Stokes: A contrarian approach has paid off for DataMirror in hard economic times.
Quote: “What we’ve seen is that resolve has changed. There’s no complacency left. Now people are going to make their minds up. ” – Stokes
“We’re running our business by being conservative. We are fortunate that our cost structures are already in line: we haven’t over billed, we haven’t overstaffed and we have positive cash flow.”
The final quarter of 2001 will be remembered for two things: the U.S. reaction to and recovery from the Sept. 11 attacks and the economic slowdown. While people fear what might turn up in their mailboxes, companies are making hard choices by slashing jobs and closing offices. In the midst of all of this, one Canadian company is standing tall in the face of disaster by providing a product that focuses on resiliency and exemplifying fiscal responsibility. ComputerWorld Canada staff writer, Kristy Pryma, recently spoke with Toronto-based Nigel Stokes, DataMirror Corp.’s chief executive officer, who describes his company as plumbers for the Internet era.
CWC: How have the events of Sept. 11 and their aftermath affected DataMirror?
Stokes: We’ve got some survivor guilt, because in some ways this will be good for our business. It feels a little bit like blood money, but the reality is that we’ve talked about it for years before this ever happened, but now resiliency has got a big exclamation mark. People are listening a bit more now and taking it in a bit more now. People are really hanging on the resiliency concept because they know that their own businesses could be impacted. The economy prior to this was in that limbo state where there was delayed decision-making probably for six months, where people were saying “We’re not going to do it this quarter, but we’ll look at it next quarter and see how our business is.” What we’ve seen is that resolve has changed. There’s no complacency left. Now people are going to make their minds up.
CWC: How is DataMirror weathering the current economic storm?
Stokes: We’re running our business by being conservative. We are fortunate that our cost structures are already in line: we haven’t over billed, we haven’t overstaffed and we have positive cash flow. A contrarian approach is that business always pay off. Because we’ve got positive cash flow in reserves, we can hire people now, and I can tell you that available resources of talent right now in the high-tech community is phenomenal. It’s been a tough market in technology for years, where you hadn’t been able to get anyone. Now you can get very skilled people because they’re not working at Northern Telecom and they’re not working at a lot of other companies that have had to go through this attrition.
CWC: What sort of strategy is DataMirror employing to maintain this economic stability?
Stokes: It’s a great merger and acquisition timeframe. Companies that have cash reserves and positive cash flow are the stronger companies, so we can gain a relative competitive advantage now by doing acquisitions today. We’re usually using cash for acquisitions rather than stock, so we’re not having to pay the 10 times revenue multiples that everyone was paying before. We’re getting a good value, and we’re getting teams who want to join us because they know that their future is better with us rather than trying to fund their businesses themselves or fund their R&D themselves.
By being contrarian now rather than two years ago, we get better value for our shareholders and we create a better environment for people who work here. They know it’s stable and that we’re not going to waste our money in this acquisition we’re not going to waste it in future acquisitions. Buying good value has always been our philosophy for the company.
We won’t diversify, though. The themes of real time data integration and real time resiliency are so broad, and the number of markets we can service and the number of customers we can service are so wide that we don’t need to diversify beyond that. We’re trying to be very focused and deliver this integration and resiliency theme to the market. It’s a very large market.
CWC: Ninety-five per cent of DataMirror’s business is in the export market. What has kept DataMirror in Canada?
Stokes: For years my board of directors always wanted the operation to move to Silicon Valley. We resisted it dramatically, and it’s turned out that it was a very wise decision because our cost of living and the resources we can get here are very good on the world stage. We create lifestyles for our people here that they couldn’t get in Silicon Valley. And now it’s really hard to get money down there. Our people maybe didn’t get that high and didn’t become instantaneous millionaires on paper for a year, but because they weren’t instantaneous millionaires on paper for a year they didn’t mortgage themselves right to the hilt and over extend themselves. They have nice houses, good lifestyles and good cars, and can buy a cottage if they want. They can do extremely well here, but I don’t think they could get that lifestyle in the U.S. very easily.
We’re committed to Canada. On a cost-per-employee basis, this is probably the most cost effective place in the world to do software development. I think it competes with India based on productivity. Canada’s also got a great talent pool to draw on. There’s a reason why Bill Gates recruits a substantial portion of the University of Waterloo graduating class, and it’s because they’re great people. By the way, every single founder of our business is a Waterloo grad.
CWC: What does the future look like for DataMirror?
Stokes: It’s an uncertain time. We all know that, however, we’re cautiously optimistic that the sorts of changes that are occurring in the broader economy and broader environment will actually drive up the demand for our technology. Resiliency is becoming more important, and integration is a very important theme for most businesses, so we expect that there’s going to be an increasing demand for both the integration software and the high availability resiliency software that we sell. We’ll probably add new products to the mix. We’ll expand the products that we’ve already invested in. We’ve grown gradually over the years, we’re continuing to grow, and we think that next year we’ll grow as well.
We’re the plumbers for the Internet era, and are about real time flows of data through an organization. Like a plumber who provides a flow of water through a building, we provide a flow of information through live data feeds. We don’t necessarily provide you with all the front-end dishwasher systems or the sink, but we do provide you with the taps and the flow, and that’s a very important infrastructure component, and it’s very stable in companies. You don’t rip down the walls and replace the pipes in a house – once the infrastructure is in place and you become dependent on that real time flow, you’re not going to interrupt it.
Besides, plumbers make a lot of money, and are always in demand. We’re quite happy with the analogy.