With revenues of over $100m in 2002 and over 2000 customers, Actuate is poised to show the market that it is far more than just another business intelligence vendor. As difficult as that may sound, with Chief Executive Pete Cittadini at the helm, it looks possible. Angel Mehta, Managing Director at Sterling-Hoffman, talks with Pete Cittadini about growing up at Oracle, growth plans for Actuate, and why he was never bitten by the entrepreneurial bug.
Angel Mehta: Tell me how you came to be at Actuate and about your transition to the CEO role.
Peter Cittadini: Nico Nierenberg, founded the company in December of '93 and in September/October of '94 is when I was first approached on the opportunity.
At that point in time, I was looking to get closer to my roots, which were very heavily data-base-oriented having come up in the IT and ISV worlds primarily through database technology as a technician and then in the sales and marketing end of things in the database world. I just saw the opportunity; it was very intuitive to me. A great understanding of the void in the marketplace for this type of technology tightly associated with getting value out of information that's stored in database management systems. I took the jaunt from east coast to west coast back in January of '95.
Angel Mehta: What was the mandate when you were made CEO? What there a specific reason the Board made that transition?
Peter Cittadini: I transitioned over a number of steps. In other words, when I came to Actuate my title was Executive Vice-President. There were responsibilities associated with the initial title, back in 1995, for building the sales and marketing business around the technology. I was not touching the technology at that point in time I was really just bringing the technology to market and creating franchises, if you will, for the technology. Now, I had done that for a good 3 years that being my charter before becoming the CEO. Nico Nierenberg, at the time, wanted me to take the next level up in hierarchy to the President and Chief Operating Officer; that happens 3 years into this adventure. The Charter, then, became the rest of the business, which included the business of building the product itself. So when I transitioned from EVP to President & COO, I picked up the Engineering organization and the Customer Support organization and the CEO, at that time, retained Finance and Administration. Two years of doing the President and COO role then I was promoted to the CEO role and took over the last piece of the business which was the Finance and Administration part of the business; that happened in August of 2000 so the CFO has been reporting to me as of August 2000. That was the last cog in the wheel, if you will, of the Charter being, 'Pete Cittadini you run it all'.
Angel Mehta: When did the IPO happen - height of the bubble, right?
Peter Cittadini: July of '98. The Bubble was in full swing, there is no question. We were born through our IPO as an "Enterprise software" company six months prior to the bubble embracing a new category of software companies called, "Internet Software Companies". Those companies have come and gone but they got the ultimate euphoria during the bubble years. Examples of that are companies that used to have $300 share prices now having $0.35 share prices. Our all time high was $37.00 we're down to $2.00 or $3.00 so that's what's happened to Enterprise software companies versus Internet software companies.
Angel Mehta: What a lot of CEO's are telling me is that their revenue is coming or their incoming growth is going to come from existing customers versus new ones. Is that the case with Actuate, as well?
Peter Cittadini: Clearly, the ratios over the last 2 years have moved toward more repeat revenues from current customers than new account openings. The good news is, however this year we've been through the first three quarters, opening up in excess of 100 new company names per quarter. When you look at the percent of revenues from current customers versus new customers the percentages have gotten higher in '02.
Angel Mehta: Give me a snapshot as to how Actuate differentiates itself from the other BI vendors.
Peter Cittadini: It's always a challenge. The world of ISV's is a tough one. Everything needs to neatly fit into the world's cubbies and we, unfortunately, continuously get characterized as 'business intelligence software' sort of as a catch-all but what we bring to the market is drastically different. Today, we describe ourselves as an 'Information Application Platform'; I would say the salient differentiators between an Information Application Platform and a business intelligence platform is the end result. What you get with an Information Application Platform is an application that's built once and used by many - whereas BI tools are typically desktop-oriented tools that are used differently by many people. Thus, we build a 'one-to-many value relationship' between an end resulting Actuate application, which is built by an IT organization, into production or deployment - whereas the BI folks primarily focus on the warehouse being the 'identity-of-one' with a bunch of tools going over the fence to a multitude of users; there is no cognizance of value the users get from the warehouse. It's not an application which knows upfront the value you are going to get out of using the application. The BI tools don't work that way; thus, corporations have a hard time holding the users of those tools accountable because you need to know how to fend for yourself; it's dependent on your knowledge, your expertise level and the way you can fend for yourself utilizing that tool.
So in that scenario a lot of enterprises that use the BI tools never understand the true value of information to the user whereas the application paradigm layered on top of an Information Application Platform is different. I know exactly the value the application will bring you, thus, I can make a judgment as to what your value is to the firm based on decisions you make through that information flow that I've given you. There are no excuses of "I didn't know how to do the query, I didn't really understand this type of table within the data warehouse and, thus, how can you hold me accountable for my personal performance?" Applications that are layered on top of an Information Application Platform alleviates that out for employees.
Angel Mehta: I'm always interested in the assumptions that CEO's are basing their go-forward plans on. One of those assumptions for Actuate, as you said earlier, is that things aren't improving in terms of the spending environment…
Peter Cittadini: Correct.
Angel Mehta: What are some of the other assumptions?
Peter Cittadini: Assumptions in our business plan for '03?
The climate doesn't get better; however, we're going to be more productive.
There are assumptions on productivity metrics per sale rep. How we intend a sales rep to execute in the '03 Year versus the '02 Year that will bring more revenue dollars to bear in trying to make our business plan for '03.
Other assumptions are that, indeed, IT organizations will have a clear understanding of what an Information Application Platform brings to them as a platform for building applications versus BI tools, thus, we'll be able to capitalize on that further, once again, from a sales productivity standpoint.
There are assumptions that we should grow faster outside of the U.S. then inside of the U.S. based on the numbers being smaller outside than inside - so more revenue from new customer names outside of the U.S. More revenue from current customer names inside the U.S.
The other assumption is that the OEM channel business is going to remain fairly flat and not as virile specifically for Actuate as it was during the bubble years of '98 to 2000 - where people got $50 million dollar rounds of funding and could spend $3 million with us the next day because they thought Actuate reporting was a really cool thing to have within their application. Those types of application companies are not operating in that manner and fashion any longer.
Angel Mehta: Do you find that investors have adjusted their expectations accordingly? Are they finally starting to get it?
Peter Cittadini: I think so. There is no question they certainly value business solidity more than business speculation and they value staying in the black versus saying you're going to stay in the red for an extended period of time because of market share purposes. So ultimately I think the investor climate is a much more realistic and appropriate one for a trajectory of a company like Actuate associated with those investors. Of course, we're in a time where we must be focused and patient because of the reality of the doldrums specifically associated with IT spending.
Angel Mehta: What keeps you up at night when you think of Actuate in 2003?
Peter Cittadini: They're all rather tactical worries to tell you the truth. In other words, I don't have the nightmares a lot of CEO's have when they've invented a technology that's seeking out a market. All the fundamentals from a strategy standpoint are here in spades at Actuate. The market is just in a BIG way requiring what we have. Now, the issue is when will they spend on that requirement? Do we have the right talent? Are we disciplined enough when we don't think we have the right talent to move the wrong talent out and the right talent in everyday? Are we doing the right targeting to the appropriate audiences that will be extremely great contributors to Actuate from a partnering and customer-base standpoint for decades?
It's the tactics that keep me up at night, it's the little nits and nats that each, in and of themselves, are not that worthy of worrying about but, as a whole, are the difference between life or death in the software business.
Angel Mehta: What were some of the surprises you had? How was the experience of becoming a CEO different then what you had expected coming in?
Peter Cittadini: There wasn't that much of a difference to tell you the truth. There was probably a bigger surprise and experience when I took over as President and Chief Operating Officer because of the development aspects - like having engineers reporting to me. If you know about my career, I came up through the sales ranks, although I started in technology a long time ago; I always wanted to get into the business of technology. Technology folks are interesting people…obviously much smarter then your average sales rep, if you will. For me, I've always been very tightly tied in with creating good culture with which field organizations feel real good about being part of. I guess when I took over early on as President and COO I would assume that everything was the same as a field organization. I put my foot in my mouth a number of times saying the wrong things to an engineering audience which is drastically different than a sales organization. A lot of those experiences have happened over the years. My communications are more appropriate depending on the business unit that I speak to; I can also now create communications that cross business units. In other words, we do have a lot of events that happen on an annual basis where there could be 4 or 5 business units present in the audience. That's something you learn through osmosis, you learn through making mistakes, you learn through a number of founders and principle engineers coming up to you saying, "We took that communication this way. We know you didn't mean to say it but 200 people out there think that's what you said." So those were some of the challenges I had is how do you bring the leadership aspect of communications to very diverse groups within the confines of one enterprise.
Angel Mehta: You came up, again, through sales. Do you have any opinions as to what functional path there is to prepare someone to run a software company?
Peter Cittadini: There are some superb CEO's that came up through the engineering, marketing, finance, sales ranks, and virtually every discipline. I think what's important are a lot of the intangibles you have as a human being in order to be an effective CEO.
Angel Mehta: Such as?
Peter Cittadini: It's more like you become the spiritual leader. It's really a weird thing. You walk around and people are looking at your face wondering…if your scowling, whether the sky is falling and if you're smiling, what that might mean. I mean, it's a pretty wild thing being a CEO. If you think about it there's not that many public company CEO's in the world. I'm sure some of us are really good, I'm sure some of us are not very good at all and I'm certain the real good ones have an intangible that you just can't groom, you can't teach that's just there innately in that human being and that's what makes them effective.
Angel Mehta: Can you talk about lessons learned from Oracle and Interleaf…comment on how those experiences shaped you as the CEO that you are right now.
Peter Cittadini: Oracle was great because it was an aggressive place to evolve. I remember having Larry Ellison in the first Mercedes I ever bought. I was dropping Larry off at the Hartford Airport in Connecticut, after a sales call with the Hartford Insurance Group. It was so aggressive that you'd always try to get each other pumped up regardless of who the two employees were; it didn't have to be Larry involved in the conversation. When Larry would fly in, he would be yelling, "Pete this is an amazing opportunity for us! We are going to crush IBM!"; so as we're driving back to the airport, he's screaming and pounding my dashboard and I'm thinking, "Larry, I just picked up this car - would you layoff of the dashboard!". [Laughter] Here he is all excited about the vision of Oracle beating out IBM in the marketplace and its stuff like that that is a tremendous lessoned learned. If you really want to be a $10 billion dollar company, as Oracle is these days, you have to at some point be a $23 million dollar company looking up at IBM…and you've got to believe you can take them out someday. It was a great environment."
I will tell you, Oracle was also a very unique experience because there were a lot of young people doing things for the first time, getting promoted because high-tech and the software business was a very young person's business. You couldn't find a 50-year-old with that skillset and bring he or she into the job. We made a lot of mistakes and it was great because for people like me who LEARNED from mistakes, you just learned a ton. So it was very aggressive, a youthful organization…they allowed you a lot of rope and experimentation.
But bottom line, virtually everyday, I think of something I learned at Oracle and how it applies here.
At Interleaf it was a different deal. We were already a public company, the Charter was to turn them from a desktop publishing company to a mainstream IT company by leveraging document management as the new facet of technology that we would embrace…lots learned there. We took our eye off the ball on the desktop publishing side, which was the lion share of the revenues. Document management back then was not accepted as a generic technology for IT, it was never budgeted for or thought of by CIO's when putting together their budgets. Since we strategically just teeter tottered all the way over to the document management side and left the desktop publishing side to die it died very rapidly; it wasn't appropriately offset in growing revenues from the doc management side. Plus, it wasn't database-oriented. Prior to Oracle, I had many years of database management experience both on the sales and technical side and I just didn't feel I had the intuition that I have associated with mainstream system software, infrastructure-type stuff like databases that run on back-end servers. So I decided I wasn't a good turnaround-type guy. I was always best with a fresh new opportunity where I could grow it from scratch, where I had the opportunity to create culture in the way I like to create culture versus acquiring a very large legacy culture and trying to change hundreds of people to a new culture; it's very very difficult to do. I learned I'm not interested in being that distant from system software and database management-type stuff so that's why Actuate was a godsend to me it had all of the elements of being very tightly tied to database management systems, server-centric system software-type stuff, as well as the potential for brand new opportunities to be created from scratch.
Angel Mehta: You talked about mistakes and learning from mistakes. If you could identify three critical mistakes you've made over the course of the past 10 years - what would they be?
Peter Cittadini: It's a generic mistake, in the cultures that I produce where within companies I'm almost building a family-oriented environment because real successful people at successful companies often have to make sacrifices and choices between family and company and, at times, they get blurred if you're doing it right. So, at times, my wife will be pissed…my kids will be pissed because I have something PRESSING at work…and, at times, people at work will be pissed because I have stuff that's pressing at home that I decide I'm going to have to do versus work and that's just great. I mean, I hope the Actuate employees are always torn because if you choose family all the time I don't think you can be a great company employee and if you choose the company all the time I don't think you can be a great personal human being that necessarily is a good contributor to a family. With that culture, however, you create loyalties that, at times, you'll know an individual from a talent standpoint or a fit standpoint is probably not the best person for the job. Because they fit the culture so well you won't take action on taking someone out and bringing in someone who is more appropriate for the company. In other words, you become a lot less ruthless because the types of cultures that I feel most comfortable with are clearly humanistic-oriented cultures.
Angel Mehta: What are the ongoing initiatives, if any, to maintain the culture you want as you get larger? That's obviously a very difficulty task.
Peter Cittadini: I stay plugged in with employees. I have, in the last number of years become less hands-on than I used to be, especially in the sales ranks. I'm not going to be able to directly participate on the operational aspects of things but when I have more time to do stuff that's less operationally-oriented where I can impact the culture just by having a lot of one-on-one's, a lot of hallway chats with employees, go downstairs and crank up the Margarita machine once in a while which is part of our culture!
Angel Mehta: There is a statement or an opinion that you've thrown around a lot, especially in the bubble years: "The right team with a mediocre offering or business plan is better than a mediocre team with a killer offering". What's your opinion on that? True then, not true now?
Peter Cittadini: In the bubble years, you could have a mediocre offering with a mediocre team and go and knock it dead. I think anything would work between '98 and 2000 to tell you the truth. I think it was an outrageous time in this industry cycle that I don't think will be replicated in our lifetime.
Angel Mehta: Were you ever tempted to go the entrepreneurial route in the bubble?
Peter Cittadini: You mean split and do something different?
Angel Mehta: Yes.
Peter Cittadini: No, absolutely not.
Angel Mehta: Why not?
Peter Cittadini: First of all, I don't think I would be a good entrepreneur. I'm not an inventor, if you will. What I need to do is be coupled with an entrepreneur during the early years of a company's lifecycle because if it's a bunch of clay that's in the midst of being molded and you can't visualize what it is. I'm not very good at creating an end result out of the hunk of clay…in replicating the pottery and enhancing the pottery on a going forward basis but as far as me making something of nothing that's not my thing.
Angel Mehta: What advice would you have for operating executives that are being tempted by the idea of starting their own company? What thought process should they take themselves through?
Peter Cittadini: Don't let your ego fool you. Be extremely cognizant of what your capabilities are, what your strengths are, what the weaknesses are and make sure the weaknesses are extremely well supplemented in whatever deal you do.
Peter Cittadini is CEO of Actuate Corporation. Prior to joining Actuate, he was SVP of Worldwide Operations at Interleaf. Pete also served six years at Oracle where as VP of the North East Region, he led the company's most successful sales group. Pete has also held sales management and technical positions at Applied Data Research, CSC Infonet and MacMillan, Inc. Pete has a B.A. in Liberal Arts from Boston College. For more information about Actuate or Pete Cittadini, email: lmukhey@actuate.com
Angel Mehta is Managing Director at Sterling-Hoffman Management Consultants, a retained executive-search firm focused on CEO, VP Sales, and VP Marketing searches exclusively for enterprise software companies. He can be reached via email at: amehta@sterlinghoffman.net