Assembling A Startup From PartsIra Sager
Michael S. Fields isn't your typical software entrepreneur. He's not programming his way into the business, he's buying it: Fields has raised a stunning $35 million in venture capital to assemble a miniconglomerate of little software companies.
So far, Fields's 18-month-old OpenVision Technologies Inc. in Pleasanton, Calif., of which he is chairman, has acquired nine companies that specialize in helping businesses manage their computers. There's not much glamour in such systems-management software, but these programs can be life-savers for companies that must keep tabs on their computer operations 24 hours a day. Fields, who used to run U.S. sales for data-base software supplier Oracle Corp., figures that as more corporations downsize to personal-computer networks, there will be huge demand for software to manage the new setups and to make sure that customers have the level of reliability they enjoyed with their old mainframes and minicomputers.
BIG-TIME RIVALS. OpenVision's stable includes programs that automatically back up files, schedule work, and distribute software to desktop systems. Gartner Group Inc. analyst Igor Stenmark estimates that, on average, big companies now spend twice as much for this software--$100,000 per system--as a few years ago. He says the market will streak from $500 million in 1994 to $4 billion in 1998.
Those numbers helped persuade venture investment firm E.M. Warburg, Pincus & Co. to underwrite Fields. But the business has also attracted some heavyweight rivals, including the mainframe-software companies Computer Associates and Legent, as well as IBM and Hewlett-Packard.
Fields's strategy comes from the playbook of Computer Associates International (CA). That company grew into a $1.8 billion giant largely through acquisitions. Fields, 47, is buying companies with niche products and giving customers a one-stop shop for getting the programs and service. But where CA has had trouble integrating the products it acquired over the years, Fields says he considers only companies whose underlying technology is compatible with the products he already has. That's not easy: To come up with the nine businesses he has acquired, Fields says he started with a list of 120.
A big advantage to buying instead of building is a steep trajectory. Gartner's Stenmark expects sales to hit $35 million this year. OpenVision already has 250 employees and 26 products. Customers include Wells Fargo Bank and First Boston Corp.
The next phase of the plan is to go international. "We need to do marketing and selling to global accounts," he says. On Jan. 10, Fields hired his old pal Geoffrey W. Squire, 46, to become president and CEO of OpenVision International. Squire says his mandate is to "see if we can do an Oracle again." When Squire left Oracle last month, he had built the company's European business into an $800 million operation, up from $26 million in 1987. If Squire can help Fields mirror that growth, OpenVision could move quickly beyond the miniconglomerate leagues.