Start-ups find growth in software-as-service biz

Not everyone wants to spend the time or money installing software on company computers Keystone Archive

Two Swiss start-ups, one in western Switzerland and the other in St Gallen, are finding growth by offering their human resource-related software as a service.

Applic8 SA is a Nyon-based firm whose software is used to manage payroll and human resources administrative tasks for medium- and large-sized business.

In a related part of the market, but not competing, Umantis, owned by BrainsToVentures AG, offers software to executive search firms and businesses to manage placing and management of personnel.

These companies are on the verge of expanding, having launched their software on the market during the worst slump the information technology sector has seen in years. They survived 2001 to 2003 by finding the straightest path to profitability.

Instead of licensing their software to customers, the applications on offer are hosted on the firms’ own web servers. Users don’t need to install the software locally.

They can use the applications via any standard browser as if the programmes were part of their own intranet.

The business model

The firms make money by charging a monthly fee or subscription. Software industry insiders call this kind of business model an application service provider (ASP).

It has several advantages. For the customer there is a fixed cost for using the software and no major up-front investment. The service provider handles things like upgrades and routine maintenance.

For the vendors, the scaling up of the business, or addition of new customers, is much more economical than the old licensing model.

The firm with the highest profile in the ASP sector is San Francisco-based salesforce.com Inc, which employs more than 700 people and had sales of $176 million (SFr217 million) in fiscal year 2005. The US firm’s software is used by companies to manage customer relationships and sales processes.

The founder of Applic8, Joao Matos, had the idea back in September 2000 while working as a software consultant on human resources applications projects.

“Many businesses do not want their IT staff configuring and maintaining the payroll application. This is sensitive data that management does not necessarily want IT staff having access to,” explained Matos in an interview with swissinfo’s Swiss Venture.

Matos and his two co-founders raised SFr2 million from private investors. They launched Applic8 in spring 2001 with a product in English, French, German and Italian, targeting companies with 300 to 5,000 employees. It has won accounts such as the Swiss operations of Lloyds Bank, Deutsche Bank Group, and STMicroelectronics.

From survival to growth

Umantis also launched in 2001. It employs 30 people and reached breakeven in 2003. Its annual sales are in the seven-digit range and it is active in the German-speaking regions of Europe.

“The past three years were difficult but we’re looking forward to winning some larger accounts this year to scale up the business,” a spokesman for Umantis told Swiss Venture.

It is a similar story for Applic8. By 2005, the firm had opened an office in Zurich and completed an acquisition of another start-up, which enabled the firm to offer a recruiting application to its customers, in addition to the payroll and administrative programmes.

It reached the breakeven point last year. It has more than 20 customers, which in turn have more than 12,000 employees using the software. Annual sales are between SFr1 and SFr9 million. It should be noted that Matos disclosed specific performance figures to Swiss Venture about sales and the exact number of users, but asked that these not be published.

“The less our competition knows about us, the better,” said the CEO.

Applic8 has immediate plans for expansion into neighboring countries. It currently employs 12 people with plans to hire eight more this year.

by Valerie Thompson