CASE STUDY: Gain and Abel – Tackling the world’s software giants

Strategy life cycles are shrinking,” writes management guru Gary Hamel in his latest book, The End of Management. “… the more rapidly business grows, the sooner it fulfils the promises of its original business model, peaks, and enters its dotage,” he adds.
Hamel’s view may become accepted wisdom but there is software company on Auckland’s North Shore with different approach that takes the somewhat longer view of its founding architect who is, he says, in no hurry to cash up.
Allan Baird, the 60-year-old brain behind Albany-based Abel Software, has much more traditional business model in mind. And given that he operates at the sharp end of today’s fast-moving technology world, his strategy sounds, on first hearing, surprisingly contradictory.
“Our approach is different to most companies,” he says without hint of apology. He thinks most companies, particularly high-tech enterprises, want to be first to market, grow fast at whatever cost, and sell up.
Not for Baird. He’s been hard graft software developer since the late 1960s, working for what he affectionately calls the “dirty companies” of mining and manufacturing in Australia and then, from 1987, with Gill Simpson’s Cardinal Network in Christchurch.
In 1995 he was enlisted to sort out the dreadful operational IT bind The Warehouse Group got itself into and that allowed him to move to Auckland. After 18 months he’d effectively delivered The Warehouse solution which, he says with characteristically dead-pan delivery, “must be reasonably okay because it’s still running the business today.”
The Warehouse sorted, Baird and his partner Jane Mattsen, now director and the company’s business manager, plus few comrades from Cardinal, who still form the nucleus of Abel’s software development team, fired up the business.
Mattsen originally set up her own office services company, The Tasman Copy Centre, to generate the cash Baird and his small band needed to fund the money-draining development of an outstanding ERP software package which they planned to sell to medium-sized manufacturers and distributors. “We wanted to build system that sat somewhere between the small business end of the market dominated by packages like MYOB, and the expensive big-boy solutions offered by Oracle and SAP,” says Baird.
“It was pretty wide marketplace but we wanted to give smaller companies, particularly manufacturers, all the functionality of big systems at prices they could afford.” Using Christchurch-based Jade Software’s database software to underpin the package, Baird’s team came up with Abel and decided to sell it on per user licensing basis. “That way we create partnership with the client,” adds Baird. “If the business grows, we win additional income. If it shrinks, the user wins by cutting costs.”
The company focuses on two vertical sectors – manufacturing and distribution. The flagship software product integrates financial, manufacturing, supply chain distribution, customer and supplier management systems for small to medium – and now even global-scale operations.
But why, considering New Zealand’s small and high-dollar-ravaged manufacturing sector, focus on smart as hell software solution when all the clever money seems to be headed for other online gee-wizardry. “Because that’s where we came from. We come from background of working for dirty companies,” says Baird cracking smile. “We don’t work for banks, finance houses, insurance companies and the like.” Fortuitous perhaps, considering what lies ahead for them over the next two or three years.
“What we know inside out is manufacturing, maintenance and all those sorts of things. That’s what we concentrate on. And the secret to our success lies in delivery of enormous functionality that is simple and ultra-user friendly because, more often than not, it is used by non-IT people – those working at the coalface of business,” he adds.
And Baird and his team are successful. Their small but perfectly organised offices belie what is becoming large and ambitious global software enterprise.
New Zealand Towel Supply (NZTS) contacted Abel in 2002 and asked for conducted tour around Abel’s applications. They liked what they saw and asked their Australian owners if they could buy licence. And that was when, like the 17th century Dutch navigator from whom the company drew its name, the world, so to speak, discovered Abel.
NZTS’ Australian owners, who in turn are owned by 100-year-old Salt Lake City-based family business called Alsco – originally American Linen Supply Company – got in on the act. Alsco so liked the product that Baird and his team spent the next 24 months teaching first the Australians and then American Alsco employees how to write in and deploy Abel throughout their network of branches. Today Abel runs in 90 of Alsco’s 180 branches around the world – in countries like Germany, Canada, Singapore and, of course, the US, Australia and New Zealand.
Abel’s product development strategy is based on constant review, enhancement and response to customer suggestions. “Our product is the result of hard grind,” says Baird. “We don’t have ‘new’ product to offer the world. Ours is the result of years of work and dedicated application to satisfying particular needs. We are targeting market in which, we think, the competition is falling away so our strategy has to be different. Unlike some new online applications, there won’t be thousands of users coming to us,” says Baird. “We have to compete out there in the marketplace and take it to them.”
So much for the product, what about the business strategy? At the start of last year the company appointed an experienced senior manager and director from Wellington, Peter Garnett, as chief executive. Garnett’s job is to grow the business that is based on Baird’s sometimes obsessional dedication to enhancing his software baby.
“I just want to build the product,” says Baird. “I don’t want to sell. The next generation will grow the business. Peter’s brief is to develop and implement sound growth strategy that is built on very stable and enormously functional product that I will feel proud about having created.
“The generation after that [Baird has one son in the business and another involved in IT] will be cash rich. They can begin the diversification of the product if that seems appropriate.”
Garnett is setting up to market Abel more aggressively in Australia and take it to more countries. He is about to open support offices in Sydney and all three directors, Baird, Mattsen and Garnett, are itching to get into the US market.
The promise of rich pickings from concerted expansion into Australia and the US ignites Baird’s enthusiasm. “America,” he says metaphorically rubbing his hands together, “is an ideal market for us. All those companies with head offices with say 30 or 40 or 50 branches.”
The task ahead is, of course, enormous. There are distributor and sales networks to establish and branding strategy to both conceive and then deliver.
“My job is to build the growth model,” says Garnett. The company is currently growing at around 20 percent year. “We need to maintain that internationally and that is big ask. Brand recognition is the next big step for us. Abel needs to be recognised as seriously good ERP system.”
On the branding front, Abel has some seriously tough competition – MYOB, Oracle, SAP and the likes have big marketing budgets and an ominously significant head start.
Not that Baird is daunted by that. “It has taken us 12 years to prove ourselves in New Zealand. We may not have finished but we think we have pretty good product now. We have different philosophy from most software developers who are driven by strategies such as speed to market. I don’t think many software companies know what makes them successful. What will make us successful is an outstanding product.”
Garnett knows that telling the story of Abel’s success is critical to its future but, on the face of it, this company’s David versus Go

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