Allen Systems Group, Inc. History

Address:

1333 3rd Avenue South
Naples, Florida 34102
U.S.A.

Telephone: (239) 435-2200
Fax: (239) 263-3692

Private Company
Incorporated: 1986
Employees: 900
Sales: $175 million (2002 est.)
NAIC: 511210 Software Publishers

Company Perspectives:

To partner with clients. To improve productivity. To significantly enhance performance through the intelligent use of technology.

Key Dates:

1986:: Arthur Allen forms his second software company, Allen Systems Group.
1996:: Company begins expanding its European business.
1998:: Company begins expanding its Latin American business.
2000:: Allen Systems Group purchases Viasoft for $152 million.
2002:: Landmark Systems acquisition is completed. in making their enterprise applications available for use in e-business. With so many products and initiatives becoming a part of ASG, management in 2000 also opened ASG University to train new sales recruits as well as its existing sales force. In addition, during 2000 ASG opened its first office in Africa, established in Johannesburg, South Africa. A second South African office would open in 2001.

ASG completed one major deal in 2001, acquiring SNMP Frameworks, which led to the development of a Web-based network management and remote network monitoring system. The company also established a strategic alliance with Viaserv Inc. to co-market and promote their e-business solutions. During the course of 2000 ASG opened its 30th international office, adding Sao Paulo, Brazil. Later in the year, ASG formed a distribution partnership with SCI-Tecnologia da Informacao Ltda., which would serve as the exclusive distributor of ASG's Viasoft and Cortex product lines in Brazil. Another major acquisition was agreed to in 2001 but not completed until early in
2002:: the $62 million purchase of Reston, Virginia-based Landmark Systems Corporation, maker of management software for mainframe computers.

Founded in 1983, Landmark had been successful for a number of years, but fell on tough times in the late 1990s. Art Allen first attempted to acquire Landmark in 1991 but was turned down by the company's founders, Patrick McGettican and Kathy Clark. Clark was Landmark's CEO in 1998, when according to the Washington Post, "she found herself in what she called the public company equivalent of 'no man's land,' the leader of a technology company that wasn't failing but wasn't in a sexy business that many Wall Street analysts chose to cover. ... Something needed to change. Clark figured she'd start acquiring smaller companies to build Landmark into a super-player. But those she targeted laughed her off--they were raising venture capital and eyeing their own public offerings. 'It was frustrating,' says Clark. 'We were doing okay. We weren't a star performer, but we were doing okay.'" An attempt to move into a new product failed and soon Landmark became the object of suitors, including ASG's Allen, who pulled out his ten-year-old file on the company.

An offer from ASG made in late 2000 came to nothing, followed by another bid in July 2001. In the meantime, Landmark's condition continued to deteriorate. In the words of the Washington Post, "Clark was terrified of the 'death spiral' of layoffs, lost customers, more layoffs, and more lost customers. 'I could not bear to watch us shrivel up and die a slow death.'" Because Allen remained persistent about buying Landmark, he maintained contact with Clark until she was finally receptive to a bid. She presented it to her board, which agreed to the sale in December 2001. For ASG the acquisition of Landmark was important because it brought with it a new core competency. To that point, ASG had been involved in three major areas: applications management, operations management, and information management. According to Allen, Landmark's performance management capabilities represented "the fourth leg on the stool," adding tremendous value to ASG's customer base.

Also in 2002, ASG acquired Entact Information Security Corporation, adding new Identity Management solutions to its product line. As a result of a five-year-long acquisition spree, ASG had enjoyed a compounded annual growth rate of 44 percent, with worldwide revenues reaching $175 million during this period, a total that eclipsed Allen's long cherished goal to be a $100 million company by 2001. In 2003 the company was poised to see revenues top $200 million. Set in the autumn of 2003 to launch its first products to enable business service management, ASG was positioned to continue its impressive rate of growth. Allen, who professed he had no interest in taking ASG public, established a new and even more ambitious target, to generate $500 million in annual revenues within the next three years.

Company History:

Allen Systems Group, Inc. (ASG) is a Naples, Florida-based company offering products to enhance the performance of clients' information technology systems. ASG's myriad of product suites deliver more than 150 solutions, divided into six major categories: Identity Management, Applications Management, Operations Management, Performance Management, Information Management, and Infrastructure Management. Identity Management controls who in an enterprise is allowed access to information and how much. ASG solutions are capable of maintaining the full lifecycle of information access, from the issuance of an account to its termination. Applications Management Solutions helps clients keep abreast of new and emerging technologies. ASG is capable of analyzing existing systems, enhancing those systems, and integrating new applications. Operations Management Solutions assists in the efficient and cost-effective management of workloads on clients' IT systems, whether the environment is mainframe or multi-platform. ASG's Information Management Solutions helps to organize and deliver vital business information, either structured (in the form of a database) or unstructured (i.e. paper/electronic documents and enterprise reports). Performance Management Solutions helps clients to efficiently monitor the performance of, and spot potential problems in, specific operating systems. Last, ASG's Infrastructure Management Solutions offers an integrated set of tools that can be used to detect, manage, and resolve problems throughout a client's IT environment. ASG serves more than 7,000 customers worldwide from some 40 offices spread around the globe, 17 of which are located in North and South America and another 19 in Europe, the Middle East, and Africa. ASG also maintains five software development offices in Australia, China, Indonesia, and Japan. Approximately 90 percent of Global 5000 companies rely on ASG in some form. Major clients include American Express, Coca-Cola, DaimlerChrysler, General Electric, HSBC, IBM, Lockheed Martin, Toyota, and Wells Fargo.

Founding of ASG: 1986

The man behind the founding of ASG was Arthur L. Allen, who had a significant background in the software industry before ASG. In 1976 he formed Allen Services Corporation, which he sold in 1981 for $18 million and then retired to Naples, Florida. Still retaining old connections and an interest in the software industry, Allen came out of retirement in 1986 when a friend asked if he could help him market a performance-monitoring product for IDMS databases. As a result, Allen, using just $2,000 in savings and a $100,000 line of credit, formed a new company, Allen Systems Group. In his previous company, Allen had a partner but decided to go it alone this time. According to a Fort Myers, Florida newspaper, News-Press, "A decision with a partner to sell an earlier software venture resulted in one of Allen's current chief competitors owning--and profiting greatly--from his work. 'In my first business, I had one partner and I have determined that is one too many,' Allen said." Although the outlay in cash he committed to his new enterprise was modest, Allen's ambitions were not. He told the News-Press, "The true vision from the beginning was to be a global company and to exceed $100 million (in revenue) by 2001."

ASG's first marketing effort, the IDMS monitoring tool called ShopMon, was joined a few months later by a product called Fast Access, which helped to increase the throughput for IDMS databases. Believing that the product held great potential, Allen bought Fast Access from the Christian Broadcasting Network, the first of what would become more than 30 acquisitions. Most of these acquisitions during the first dozen years were small, ranging in cost from $1 million to $5 million. In addition to acquisitions, Allen also looked to organic growth. By either means, ASG diversified its customer base and distribution channels, and as a consequence it also built a highly diverse staff. By the end of the 1980s the company had accumulated a varied line of automation and performance software products supporting IBM mainframe software, and boasted sales and technical offices throughout the United States, Canada, Denmark, Norway, the United Kingdom, and Sweden. ASG encountered some cash flow problems because of lengthy delays involved in collecting from international customers, who paid weeks and in some cases months later than domestic customers. Most of the delay was the result of banking bottlenecks, prompting ASG to open bank deposit accounts in key foreign banks and to institute a daily, global cash management system. By mid-afternoon each day, Allen received a consolidated cash report telling him the status of all ASG's bank accounts and the company's line of credit. He then had all excess international funds transferred to a U.S. account, where they were invested on a short-term basis. Allen estimated that he only had to devote an hour of staff time and ten minutes of his own time each day to make the system work. But as a result of this modicum of effort, ASG improved its margins and greatly mitigated any cash flow problems that might hinder the growth of the small company.

European Push in 1996

After establishing a solid base in the mainframe marketplace, ASG expanded into a number of PC and mid-range platform markets. The company also launched in 1996 a concerted effort to expand its European business. By 1997 ASG was generating $23 million in annual revenues and employed some 175 people. The company's slate of products totaled more than 30, providing solutions for enterprise service management, CA-IDMS, data center automation, job control management, file transfer, and data entry. Starting in 1998 ASG completed a series of significant acquisitions that resulted in explosive growth for the company over the next five years. In March 1998 ASG acquired Impact Software Technologies, thereby adding a rapid maintenance and enhancement tool to analyze mainframe systems. A graphical user interface provided an instant, in-depth presentation of the attributes and relationships of an IT system in an easy-to-grasp format. A month later ASG announced that it had bought IMPACT Software Technologies, a French software development firm that developed a computer program which was a strategic fit for ASG's suite of data center automation products. Another important pickup occurred in July 1998, when ASG purchased Firesign Computer Company and bolstered its slate of data center automation products with the addition of Outbound, Firesign's signature product, which provided a high-speed and reliable way to implement on-demand and automated data transfer across multiple platforms. Next, in September 1998, ASG completed two acquisitions. In its largest acquisition to date, ASG bought the oldest and largest vendor of repository solutions, Amsterdam-based Manager Software Products, with solutions that included the management of information assets, IT infrastructure, data, and process models. ASG also purchased Emprise Technologies, adding the CATS and CSD/Auditor products for CICS change management. Moreover, in 1998 ASG initiated a plan to move aggressively into the Mexican, Latin American, and Caribbean Basin markets, similar to its successful European plan of two years earlier. The strategy called for expansion in both direct and indirect sales, targeting the key markets of Brazil, Argentina, Chile, Mexico, Central America, and Venezuela. Latin America, boasting the world's fastest growing technology market, offered especially promising opportunities for ASG. In 1998 the company also forged strategic alliances with FirstSense and Harris Corporation to integrate complementary products.

ASG completed one major deal in 1999, acquiring several mainframe scheduling and intelligent management tools from Computer Associates, which had months earlier picked them up as part of a purchase of Platinum Technologies. In order to comply with U.S. antitrust regulations, CA was required to divest the products in question. As a result, ASG added such orphaned products as AutoSys/Zeke, AutoRerun, AutoMedia, and CCC/Life Cycle Manager, thus establishing a strong foundation in the Operations Management category. Furthermore, the procurement of the Platinum Technology products put ASG in line to become a $70 million company in 2000, thus making it the third largest private software company in the country, according to Software Magazine.

More important acquisitions followed in 2000. In January ASG acquired SISRO, adding a distributed platform scheduler, a production repository, and JCL Generation tool to its list of products. Also in January, ASG bought BETA Systems Software's line of workload products, rounding out its Operations Management tools. Later in 2000 ASG acquired Network Software Associates, adding Report.Web, a multihost publishing and distribution tool for corporate intranet/extranet environments that allowed immediate access to reports from any host source using a standard web browser. ASG also bought the Safari suite of data access, management, and reporting tools from Condor Technology Solutions, Inc. ASG followed with an even more noteworthy deal, the $152 million purchase of Viasoft, a former Wall Street darling. Viasoft first came into prominence after going public in 1995 when it became involved in the Y2K business, helping corporations prepare their systems for the change to 2000. Viasoft, initially priced at $8 a share, saw its stock soar beyond $55 before beginning a long decline. ASG agreed to pay approximately $8.40 a share (essentially double the IPO price when a 2-for-1 stock split was taken into account). As a result of the deal, ASG added Viasoft's Existing Systems Workbench, a tool that nicely complemented its Applications Management product line, and Viasoft's Rochade repository that greatly enhanced ASG's position as major world player in repository and metadata management. In other developments in 2000, ASG entered into an important development partnership with Sybase, Inc., one of the largest, global, independent software companies. ASG was now able to offer a Sybase product bundle to round off its ASG-replication Suite, allowing users to more easily update databases with the assurance of data integrity. ASG announced in September 2000 the establishment of an Enterprise Application Integration division, able to assist clients

Allen Systems Group, Inc. History

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