Pete Tierney, CEO of Inference Corp, exudes confidence. A suave, self-starter, he has a reputation for turning company fortunes around. His achievements at Inference are certainly commendable. In 1990, when he joined the company, Inference was a small-time vendor of sophisticated – but niche – artificial intelligence software. Tierney, therefore, set about refocusing the company on the more commercial – and profitable – area of help desk software. He did so utilizing Inference’s specialized case-based reasoning (CBR) technology, an information retrieval method in which a database of past examples is employed to narrow down a customer problem to a small number of specific possibilities. Then in June 1995, Tierney steered Inference through a successful initial public offering (IPO). The company finished its first full financial year as a public company with a profit of $3.8m, compared to pro forma net income of 1.0 million in fiscal 1995, on revenues up 47% at $29.4m. Last year, that trend continued with revenues for fiscal 1997 rising 22% to $36.0m. However, a downturn in profits, to $2.4m, appears in retrospect to have presaged the company’s problems. In the first two quarters of fiscal 1998, Inference has seen a marked downturn in its fortunes. The first quarter saw a loss of $943,000, compared to a profit of $753,000 a year earlier, on revenues which fell 22% to $7.1m. In the second quarter, net losses grew to $906,000, on revenues down 28% to $6.7m. Nobby Akiha, the company’s vice president of marketing, attributes the downturn to two major factors. First, he says, the company has been working with the wrong sales methodology, which has led to high staff attrition rates and problems with training. In a bid to resolve those problems, Inference has embarked on a major restructuring, hiring around 30 new sales staff since the beginning of the year. Those who know Tierney’s excellent track record as a senior sales director at database software giant Oracle, believe that he has the acumen to now build a stellar sales team at Inference. But the question of why the company suffered for so long before restructuring began remains.
Hindrance to growth
The other hindrance to Inference’s growth, according to Akiha, has been the specialized nature of its products. We have not provided a sufficiently complete solution, he admits. Help desk products from major vendors such as Scopus Technology, Vantive and Remedy assist customers in tackling the more general administrative duties related to call center management, such as tracking calls and monitoring call volume, for which there is strong demand. Inference, however, has concentrated on the more specific task of customer problem resolution using its case-based reasoning technology. Although Inference partners with many of the more general vendors, the niche nature of its products, according to Akiha, has meant that it has found itself losing control of accounts, and being pushed to the second phase of implementation projects. One possibility was for Inference to flesh out its product line to include tracking software, but although Akiha admits that it has had several attempts to do so, the results convinced the company that this was not where our core competency lay. Instead, the company is seeking to decrease its reliance on its partners as resellers by targeting a new market – self-service internet-based help desks. The product behind that push is Casepoint Webserver, launched in early 1996, and boasting an installed base of 70 major customers including entertainment software vendor Broderbund, and business applications software giant, PeopleSoft. For the moment, however, sales of Casepoint Webserver account for just 15% of revenues and Akiha is wary of making any forecasts as to the product’s revenue contribution in fiscal 1998. It should increase, he said. As for a turnaround in the company’s overall financial performance, Akiha says this cannot be expected in a matter of months. However, he says, the company will be examining the third quarter results for signs of benchmarks which might indicate that the company is back on the right track. The existence of those signs may prove very important. Inference’s key competitors, Remedy and Vantive, which boast revenues of $80.6m and $64.3m respectively, remain relative giants compared to Inference and are obviously also looking to extend their product lines, perhaps by moving into problem resolution. While it is not out of the question that they would attempt to develop their own problem resolution products, there is also the distinct possibility that either could choose the quick route and make a bid for Inference, picking up a ready-installed, blue-chip customer base in the process. While Akiha concedes that anything is possible, he says, it’s certainly our intent to remain as an independent company. Regardless of intent, however, it seems clear that Tierney will have to give Inference a strong dose of self-help therapy if the company is to survive this time, and if he is to keep his reputation in tact.
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