January 2005

Ecometry extends its HP 3000 lifespan

Support strategy changes after buyout of firm’s founders

The founders of Ecometry have retired and sold off their e-commerce firm, but that transaction won’t change things for customers as much as another retirement. The new owners of the company will mothball the strategy that all of its HP 3000 customers must leave the platform by HP’s Dec. 31, 2006 support deadline.

Ecometry was founded by Will Smith and Allan Gardner, and those two men sold the privately-held company in December for an undisclosed amount to a partnership of equity firm Golden Gate Capital and current Ecometry executives led by CEO John Marrah. Smith and Gardner retired after building up the application supplier which still counts one of the biggest single groups of HP 3000 packaged application customers.

Marrah said that Ecometry, bolstered by Golden Gate’s $2.5 billion wallet, will pursue an aggressive acquisition strategy in 2005, buying companies to both extend its customer bases and advance its technology. But in the meantime, he said Ecometry will spread the word that HP 3000 sites can expect application support of its MPE-based software during 2007, and perhaps beyond.

“We’re going to extend support of Ecometry,” Marrah explained, “because of the advent of the 3000 support network. It’s really becoming a reality.”

Marrah said in early January that the company hasn’t decided yet on any end date for MPE-based Ecometry support. Up through the end of 2004, customers had been told for three years that Ecometry wouldn’t support HP 3000 installations past 2006.

But in exchange for the support extension, the company will ask its 3000 customers — more than 70 percent of its 380-company base — to move up to the most current version of Ecometry, 6.11/7.0U, to be eligible to remain on their HP 3000s.

With the year-end holiday rush behind them, Ecometry’s sites can consider changes to their systems for the next six to nine months this year. Customers have reported they will be migrating slowly, if at all.

“We are going to get as much life from our HP 3000 as possible,” said Todd Bostwick, Ecometry analyst at Teacher’s Discovery. “We do not want to migrate, and homesteading is our first option at the moment.”

Other sites have been waiting for an event like this before they make a decision about going forward with Ecometry on another platform.

“We have no plans of moving off the HP 3000, MPE 7.0 and Ecometry’s 7.0 application,” said Tony Luna at the United Methodist Publishing House. “This issue will be up for review in October, 2005. Until then we will sit and see what happens.”

Customers who run their businesses with the HP 3000 version of Ecometry will not see major modifications and enhancements, Marrah added. “We are doing new UPS [shipping] updates, and credit card updates,” he said. “The things that are necessary to keep that platform alive and running, we are doing. But we stopped doing enhancements nine months ago on that platform.”

“For the people that the 3000 is doing everything they need, there’s no need to change or migrate,” Marrah said. “If they’re happy with that platform, and they’re able to get third-party support, that’s great. I don’t want to force them off.”

As the clock ticks down to the end of HP’s 3000 support, Ecometry will point its customers “at all of those great third-party support companies,” Marrah said.

Ecometry won’t be realizing additional revenue for moving its 3000 customers to the latest application release, he added. “It’s free to them,” Marrah said. “If we can get them on the current versions, it’s easier for us to provide better support.”

The company regained profitability at the end of 2003. The red ink surfaced when Ecometry was creating an open systems version of its application while weathering a downturn in the economy. The dot-com boom created new customers through 2000, but its bust coincided with Ecometry’s investment in developing a non-3000 version of the software. Migrating customers to the new version has taxed support profitability.

“We never increased support costs,” Marrah said. “We migrated customers almost for free. Over the last four years we cut the company’s resources almost in half, had a hugely significant decrease in revenue, increased customers, increased support requirements and built a new open systems product that we’ve got 90 customers on today.”

Outside enthusiasm, inside management

Ecometry stepped up to its new name — it was known as Smith-Gardner — around the same time that Smith and Gardner took the firm public in 1999. That IPO raised $53 million in capital for the founders and shareholders such as Marrah. He started as Chief Operating Officer and became CEO in 2001, and his share of the company was essential to the buyout.

“I owned 25 percent of Ecometry,” Marrah said, “and we found a financial partner to help us execute a strategy of growth.”

Smith and Gardner attempted to sell the company back into private status in 2003, but a deal with Syngistix fell through. The two founders then paid shareholders $2.70 a share in a transaction that cost Ecometry more than $30 million to go private. The stock had run as high as $22.63 at its peak.

Back in 1999 and 2000, the company was posting yearly revenues of more than $45 million and had a workforce of 400. Its experience in catalog commerce applications made it a leading choice for e-commerce, as mail order companies ramped up their Web-based sales outlets using HP 3000s. Its client base has represented some of the best-known companies among HP 3000 users, including Nordstrom, Lego, Time-Life, Brookstone, Hickory Farms, Levenger, Nine West, Coach, and Urban Outfitters.

Golden Gate, which owns HP 3000 user Herbalife, was excited about buying into Ecometry’s future. “We are very excited to invest in Ecometry,” said David Dominik, a managing director at Golden Gate.

Ecometry’s HP 3000 customers have been slow to move to the open systems product up to now. Marrah said 30 HP 3000 shops have made the switch to open systems versions of the application, adding that the Windows version of Ecometry remains the migration target for more than 90 percent of the shops.