JANE GARRETT - NETCENTRIC SYSTEMS - (NCS.L)
CEO Interview - published 01/22/01

DOCUMENT # LAP015

JANE GARRETT is the co-founder and Chief Executive Officer of Netcentric Systems Plc. Based at Netcentric’s UK headquarters in Cambridge, she has overall responsibility for the company’s growth, and strategic direction, including corporate sales performance for the company’s flagship web content and information management solution, Lychee, R&D, and all areas of operational management. Ms Garrett co-founded Netcentric in January 1997, and has led the company for over three years building it from a two person pure Internet consultancy to a venture capital-funded company focussed on building a product-based information management solution for non-technical personnel, and providing related consultancy. She has over 15 years experience in IT, the last 10 years of which were in business and company management, both as a Director and Senior Manager, primarily with Logica and later as a Director of a Cambridge based networking company, Shute Associates. Ms Garrett has a degree in Physics from University of Wales and is currently a committee member of and the former Chairman of the Sun User Forum.

Sector: Multimedia Software

TWST: Jane, could you start us off with a quick corporate profile of Netcentric Systems, please: what is its business?

Ms. Garrett: Netcentric Systems is an information management provider for intranets and websites for the Times Top 3000 companies. We have solutions based around our flagship product, Lychee. Our solutions enable people who don’t need to understand the complex languages of the web, such as HyperText Mark-up Language (HTML), to deliver content directly onto a company intranet or website, helping users to make effective use of corporate information and utilising it on the website. It takes the ownership of the site away from the IT department or web-master and puts it in the hands of the business user. Netcentric was originally a consultancy company. Early revenue was generated from Internet-based projects, and through this we became aware of the problems that corporations encountered trying to effectively utilise information. The opportunity saw the company shift from a consultancy to a product-based solutions provider after we were asked to provide a way of making it easier for non-technical users to update web site content. The solution requires a consultative process regarding the information structure that builds into the Lychee application. There is still a need for web designers to set up the templates and administrators to set up the security aspect, but once this is done, you don’t need the intervention of the IT department for the management of content.

TWST: Sounds ideal for the small business sector.

Ms. Garrett: It is, but the target market for Netcentric is the larger corporation as oppose to SME’s (small to medium-sized enterprises). Looking at the market, our competitors include Media Surface, Vingette, Interwoven, and to a lesser extent Broadvision who are all shifting their focus from the Times Top 1000 plus companies to the SME market. Whilst we believe we have a competitive edge in this marketplace, the larger enterprises still need to understand and maximise the use of existing information and how it can be deployed on their intranets and web sites.

TWST: How large a market is it? Is it principally in the UK currently?

Ms. Garrett: Although Netcentric has been a UK focused company up to this point, we have grown in size and stature and as a company have global scope. We intend to move into international territories, beginning with a European campaign, but we received our funding through a reverse take-over of Manx and Overseas in July 2000, and as everybody knows, it takes a while to recruit the right staff and to make sure the teams are working effectively together. The META Group believes the market to increase 500 per cent by 2002 and similarly, Gartner Group believes the market will grow worldwide to USD2.5bn by 2002, so as you can see, the market poses huge opportunities.

TWST: Let’s talk then about the UK small–medium business market. How do you estimate, how do you measure it; to what capitalisation or turnover company are you going, and what level of penetration has Website presence really developed in the SME sector?

Ms. Garrett: We’re not really looking in terms of market capitalisation of target companies, because it’s something that absolutely everybody needs and everybody can use. Ultimately this market will be a commodity market — I’m talking two to three years hence. What we’re finding in terms of the market is that corporations either know they’ve got a problem that needs resolving or not. As the market develops, which it rapidly is, we’ll find more and more people feedback from business users identifying the need for an information management solution. There are quite a number of corporations that we currently work with who previously recognise the problems of running a web site. Web sites are now ubiquitous in the business environment and so more companies are feeling the pressure of keeping web site information up-to-date.

TWST: I wanted to ask about the reverse take-over of Manx; what was the thinking behind that event?

Ms. Garrett: Netcentric achieved its first venture capital funding in August 1999, which was effectively seed capital and our second-round fundraising was achieved at the time when the Internet stocks were riding high. This enabled us to get Lychee and Netcentric Systems known in the marketplace. Manx is a property company, and because of the Internet stocks being as they were, they were looking to bring shareholder value. We achieved just under GBP4.5 million in funding, and the listing gives us more visibility, we’re now known to the financial institutions. So my view is that whilst it wasn’t an easy deal, although I don’t think any reverse is, it was worth taking because of the added presence that it gave to Netcentric and the funding that it brought.

TWST: The disposal of the former property-related activities: what’s the schedule for that? Is it already complete?

Ms. Garrett: What we’re aiming to achieve is as close to FAIR MARKET PRICE as we can for them. We’ve appointed an agent to manage the properties; they’ve been valued and are on the market. We have offers on a number. We have undertaken to sell the properties within a year of doing the take-over and we’re on track.

TWST: Obviously the company management structure has changed completely from its previous incarnation as Manx and Overseas: can you take me through how the new company is structured, who the key people are?

Ms. Garrett: The Chairman, who we have appointed just prior to the deal, was Bob Williams. Bob Williams was the Chief Executive of Unipalm and Pipex when it floated on the London Stock Exchange. He is part of the venture capital fund that put funding into Netcentric in August 1999, which is a company called Counterpoint based in Cambridge. He’s a fairly new addition to the team. My husband and myself have obviously stayed on board; we’re the founders; and my husband is Chief Technology Officer. Venture Capital funding brought on Gerry Thompson and Chris Williams; Chris Williams was Sales Director and Gerry Thompson was Chief Financial Officer at the time. He’s moved to Chief Operating Officer, and the person that we’ve brought in as Finance Director is Howard Freedman. Howard was with Manx and Overseas, and he’s the only member of their team that we’ve kept. Since the deal we’ve brought on Andrew Karney, who is ex-Logica board, a Guardian New Media Group Non-Executive. And we’ve also brought on Charles Tipping, who is ex-Sun Microsystems, as our Global Operations Director; so he’s a new addition to the team. That’s the board as it stands now and moving forward.

TWST: What are the main areas in which you’ll be looking to grow the company over the next 18-24 months? Is it new product introduction; is it acquisition; what’s on the menu?

Ms. Garrett: Our focus is on intranets and websites and we are extending the Lychee product suite using ‘best of breed’ applications that either we develop or are developed through partner organisations, which will feature value-added complimentary services and consultancy. At the moment we are building relationships with established and credible partners in the market in order to extend the reach of our expertise. Our channel strategy is concerned with both direct and indirect sales. We intend to achieve 50 per cent of our business through indirect sales in two years time. Moving forward on the development strategy, we intend to develop what we call selectable units that will bolt into our base module, that will tailor the product to either resolve a particular need in the market or to address a vertical market. So there will be added revenues that we will achieve through the sale of these selectable units. That’s in terms of our product development. As we all know, the Internet market is moving incredibly quickly; we need to be able to move as the market moves.

TWST: Your marketing activities: how are you going to develop your sales?

Ms. Garrett: We have built a strong marketing department and have deployed an integrated marketing campaign, which includes a public relations programme, advertising, presence at pertinent trade shows etc. We are also in the stages of changing our brand, which will reflect the company’s image as an innovative provider of information management solutions. The objective is for Netcentric and the Lychee brand to be associated with information management and the dissemination of web site content.

TWST: Let’s talk about resourcing the research and development innovation; how does that happen at Netcentric?

Ms. Garrett: Lychee is a Java and XML based, thin client/server application and as you can imagine, good programmers are hard to find. We have increased resources and have a strong development team. We have plans to create a research division, so that we are in touch with how the market is developing and can provide products accordingly.

TWST: May we talk about the business model and the revenue streams that you anticipate?

Ms. Garrett: I’m in closed period, therefore unable to give you any details.

TWST: You don’t have to tell me any numbers but can you just identify how the revenues will be composed?

Ms. Garrett: We’re selling Lychee version 3.5 at the moment, which we tailor for specific customers. We deliver a complete solution for less then GBP100,000 which, if you look at our competitors, is extremely competitive.

TWST: And what sorts of contracts do you typically have with your customers?

Ms. Garrett: We would have a contract to supply the product and to supply the surrounding services. That can be one of two things; it can be a case of supplying the product with web-master training to enable their technical people to configure Lychee to their own needs, or we can provide the configuration; so it’s very flexible. If you take one of our customers, Sun Microsystems, what we did was to supply product and training so they could configure it themselves. In another customer example, ACPO (Association of Chief Police Officers), we provided the surrounding services to ensure Lychee was fully tailored.

TWST: How dependent are you on your top 10% of clients?

Ms. Garrett: We’re not dependent on our top 10%; they’re spread amongst our customer base.

TWST: How do you anticipate the pricing environment evolving over the next 18-24 months?

Ms. Garrett: Initially it will go up. As I mentioned, we currently sell Lychee version 3.5 and we have plans to announce version 4.0 in the future featuring added functionality. On top of that, selectable units will be charged for at prices we haven’t yet defined which will increase the value of the product, but complete solutions can range from GBP10,000 to GBP100,000 depending on specific needs.

TWST: How will you cope with that; how will you keep your margins?

Ms. Garrett: That’s something that’s in the planning stage at the moment.

TWST: Turning to your role as CEO, where are you spending your time?

Ms. Garrett: My time at the moment is being spent with the financial institutions, to bring added visibility to Netcentric, so I’m spending approximately two days a week at the moment doing that. I see that tailing off over the next six months down to approximately one day a week. I’m also spending time in ensuring that the staff are integrating. We’ve got two sites; we have a site in Cambridge and a site in Fleet. Fleet’s just opened; Cambridge is being expanded at the moment so I’m doing a lot of man management. I’m looking also in terms of plans for the future and making sure that we have procedures in place to ensure that the company operates smoothly and effectively. In terms of recruitment, I have been involved, because we need to ensure that our teams have the right sort of characters and are going to work well together. In fact, we have an excellent team behind us, and we’ve had no difficulty in getting staff whatsoever.

TWST: What’s the reaction been of the financial analysts and the institutional investors that you’ve spoken to? What are their comments; what are the issues that they’re keen to raise with you?

Ms. Garrett: Their reaction is very positive; they like the solutions; they like what they’re hearing; they see the opportunities for the company. I appreciate the feedback, running a public company is not an easy task and it introduces challenges of its own. We’ve never said we know it all, so it’s encouraging to hear the right noises coming from such an influential sector.

TWST: What would you say are the critical issues facing the company over the next 18-24 months?

Ms. Garrett: It’s ensuring that we get out into the market in an effective way, that we stay on top of where the market is moving, and we understand how it’s changing and how we need to change to match the market changes and trends. In terms of the biggest challenge, it’s being aware of where the market’s moving. I think we’re well equipped to deal with that, and we have the right sort of people on board to do that for us.

TWST: And in terms of funding, your cash situation: what’s the situation there; are you comfortable for the next period?

Ms. Garrett: Yes, we are. We have the properties to sell which will generate cash for the business, and our cash projections and our working capital have been managed on the funds that we raised at the time of the deal. When we start moving forward internationally, we will review how territories are moving before we go to the expense of setting up an office. As I mentioned, by two years 50 per cent of our business will be via indirect sales, by partnering with like-minded companies we can achieve this.

TWST: You mentioned that you’ve opened a second location in Fleet; is that up and running?

Ms. Garrett: Yes, and it looks absolutely fantastic. It’s for sales and marketing. Our R&D headquarters are based in Cambridge, it’s near Silicon Fen and there is an abundance of technical people in the area. The sales and marketing office was opened in Fleet because that’s where a lot of the expertise resides, in the Southeast corner.

TWST: If you were sitting down with a potential US investor, maybe a small-cap specialist, what would be the three or four points that you’d like him to take away from the interview that would compel him to buy into the stock?

Ms. Garrett: First of all, the experience of the management team and its ability to move and drive the company forward. Secondly, the opportunity. We have identified the market potential and are aiming to be a serious player in this arena. We’ve got a great product, and we’ve adopted XML as a standard and I think that’s important for the strategy of the technology going forward. We will be looking to move to the States, but when the time is right.

TWST: Do you see any precedents in the States for what you’re doing?

Ms. Garrett: We have international scope and as I mentioned will be looking to move to the States but will do it when we feel ready and processes are in place. We have had positive feedback about our solutions from the types of companies we’d like to work with as well as partner with and form alliances.

TWST: Where would you like to take the company in three years’ time; where would you like it to be?

Ms. Garrett: We’d like to claim a worldwide presence in three years.

TWST: You mentioned vertical foci; will there be particular markets in which you’ll be pre-eminent?

Ms. Garrett: We have a product with huge horizontal scope in a growing market, and in order to address the market we do need to look at verticals where we will focus. There is a danger of companies loosing focus when they fail to address vertical markets, but we are recruiting our direct sales force with a particular focus. At the moment we are looking at the financial, telco and travel and leisure.

TWST: Thank you. (OK)

JANE GARRETT
 Chief Executive Officer
 Netcentric Systems Plc
 Lower Court
 Copley Hill Business Park
 Cambridge Road
 Babraham
 Cambridge CB2 4AF
 United Kingdom
 +44 (0)1223 839 800
 +44 (0)1223 839 700—FAX
 www.netcentricsystems.net

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