A company’s computer system no longer is a subset on the flow chart.
Technology has become the underpinning of what a business is all about, says Kent Erickson, CEO for Pointivity, a San Diego-based information technology solutions provider.
“IT (information technology) has become the driving force in how a company’s sales, marketing, the human resources departments accomplish their strategic goals,” he said.
Pointivity once was a systems integrator, helping companies figure out what kind of computer system is needed, setting it up, then providing maintenance.
Today it’s doing a lot more: Things such as providing all of a business’ information services through a remote location via the Internet; designing and maintaining Web sites and integrating a company’s back office functions into its e-commerce site.
Benchmark Commercial Insurance Services Inc., a four-person business insurance broker in Encinitas, now contracts to have all its computer networks managed at one of Pointivity’s two data centers in Burbank.
“We now basically have a turn-key, headache-free operation as far as our network systems go,” said Roy Cohen, Benchmark’s president. “Pointivity took over one aspect of our business we don’t know anything about and allowed us to concentrate on our business, which is selling business insurance.”
Erickson said his company has customers with annual revenues in the hundreds of millions of dollars, but the majority are small- to mid-market firms, ranging in size from a few employees to about 400. Counting the client base of two recently acquired businesses, Pointivity has some 2,500 customers, including 200 actively managed projects over the past 18 months.
Smaller companies may have technology systems managers on their staff. But for the most part, Erickson said the complexity of working with several different networks using multiple servers involving a disparate number of functions has caused more businesses to subcontract with specialists like Pointivity.
Even if a company employs an information technology expert, the breadth of skills required these days usually causes the firms to seek outside help, he said.
John Kiester, IT manager at Rokenbok Toy Co. in Encinitas, said Pointivity has been providing its services since 1997. Two months ago, Pointivity upgraded the service by installing a help desk that allows employees experiencing computer problems to seek assistance directly from Pointivity staffers. In the past, Kiester was the point person, resolving problems when he could, but occasionally running into situations where he simply didn’t have the skills.
In the fast-moving and ever-changing field of information technology, keeping abreast of all the changes is something usually only large companies can afford, Erickson said.
“If you’re an expert (in IT) it’s almost like, in a year, you’re not an expert anymore because the technologies are coming so fast and so close together that it’s hard,” Erickson said. “Even if you have a large staff of technical people, it’s very hard to keep them up to speed, let alone for a small business owner.”
After four years as a CPA primarily in the Los Angeles area, Erickson was looking for a more challenging line of work in 1991.
“The driving factor was my desire to start and run my own business,” he said. “I wanted to be in charge of the shots rather than working for someone else.”
He saw a need among many businesses to obtain specialized accounting and financial software, and together with a partner, launched Logic Technology Partners in San Diego. His capital outlay to get the business started was no more than $10,000.
During the company’s first two years, it installed the management information programs on hundreds of existing computer systems. By the end of 1993, Erickson focused the company on systems integration, designing, installing and servicing computer systems, mostly for smaller companies.
For the first year, revenues were less than $300,000, but the company has always been profitable. After changing its focus to systems integration, Logic averaged some $7 million to $10 million in revenues and between 40 to 65 employees over the next six years.
Last year, Erickson decided he should diversify and completed the acquisition of two companies, the Ace Group, a 15-person consulting firm specializing in accounting and customer relations management, and First Cyber Communications, a 20-person Internet technology firm.
The acquisitions were made possible by the infusion of $2 million by four private investors. Coinciding with the purchases, Pointivity , Logic’s new name , went from a privately held firm owned mostly by Erickson to an employee-owned entity.
Erickson opened up the company to employees in order to retain his best workers, many of whom had gained much technical expertise and were getting heftier salary offers from other tech companies.
The technically-skilled workers who make up most of Pointivity’s payroll are often “looking for the next step, and that is to have an impact, to share in the gains of their efforts,” Erickson said.
The company’s stock plan permitted workers to buy shares at $3, the price set at the time of the private investment, and for every three shares, receive a warrant for one share at a penny.
In a sense, the employees who decided to buy at least three shares immediately saw a 25 percent gain on their investment, Erickson said.
The resulting feeling once the plan took effect was astounding, he said. For openers, every employee purchased shares.
“There was such a transformation here. We were so on fire we had to kick people out (tell them to go home),” Erickson said. “It’s not that employer/employee relationship anymore. It’s ‘I’m a part of this.'”
Virtually overnight, employees adopted a totally different approach to their jobs. “You couldn’t waste money here anymore if you tried, because all of a sudden people realized, ‘Hey, this is my money.'”
While outsourcing information technology admittedly makes a lot of sense for many businesses, it’s not the right model for everyone, says Bruce Ahern, a San Diego-based technology analyst.
“Outsourcing your IT makes a lot of sense in many environments where the major thrust is not technology oriented,” Ahern said.
Among the biggest concerns in contracting out for IT services should be whether the provider actually does what they say they can do, and whether they have a track record of reliable service.
“For any company that goes that route, you should question everything they say, and especially, are they going to be around,” Ahern said.
For Erickson and Pointivity, the answers are easy: After 10 years, they’re still growing, and there’s no slowdown in sight.
This year, sales should reach $10 million, up from the $6.5 million it did last year, Erickson says.
The flip side of the employee-owned company is sometimes having to say no, that’s not a good idea, but it’s one he will take every time over the former management model, Erickson said.
“It’s a lot easier to have to control them than to put the whip to them to motivate them.”