John Streets
John Streets of Focus Solutions reflects on recent history. Focus Solutions, his IT company, floated at the same time as lastminute.com and has had similar stock market treatment despite solid sales.
Just how do you manage a fast growing business in today's cut-throat economic environment? As chief executive of Leamington-based Focus Solutions, recently acclaimed the Midlands' fastest growing technology company, John Streets should know the answer. Jim Pendrill caught up with him.
Outside it's a particularly dreary and uninspiring winter's Monday morning, but walking into John Streets' office one can tell by its frenetic pace and life that his week is already in full swing.
As he prises himself away from his monitor and turns his chair to shake my hand at an adjacent circular meeting table, it is clear that his inbox is already filling up all too quickly again after the weekend lull.
An hour later, having had the full run-down on the past, present and future of Focus Solutions, the software development specialist he founded back in 1995, I ask him what it's like heading a fast-growing business in today's world.
"It's like a whirlwind. I can honestly say I couldn't tell you what problems as a company we will face from April onwards. But that's all par for the course in running a business in a sector such as ours."
Sorting out others' problems is actually what Streets and Focus are all about. Streets spent some 20 years in the IT sales business, including spells with Honeywell Information Systems, Wang Computers and Fame Computers, before branching out on his own and founding Focus while he was contracting for AT&T and helping it to extend its insurance solution offer.
Focus came into life on the back of a five-year sales and marketing agreement with AT&T, and grew through the development of software to make mortgage, insurance and pension sales operations more efficient for leading insurance companies.
Focus's journey has been a well- travelled one for a 21st century technology company. As a business incubated in the surrounds of Warwick Science Park, Streets was able to access the crucial corporate finance advice and networks he needed to get the venture capital backing to drive the business forward.
Private equity investment came from Top Technologies Ventures in two instalments of £3800,000 and £3600,000. Its faith was handsomely rewarded when, after Focus's flotation in March 2000, the VC was able to take £34m back out of the business. Three years later Top Technologies continues to show its faith by retaining more than a 20 per cent stake in the business.
To those who know their recent economic history the date March 2000 is extremely poignant. If I was to say to you that Focus floated the very day before lastminute.com hit the market, you can guess the market turmoil that it has had to experience since then.
Despite soaring turnover growth, a 195 pence flotation price has since been slashed to a figure that hovers above single figures, and more recently the company has been forced to embark on a £31m cost-cutting drive under the lead of chairman Alastair Taylor, the previous head of Unisys's financial services arm, who moved up from deputy chairman last July to oversee the streamlining.
But the company insists that it has not shed any jobs and continues to talk positively about its future.
Streets, who has seen the value of his own shareholding plummet from more than £316m upon flotation to a fraction of that today, says: "Markets are markets. My job is to implement the business plan irrelevant of the share price. While the share price does not help us it doesn't hinder us either as we do not want to raise any money."
Today, much of that business plan centres on continued growth of Focus's goal software which is now being widely used in the life and pensions industry.
The attraction of the XML-based software - which was designed in-house and is constructed such that it can work with various computer systems and channels - continues to reap major contracts for Focus. Late last year the firm secured a five-year deal with Worcestershire-based financial services software company Misys to integrate goal into Misys's imminent mi-solutions package. Misys is about to give 1,200 of its independent financial advisers (IFAs) access to the software to start with and plans to roll it out to the other 5,800 IFAs on its books.
At the same time Focus also announced a new contract win with Skandia UK, worth £3200,000, where goal would be used in extranets in Norway, Finland and Sweden handling investment bond applications.
Streets explains goal's benefits to me in terms of its practical uses.
"Take a standard application form. How many times do you find you are asked irrelevant questions by people and companies who should already have all that information of their files? For instance, how many times are you asked if you have children, or if you have a disability.
"goal is all about making that whole application process far more efficient and paperless so that firstly you don't end up answering irrelevant questions, and secondly that it can all be done far quicker on screen.
"Data acquisition is a problem wherever you are, but is a huge problem in areas where you are dealing with information that is changing constantly."
Focus's main business today is providing solutions built on the goal technology for specific customers.
Streets asserts: "As a company we are not successful because of the technology. We are successful because of the knowledge of building solutions for the life and pensions market. It is a question of taking the technology and applying it."
Inevitably, Focus hasn't been immune from the fall-out in the broader technology sector.
"A lot of people and companies have hidden behind September 11 for blaming their ills but the truth is that those events were quite significant for insurance companies who proceeded to slash their spending on new IT projects. Some big projects got canned. As we went into 2002 most insurance companies did not have new budgets for new projects."
But despite the torrid market, Streets proudly states that Focus won a dozen projects in the six months to September 2002, with all but two coming from existing clients.
I probe Streets as to whether there was any secret formula to those wins.
"It was all about speed. We go to our clients and tell them how we can make them make major savings within 12 months and then deliver.
"The growth of this company will come from repeat business. Our customers are so big that we need to build up substantial inroads into their IT spend. We want them to use our technology in more than one distribution channel. We are only scratching the surface of how big we could become."
With clients such as industry giants Norwich Union - which accounts for just under half Focus's business - Standard Life and Legal & General it is hard to disagree.
Focus revenues are still growing too. When Focus floated it was turning over £3721,000. In the year to March 2002 the company turned over £35.1m and is forecasting revenues of £36.6m in the year to March 2003.
In terms of market focus the company intends to continue concentrating on the life industry.
"There are 120 people in this company and 80 of them understand the life and pensions industry inside out," says Streets. "That is where we will find partners to go forward. As far as we are concerned there is plenty to go at. We still see people implementing 20th century solutions which are flawed."
One pinpointed growth area is the government's own huge IT spending drive and the tremendous potential for goal technology to become standard software in huge areas such as tax collection.
"The more we work with large partners the more people will realise the benefits of the technology," enthuses Streets.
And the more competitors will see it too. Streets admits that two companies recently wanted to buy the source code to goal, and says Focus is naturally keeping an extremely close eye on competitors given that it recently submitted 29 innovations under one patent to the patent office.
Regarding the future status of Focus - and given deals such as the recent contract with Misys - I feel compelled to ask Streets about the future status of Focus itself (which is still majority-owned by Streets himself and Top Technologies).
Streets is naturally reluctant to be drawn but with a wry smile adds: "We will make a decision on the basis of value to our shareholders."
In the meantime it's profits that both the markets and Streets himself want to see. The company, which lost £31.6m in the six months to September 2002, is forecasting a loss of £32.3m for the full year, not helped by its £3941,000 acquisition of its American development and sales partner MPO in April last year, which is currently losing £365,000 a month if the sales team fail to win any contracts.
Streets adds: "The UK part of our business which is still the vast majority of our business is moving into profitability and our cash burn is slowing down."
I ask whether he regretted the American venture.
"Not at all. MPO are a mirror image of us and like in Britain we are barely scratching the surface of our potential over there. MPO know every senior life and pensions executive in the US."
Streets concedes that Focus has to make the US acquisition work before it thinks about any further European expansion. "We are obviously keeping more than one eye on the US situation."
Long term, Streets is unperturbed by the present stock market malaise and Focus's own share performance. With cash in the bank (Focus raised almost £310m from its initial listing) and a huge market to go at he remains upbeat.
He also refuses to get depressed about the state of the UK pensions market in the wake of the stock market collapse.
"Despite its present difficulties and issues we know that there are literally millions of new pension customers who simply have to come into the market over the next few years. For instance, we see group pensions for smaller companies as a particular growth area."
Further down the line Streets sees moves towards increasing government regulation and the making of pension provision all but compulsory as only further helping Focus's cause.
And so despite market malaise and a horrid economic climate, medium to long term it all adds up to a picture that belies Focus's fall from grace on the markets.
Streets concludes: "We have the largest pipeline of business we have ever had and that pipeline is solid. If you can grow when some massive companies around you are shrinking you must be doing something right."
Finding the net
Focus's future growth has become inextricably linked with its flagship product - goal technology
So precisely what is this goal technology all about? The starting point is that traditional software has always been built to last and in many cases still is, with companies developing software in the same way that they have done for years.
But as Focus will tell you, the 21st century demands a new approach to meet the changing expectations of the business world and as such 21st century software must be "built to change".
goal itself was developed in-house at Focus by Mike Sloane and is an XML-based collaborative toolkit which enables the rapid development of components to automate the end-to-end sales process.
The use of XML messaging allows goal to integrate with existing applications, thereby protecting investment to date. It also separates business logic from technical infrastructure, thereby making amendments to business requirements and needs easy to change and implement.
It is also described as "platform independent" which means it can be run in any environment such as Microsoft or Java, allowing the same component to be re-used in different environments.
Its key benefits for companies are that the process involves no programming (so applications are developed faster), it is easy to change and maintain, and ultimately saves cost because you don't have to replace existing systems.
Streets, the master of understatement, remarks: "We feel we have taken the technology to the extent where we can see that it has quite an attractive future."
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