July 14, 2003
Finally on the right track
IQNavigator reinvented itself in order to survive
By Jennifer Beauprez
After four years of trials on the bumpy road to success, John Raeder has hit his stride.
The chief executive officer of IQNavigator said his Denver software firm - after changing business plans twice to stay alive - plans to acquire as many as four competitors, expand overseas, hire more people, double in size and reach profitability at the end of the year.
John Raeder, chief executive of IQNavigator, sits next to framed logos of some of IQNavigator’s customers. The firm makes software that helps companies coordinate the hiring of contract workers and consultants.
That's a mouthful for most tech companies in Colorado these days. Customers are slow to spend their money on software in the bleak economy, and the local tech industry has been characterized more by slowdown than growth.
"We're just hitting high velocity now," said Raeder, who started out as an investor but ended up running the company.
Still, survival isn't set in stone. The business- software industry is shrinking quickly as competitors, including PeopleSoft Inc., mull buying others or being acquired.
That places smaller companies with fewer than 100 customers in an uncertain spot, said Jennifer Chew, an analyst at Forrester Research.
"Most people put companies like IQNavigator in the eat-or-be-eaten category," Chew said.
Raeder prefers to eat.
Much of his time today is spent scouting the competition and hunting for deals. Raeder declined to disclose annual sales of IQNavigator, which has 20 customers and 70 workers. But he said the company could grow to five times its size if he succeeds in closing two or three buyout deals by mid-2004.
Raeder said he's kept a tight lid on the $45 million he raised from investors, in order to ensure the firm survived.
"We didn't create any situations where we had to maneuver out of a death spiral," Raeder said.
That's not to say it was easy.
IQNavigator began as a traditional temporary-staffing firm. But in the late 1990s, it changed to become an online marketplace like Monster.com where companies could find temporary workers and consultants.
By 2000, Raeder realized the strategy wasn't going to work. "I learned it would take $50 million to brand a marketplace like Monster," he said.
IQNavigator kept its $50 million and once again changed strategies. This time it became a software developer.
The company's software allows corporate executives to hire consultants - whether it's auditors, law firms, marketing firms or computer help - and keep better track of of the work through collaborative online documentation of hiring, contracts and invoices.
Previously, executives did those tasks via telephone and fax.
"Before, a lot of people didn't know what they had and what they were paying to whom," said Kim Chapman, a finance manager at Shell Oil Products, which started using IQNavigator's software in December.
Raeder may have picked the right track. The company's biggest pitch to customers like Shell is a promise to save them money.
And that's the pitch corporate executives want to hear before they hand any money out, said Forrester Research's Chew.
Chew said companies spent too much on business software without proven returns during the 1990s.
"There is skepticism about the benefits of software," she said. "A bad economy on top of it, and it makes managers very conservative."
Raeder doesn't mind the conservative mindset, primarily because IQNavigator is delivering on its promises, he says. Shell Oil, in particular, is on track to save more than $10 million a year in spending - about $2 million more than the company expected.
Despite IQNavigator's small size, the company has managed to latch onto 16 Fortune 500 clients in the past 12 months, Raeder said. Last week, defense giant Northrop Grumman bought the software, and Raeder said he has another two dozen companies prepared to buy soon.
Later this summer, the company will try to appeal to more multinational companies by introducing a French version of its software and by selling in Europe through its partner and investor Exult, a human resources consulting firm.
And eventually, the company will branch out beyond software for managing consultants with programs that manage services such as caterers, printers and travel accounts.
IQNavigator also is hiring: netting six new employees in the past three weeks with plans to hire about 15 more by year's end.
IQNavigator's current expansion marks a sharp turn from earlier in its history, when Raeder believed staying alive was more important than growth.
"I never thought it would be this difficult to execute against a business plan. I've been banging my head," said Raeder. "We paid a lot of attention to hiring smart people - type A personalities that will not fail. That's very important to our success."
