicala, a former vice president at Gartner Group who now has her own New York-based IT company, said she has known Swanson for decades.
Over the years she has referred hardware clients to Swanson as a “specialist in the highest-end technology, the mainframe and the high-end server.”
“He probably has the most extensive database on the buyer’s side that I’ve seen,” said Cicala, CEO of Cicala & Associates. “You can’t compare yourself against other customers unless you have an independent database, which is what he has.”
The experts say: Dileep Rao, president of InterFinance Corp. in Golden Valley, said Swanson has done many smart things in building his business, including keeping overhead low and making his employees partners.
“By making his employees into partners, Michael ensured that his employees thought like owners — and his revenue per employee of $800,000 seems to be proof of that,” Rao said.
Mike Harvath, president and CEO of Revenue Rocket Consulting Group of Bloomington, said the need for software asset management and cost benchmarking will become more crucial as cloud computing grows.
“Data is power, and Michael Swanson is on to something,” Harvath said.
Source:http://www.startribune.com/business/122363114.html?page=1&c=y
