Datacare – Software firm weaves web of gold

20th November 2005

The Datacare Software Group has a client list any company would be proud of: Coca-Cola, Shell, Ford, Morgan Stanley and Walmart are all customers. What makes its roll call of blue-chip firms particularly noteworthy is that Datacare is not some large Silicon Valley enterprise run by dotcom whiz-kids. It is a small Irish business based in Monaghan, where it was set up 20 years ago by John Kelly, then in his late thirties.

Today, Datacare is a €5m turn-over international operation employing 60 people. Its main product, Global Corporate Manager, is a software package that assists companies in meeting their corporate compliance obligations. More than 95% of the firm’s business is with customers outside
Ireland. America is Datacare’s biggest single market.

The company has been consistently the first to market with its type of product, initially on a Windows platform and more recently with a web-based version. “Our aim has always been to use innovations in technology to gain market share,” said Kelly. “The big advantage for our customers is that ours is a global system. It can take regional data and maintain it on a centralised platform for ease of access by head office.”

Before setting up Datacare, Kelly spent many years in the building trade. But he had always taken a keen interest in what was going on in the wider commercial world. He was also an inveterate student. During two decades studying maths, computers, science and management with the Open University he had observed the gathering momentum of the IT phenomenon. Kelly was convinced that before long, people’s personal and working lives were going to be highly technology-dependent. “I wouldn’t describe myself as visionary. I was aware of what was happening and responded to it,” he said. “I started by selling hardware and software packages. What allowed the company to develop was a combination of changes in the regulatory environment and quantum leaps in technology.”

Kelly first became involved in corporate records management software when an accountant friend mentioned what was then a new EU directive on company returns. The ruling was designed to tighten up filing procedures and it put finance professionals under pressure to ensure returns were made on time. In 1987, Kelly and Angela O’Hagan, a co-founder and director, came up with a software programme designed to help them do this. “The software was on a floppy disc in MS-DOS and it was pretty basic, but there was a demand for it because it met a need,” said Kelly.

This acquisition was important because it made us more than a local player

In 1994, Datacare linked up with Michael Business Systems, a British software distribution company, which it subsequently bought from its then parent, GE Capital, in 1996. “This acquisition was important because it made us more than a local player,” said Kelly.

Two years later Datacare broke into the Canadian market and in 1999 opened an office in New York. “Canada was a mature market, but we had contacts there and felt it would be a stepping stone to the wider North American market,” said Kelly. Datacare’s links with Canada remain strong. The company’s North American operation has its headquarters in Toronto.

The next big milestone for Datacare was the move from Windows to the web. Datacare launched a web-based version of its Global Corporate Manager in 2001 following two years of development.

Datacare’s main competition comes not from other software firms, but from in-house developers. “One of our biggest challenges is convincing companies to buy our product instead of building their own,” said Andrew Moore, the company’s vice-president for sales and marketing. “This can require a big shift in thinking because development has been a way of life for them. They stick with it even though we can offer a better value for money proposition. In terms of external competition, we’re about two years ahead of our closest competitors.”

Moore believes Datacare has been successful in landing high-profile clients because of its mindset. “We think like a big company and that allows us to punch above our weight,” he said. “But it’s only one element. The other is that we have a good product and the decision makers have recognised this.”

Datacare is making money, but Kelly is reluctant to say how much. “It’s not that simple because we are still developing the business,” he said. “Every client who buys our software pays an annual service fee of 20%. If we were prepared to just sit back and collect fees we would be an extremely profitable company. But that’s not what we’re about. We have already built an infrastructure that can support at least twice the turnover we have now. We want this company to reach its full potential. You can’t do this without ploughing a lot of money back into development.”

Kelly says Datacare is ready to take its next step forward. The company dominates its niche, but it wants to widen its product to give it broader appeal. “We think the time is right because there are no technological revolutions on the horizon,” said Kelly. “The corporate governance market as a whole is worth about $50 billion. (€43 billion) We’re only in a tiny part of it.”

Datacare has some cash reserves to fund expansion, but not enough to grow at the pace Kelly would like. “We are looking to raise about €10m in order to steepen the growth curve,” he said. “We have a window of opportunity now which we must seize with both hands. If we’re successful we will double our size in 2½ years. A key question is how best to raise the required finance. Do we go for venture capital, an initial public offering or do we simply try to borrow the money?”

Datacare already has outside investors. In 1997 Enterprise Equity put IR£300,000 (€380,000) into the company, while in 2000 there was an injection of $5.4m to help fund development of the web-based system. This came from existing investors and from the venture capital company Penta. EnterpriseIreland also has a small investment in Datacare. Kelly and the senior management team are the majority shareholders in the business.

Part of Datacare’s growth strategy will involve expanding its sales network, and Moore says the firm is looking at doing this in part through reseller channels. It would also like to develop links with some of the global software houses. However, the company is still keen to have its own presence in key European markets. Datacare opened an office in Germany earlier this year and recently signed a big client there. A second is in the pipeline.

Sunday Times – 20th November 2005