Long time no post! So many things are cooking that I had to let the posting aside for a bit. Anyway, more in the coming weeks about all that "stealth stuff".
I had the pleasure to meet Bernard Liautaud for the first time tonight, as he spoke at the Harvard Technology Roundtable organized by my friend JP Emilie-Marcos. Bernard was interviewed in a fireside chat by a journalist from Barron’s.
Bernard is an icon in the French software world, as the co-founder and 15-year CEO of Business Objects, the Business Intelligence market leader. He is a model for having started a company in France, with very limited funding ($1M), growing it to become the global market leader – listing the first French software on Nasdaq along the way, and successfully going through quite a bit of a roller-coaster ride.
The journalist described him in his introduction as "One of France’s finest exports, someone who worked for Larry Ellis and lived to talk long enough to about it".
Bernard was the Marketing Manager of Oracle France in 1990, when he met a software developer who had prototype a decision-support tool – as a hobby. His software made it possible to generate SQL statements from a simple
user interface, without the user having to know SQL. Bernard tried to to have
Oracle productize and distribute it, and when they declined, he and co-founder Denis Payre left Oracle, bought that software and launched Business Objects.
At that time, there was no financing available from Paris-based VCs for such a startup, which "forced" the two founders to go up and down Sand Hill Road to end up raising… $1M from VCs who were on both sides of the Atlantic, and open a real office in Paris.
Bernard explains that they build Business Objects using Silicon Valley companies as a model, and considered from the get go the French market as totally irrelevant for a software company. This led them to open offices in the US and the UK upon reaching 10 employees. The US office had two people: one pre-sale technical engineer, and one sales rep: "That’s just what we needed to get going: revenues.".
Asked to comment about why no other French company has replicated BO’s track record, Bernard suggests that there are often mistakes made on marketing and positioning, forgetting the importance of becoming category leaders, not considering the market as global, and taking into account cultural differences. Furthermore, there was (and still is) a lack of strong operators of Bernard’s caliber in French VC firms .
Not that BO’s execution was flawless: in 1996 they introduced a completely rewrite of the software (ah, the famous "next generation" meme) that had generated a lot of expectations in the user base (leading to a freeze of sales of the current product) and was so buggy that it took months, for BO to stabilize it. Net effects: loss of confidence from clients, revenues targets missed so badly that the stock went from $55 to $5, and employee morale "flushed in the toilets" (I know, in English it does not sound that great).
The Board supported Bernard in implementing necessary changes (co-founder Payre left the company around that time) that would lead to a successful turnaround of the company. Because BO’s growth was centered on the US, Bernard and family moved to Palo Alto, where they lived for 7 years, before moving to London a couple of years ago. And the stock moved to $300 (during the bubble).
Enterprise software is very challenging (and getting worse) but Business Intelligence is number two on priority list of CIOs (because of drivers like compliance/SOX, performance management, …). BO is therefore growing by taking "the right portion" of IT budgets, even if these don’t grow at all.
Bernard then talked about the need for BO to be the leader in the space, differentiating itself from competitors like Cognos or Hyperion. This was achieved through the $1.2B acquisition of Crystal Decisions, a company BO had been partnering with for years. When Crystal Decisions filed its S1, Bernard knew that he only had a few weeks to get the deal off the table – which he did. It then took a year to integrate CD into BO, and release an integrated product.
BO is now a company with 2,800 employees, $950M in (2004) revenues (up from $450 before the CD acquisition) and a market cap of $2.6B. It is truly global with 700 people in Paris, 1,200 in Vancouver, 500 in the Valley, and 300+ in India (from 0 2.5 years ago).
What’s next for BO ? Bernard stayed very vague (quite period before their earnings announcement did not help) but he clearly sees an opportunity to grow by providing rich functionality on top of BI. Now that CD has been integrated, it would not be surprising (my words) to see BO acquire products and/or revenues.
Asked about the face of the market in five years, Bernard stated that he did not believe in the mode whereby only 3 large software companies would survive (SAP, Microsoft, Oracle ?). And thought that paradigm shift would actually come from business model innovation: think Siebel disrupted by Salesforce.com, to which I would add (with a ?) and SF disrupted by SugarCRM. Bernard stated that he was closely following the development of the
open source model, especially since he is on the board of MySQL. He also saw China becoming a competitor of US and Europe in the development of software and solutions, unlike India which he sees focused on delivering great quality off-shoring.
He concluded on the importance of having a balanced life, mixing the constraints of being a global public company CEO, a father of five and someone who stays in shape through playing a lot of tennis.
After the end of the session, I had a chance to talk with Bernard about the "topic du jour" for me, the scaling of European venture capital – which is the topic of the panel I will moderate at Innovate Europe in a couple of weeks. To oversimplify, there aren’t enough strong, international operators in European/French VC firms, which impacts the ability to build strong local companies with strong operators, that can then become VCs, etc.