/Entrepreneur Carl Rodrigues has thrown out the standard tech playbook — and his strategy appears to be working
Entrepreneur Carl Rodrigues has thrown out the standard tech playbook — and his strategy appears to be working

Entrepreneur Carl Rodrigues has thrown out the standard tech playbook — and his strategy appears to be working

The Financial Post takes a look at 11 people and companies we’ll be watching closely in the new year.

In the soaring atrium of the Royal Ontario Museum during a fall day in Toronto, men in khakis and blue blazers sip their drinks underneath looming dinosaur skeletons, paying only passing attention to the awards ceremony playing out on the nearby stage.

An exuberant host announces the awards in various categories, but all the winners are companies you’ve likely never heard of, given that they’re niche consultants being feted for selling enterprise device management software created by Mississauga, Ont.-based SOTI Inc., another company you’ve probably never heard of either.

Heartland Computers Inc., based in McHenry, Ill., takes the top prize for selling the most SOTI software in the past year, and company executives receive their award on a stage flanked by a fossilized dinosaur and an enormous gilded Buddha statue from the Ming Dynasty in China.

Earlier in the day, these same people were gathered in the ballroom of the Fairmont Royal York Hotel in downtown Toronto to hear former U.S. vice-president Al Gore deliver a keynote speech.

It wasn’t clear if Gore knew anything at all about the company paying him — he vaguely referenced SOTI only once in a passing joke during a 40-minute speech about climate change — but high-profile speakers and extravagant parties are commonplace for flashy tech companies trading in hype and hyper-growth.

Yet in most other ways, SOTI eschews the standard tech business playbook. It doesn’t have a cool office; its headquarters are in a nondescript office park. It doesn’t have deep-pocketed investors with name plates in Silicon Valley, Wall Street or even Bay Street. And it doesn’t have scads of venture capital to burn through while acquiring millions of customers, before the founder or investors cash out via an acquisition or initial public offering.

In short, company founder and chief executive Carl Rodrigues believes SOTI can succeed by throwing out the tech playbook developed during the late 20th century and using a strategy that is a little more timeworn.

“Historically, all the great companies were built with the same recipe that SOTI is built with. This is how your grandparents built companies: they worked hard, they produced the best product, they cared about being innovative,” Rodrigues said. “Yes, I could sell this company any day and easily be a multi-billionaire, no problem. It’s not that interesting. It’s more interesting to create a great company that’s hopefully here well after I’m not here.”

This is how your grandparents built companies: they worked hard, they produced the best product, they cared about being innovative

Carl Rodrigues

So far, his plan seems to be working, at least according to Rodrigues, who still owns the 25-year-old company along with his wife.

Put simply, SOTI software allows IT departments at large companies to remotely manage handheld devices, such as warehouse barcode scanners, or touchscreen kiosks like those found in McDonald’s. Techies can set security parameters, update software and troubleshoot problems without ever needing to physically touch their company’s devices. The cost: around $4 per device per month.

The company reportedly has annual revenue of more than $100 million, and claims revenue growth of 163 per cent between 2015 and 2018. It hired its thousandth employee earlier this year, and has offices in Sweden, Ireland, India and Australia, to name a few. More unusual for a technology company, SOTI said it has had 97 consecutive quarters of profitability.

Plenty of other tech companies lose money, especially in the early days. Uber Technologies Inc. famously lost more than US$5 billion in a single quarter this year, and the conventional wisdom among venture-backed startups is that the path to success involves losing money in the product development and customer acquisition phases, before pivoting toward profitability.

SOTI’s claim suggesting 24 years of profitability is notable because the actual Mobicontrol product at the core of SOTI’s business wasn’t built until around 2001. Before that, the company was a vehicle for Rodrigues’ consulting work with Nortel Networks Corp., which suggests it was profitable while he was in his basement writing code.

Of course, we only have the company’s claims to go on, because SOTI is privately owned and has never taken outside investment. No shares of the company have ever traded hands.

The company might be part of the unicorn club of startups worth more than $1 billion, but that isn’t testable either since it’s difficult to put a value on something that has never been bought and is not for sale.

Founder and chief executive Carl Rodrigues believes SOTI can succeed by throwing out the tech playbook.

Founder and chief executive Carl Rodrigues believes SOTI can succeed by throwing out the tech playbook.

Tyler Anderson/National Post files

In some ways, SOTI’s story aligns with the standard mythology of the tech startup: after working as a consultant for a few years, Rodrigues went into his basement one day, started tinkering with software and built a program to remotely control personal digital assistants (better known now as PDAs), the precursor to modern smartphones.

Eventually, SOTI’s Mobicontrol software became popular with companies that use rugged handheld devices, such as barcode scanners and the kind of chunky terminals used by blue-collar workers.

At SOTI’s partner conference in Toronto in October, an IT worker for American Airlines Inc. casually mentioned that he’s responsible for remotely managing 17,000 tablets that flight attendants use to sell in-flight food and beverages.

The competitive landscape for this sort of software is difficult to nail down since the number of meaningful competitors widely ranges depending on who you ask. Microsoft Corp., VMware Inc. and BlackBerry Ltd. all offer software with similar tools.

“There are probably over 100 companies in the world, at least that I know of, that are in that space. The reality is, there’s probably about half a dozen, maybe seven, that are big players. There is no dominant player that owns 50 per cent of the market,” said Nick Dawson, global director, enterprise platforms strategy and business development at Samsung. “SOTI is one of those big players.”

I don’t want to just make a bunch of money, drive a Lamborghini and sit on the beach all day

Carl Rodrigues

Samsung is a key partner for SOTI, whose software is designed to integrate tightly with Android smartphones and tablets for enterprise deployments. Dawson was a speaker at SOTI’s partner conference in Toronto this year.

David Krebs, a market research analyst focused on enterprise software at VDC Research Group Inc., said SOTI isn’t a dominant player among the white-collar enterprise customers that are mostly managing smartphones and laptops for office workers, but the company excels in the rugged device markets.

“SOTI is very well-known in the business/mission-critical mobility market and is considered a leader in this space,” he said. “While the company has grown substantially, they do not have the same marketing/PR horsepower as do some of their larger rivals. This has been and will likely continue to be a challenge for them.”

Multiple people familiar with the market, including SOTI employees, said the core job of managing mobile devices is becoming increasingly commodified, but the company is trying to build off its core competence to offer a broader suite of services.

For example, SOTI is moving into analytics, using data gathered from all those managed devices to offer useful business insights. It is also using a tool to create simple apps without any coding, allowing companies that use SOTI to automate paper-based processes into digital workflows.

As the company evolves, it’s a safe bet that SOTI won’t be taking any outside investment to finance new projects. Rodrigues becomes animated when talking about the venture-capital investors that are the backbone of the tech economy.

“The moment they get into your kitchen, they’re mixing up the recipe,” he said. “They’re stirring the pot, they’re adding their own ingredients, and then suddenly you can’t go in exactly the direction you want to.”

Rodrigues said such investors are mostly American, and they’re generally just chasing an exit in the form of a sale or an IPO.

“Success is not how much money you take. That has nothing to do with it. I hear on the news every day, ‘Hey, we got a Series A of $100 million.’ Then three years later, the company is defunct, it’s gone off the planet. That happens every day. That’s not what success is about,” he said. “It’s a different value system, for sure. I don’t want to just make a bunch of money, drive a Lamborghini and sit on the beach all day.”

Financial Post

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