SCB Computer Technology, Inc. History

Address:

1365 West Brierbrook Road
Memphis, Tennessee 38138
U.S.A.

Telephone: (901) 754-6577
Fax: (901) 754-8463

Website: www.scb.com

Public Company
Incorporated: 1976 as Seltmann, Cobb & Bryant, Inc.
Employees: 1,100
Sales: $109.5 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: SCBI
NAIC: 541511 Custom Computer Programming Services

Company Perspectives:

SCB is following a course for the future that encompasses three key strategic directives: acquisitions, strategic alliances, and internal development. This combination provides a strong foundation to achieve future success.

Company History:

SCB Computer Technology, Inc. is a provider of numerous information technology (IT) services to clients such as state and local government agencies, Fortune 500 companies, and other large organizations. SCB offers its services in five main areas: IT consulting, outsourcing, professional staffing services, telecommunications consulting, and Year 2000 compliance consulting. Headquartered in Memphis, Tennessee, SCB also operates regional offices out of Atlanta, Georgia; Dallas, Texas; Nashville, Tennessee; Long Island, New York; and Phoenix, Arizona. The company has also opened an Emerging Technology Center in Memphis, and has plans in the works to open additional such centers throughout the country.

The Early Years

SCB Computer Technology, Inc. was actually incorporated in 1984, but the company's beginnings date back eight years earlier. In 1976, three employees at Deloitte & Touche in Memphis--Ben Bryant, Scott Cobb, and Lyle Seltmann--founded a company of their own and named it Seltmann, Cobb & Bryant, Inc. The company was formed to provide IT services to other area businesses, which up to that point had been forced to do that type of work in-house.

The three men had varied backgrounds prior to their meeting at Deloitte & Touche, not all of which included extensive training in computer programming and technology. For example, while Cobb began college with the knowledge that he wanted to enter the fields of mathematics or engineering, Bryant graduated from Memphis State University in 1968 with an accounting degree--but ironically did not want to become an accountant. Therefore, on a whim he took an aptitude test for McDonnell Douglas Corp., and began working there as a computer programmer--with no previous experience in the field. Seven years later, he returned to Memphis to work as a consultant at Deloitte & Touche, which led to his meeting up with Cobb and Seltmann. They all shared an interest in computer technology, but had no idea what the field actually had in store for them in the years to come.

In its first year, Seltmann, Cobb & Bryant, Inc. operated with just four employees, including the three founders. The enterprise achieved around $179,000 in revenues that first year, and the three men decided to stick it out and work to achieve further growth.

Eight years later, in 1984, Seltmann, Cobb & Bryant, Inc. was reorganized and incorporated as SCB Computer Technology, Inc. At that time, Cobb assumed the roles of chairman of the board and president, and Bryant began acting as CEO, vice-chairman of the board, and treasurer, finally putting his accounting degree to work. Seltmann later became a strategic planning advisor for the company.

For the next ten years, the company continued to operate as a privately held entity, gradually increasing both its annual revenues and its client list. Most of its growth, however, came from the recruitment of new clients and the provision of additional IT services to existing clients. It soon became clear that if the company was going to grow substantially, it needed the revenue that would come from a public offering of stock.

Growth Through Acquisitions in the Mid-1990s

By 1994 SCB's annual revenue had grown to $28.6 million, but the company posted a loss of $15,000 for the year. The following year, sales increased to $39.2 million, this time with earnings of $1.6 million. At that time, the decision was made to enter the public arena. In February 1996 SCB went public, issuing its stock at just over $5 per share. Cobb turned over his presidency to Bryant, but remained the company's chairman of the board.

The public offering allowed SCB to increase the amount and scope of the services it offered, while also providing funds for the company to begin expanding through acquisitions. In September of that year, SCB purchased Delta Software Systems, Inc., a provider of IT consulting and application development services. Delta had been founded in 1982 as a programming and consulting firm for IBM, and had expanded its services throughout the rest of the decade. After the acquisition, Delta became a subsidiary of SCB.

Meanwhile, three SCB employees had become the targets of a federal grand jury investigation involving the company's billing procedures during a job that was completed for the Tennessee Valley Authority (TVA) in early 1996. Cobb was named in the investigation, along with Executive Vice-President Steve White and an unnamed SCB administrative assistant. The Securities and Exchange Commission (SEC) also began conducting an informal investigation into the matter. On May 31, 1996, SCB paid the TVA around $40,000 in relation to the possible billing errors, although the matter had not yet been settled.

SCB attained 1996 earnings of almost $2 million on sales of $56 million. It was at that time that the company achieved a heap of recognition from the media. First came Cobb's Entrepreneur of the Year Award from the Memphis Business Journal. Then SCB was recognized in the November 1996 issue of Forbes magazine as one of the country's "200 Best Small Companies," ranking 131st. Soon thereafter, Business Week ranked SCB 69th on its list of "Hot Growth Companies" for 1997.

In 1997 SCB completed two more acquisitions. In February, the company purchased Technology Management Resources, Inc., another IT consulting company. Technology Management Resources had been formed in 1991 to provide consulting for special state and local government divisions, including areas such as child support enforcement, welfare, the courts, and human services. The second 1997 acquisition came in June, when SCB purchased Partners Resources, Inc. and Partners Capital Group, which collectively came to be known as The Partners Group. The Partners Group was created in 1986 as a computer leasing company and service provider to the Unisys, Hewlett-Packard, Tandem, and Open Systems user groups. Both Technology Management Resources and The Partners Group were added to SCB's subsidiary holdings. SCB's annual revenues rose to $64.1 million for the year.

The company negotiated another merger deal in May 1998 with Proven Technology, Inc. Proven Technology was a systems integration services company, and was also added to SCB's subsidiary portfolio.

2000 and Beyond

As SCB approached the millennium, it was experiencing an extreme growth spurt. Sales for 1998 skyrocketed to $109.5 million, and by that point the company was operating out of five regional offices in addition to its Memphis headquarters.

In January of that year, the city of Memphis placed on the Top 20 List of "entrepreneurial hot spots" in the United States. SCB not only helped Memphis achieve the notice, but the company also benefited from the city's recognition and the business environment surrounding it. In the January 26, 1998 issue of Memphis Business Journal, SCB Director of Marketing Rick Nunn described the potential benefits for his company when he stated, "We do have more firms here now that are demanding high tech employees." He explained that SCB specialized in providing many such companies with skilled technical employees through its Professional Staffing Services division, and was therefore able to capitalize on the situation. That year, SCB was again recognized by Forbes, this time being ranked 44th in the magazine's list of "200 Best Small Companies" of 1998.

The company also gave something back to the community in which it was headquartered when it contributed to the University of Memphis's Global Information Technology Center project. Spearheaded by Professor Prashant Palvia, the center was developed to research practical applications for global IT, while also providing education, information, and resources to businesses. In 1998 SCB and Bryant himself pledged the equivalent of $1 million to get the center up and running.

SCB's immense growth and success in the end of the decade was a direct result of a headline-making problem in the late 1990s, the "Year 2000" problem. Better known as "Y2K" or the "millennium bug," the problem resulted from many computer systems' inability to properly interpret lines of code containing the two-digit date "00" as 2000 instead of 1900. By 1998, Y2K was stirring up quite a bit of concern throughout the world, as people predicted the crash of a computerized world at the turn of the millennium. SCB benefited from the problem in that one of the company's main offerings was Y2K conversion. In other words, in the late 1990s, SCB gained contracts and was paid millions by numerous clients to convert the code within their computers to read the dates properly after the new century rolled in.

By mid-1998, it was predicted that less than 60 percent of corporate America had completed even the preliminary steps in Y2K conversion. According to James Overstreet in the September 11, 1998 issue of the Triangle Business Journal, "It's an alarming study that illustrates just how lackadaisical corporate America has been when it comes to dealing with Y2K." SCB and its competitors, therefore, had just about all the work they could handle. In fact, as the turn of the century neared, the biggest problem facing SCB was not a shortage of available work, but a difficulty in finding enough qualified technicians to carry out the task. In the July 14, 1997 issue of Memphis Business Journal, SCB's Rick Nunn confirmed: "We are definitely facing a shortage in the workplace. Everything else still has to go on. Other types of businesses can put jobs on the back-burner, but not this one."

Therefore, as the company's revenues and client list rapidly expanded, so did its employee count. The company even resorted to enticing retired government employees who were familiar with the old computer language still used in many present systems to return to the workplace. Furthermore, as the problem neared and demand for conversion increased, the price tag for the work soared. For example, in 1994 many SCB conversion programmers were earning around $35 per hour; in 1998, the same work was being done for $100 per hour or more.

Up to its ears in Y2K contracts, in 1999 SCB began formulating plans to build a new $10 million, 75,000-square-foot headquarters building near its already existing corporate offices. SCB predicted that the expansion would create over 150 new jobs with a median income of around $80,000, in addition to giving the company more space to house its blossoming enterprise. The company obviously predicted future growth as the new century neared; its ability to facilitate such growth, even when its Y2K conversion services were no longer needed, would undoubtedly determine the company's future.

Principal Subsidiaries: Delta Software Systems, Inc.; Technology Management Resources, Inc.; The Partners Group, Inc.; Proven Technology, Inc.

Principal Divisions: Professional Staffing Services.

SCB Computer Technology, Inc. History

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