CEO Spotlight: Mark A. Stiffler, Synygy

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

Angel Mehta: Let's start out by talking about how Synygy differentiates from other best-of-breed vendors in the employee incentive management software segment. What are the major differences between Synygy and, say, Callidus Software?

Mark Stiffler: First, superior technology. Synygy technology is 100% web-based J2EE-compliant technology. We've proven that it's scalable and functionally mature. Synygy technology is consistently viewed as being the best technology, especially in the past four quarters, because companies like Callidus have old client server technology and other competitors have unproven web-based software. So, the Number 1 thing is that all of our software runs in your web browser.

The second reason is our business model. We allow clients to license software for an upfront fee like a traditional software company, but also give them the option of an ongoing subscription fee instead. We also provide implementation services on a fixed fee basis rather than a time and materials basis, as is the case with all our competitors. The business model, like the technology, is about reducing risk to clients.

The third factor is that we just have more experience - period. We've been doing this for 12 years now - building software, operating our software at our data centre and using our software in the provision of outsourcing services.

Angel Mehta: How does a company measure ROI with Synygy's product? Incentive management, at first glance, feels like just another extension to an ERP suite. So tell me why incentive management as an application is a must have and not a nice to have.

Mark Stiffler: We had The Giga Group interview our clients and analyze the total economic impact of our solution. The Giga report shows a 173% annual return on investment for the first 3 years - so that's like getting 173% interest for three years in a row. Some of the things that most affect that return on investment are the ability for clients to quickly align their strategies with their variable pay plans. They're not constrained by their existing systems or manual processes. Another factor driving ROI is improving the accuracy, understandability and timeliness of communications so that people are motivated and they change their behaviours to be aligned with the company strategy.

Then, most importantly: there is a direct effect not just on the behind-the-scenes operational costs but on increased revenue, improved margins, reduced employee turnover and overall lower costs of administering and managing what could be a very complex process.

Angel Mehta: One of the things that interests me is that Synygy seems to be one of only a handful of best-of-breed vendors that seems to have grown even through the downturn….you've made it past the $10m level where so many startups seem to get held up. Tell me about some of the key transitions that the company has had to make on its way from a startup to $50m in revenue. I'm talking about fundamental shifts or changes in the organization that might have been painful, but were just necessary to do in order to continue to the next level in each instance.

Mark Stiffler: When I founded the company in 1991, Synygy began with a focus on automating the analysis of sales data for individual sales people. Our first clients were pharmaceutical companies. Over time our work began to include the management of incentive compensation plans, which happened to utilize the same data as for sales analysis. We grew organically, via word of mouth for the first few years. The biggest and the first major transition was in 1998, with incentive compensation solutions representing most of Synygy's revenue, Synygy began to focus exclusively on providing incentive compensation outsourcing solutions and broadening our client base beyond pharmaceuticals.

Angel Mehta: Exactly what do you mean by, "Incentive compensation outsourcing solutions?"

Mark Stiffler: It means providing a service to clients where we process their data, manage their plan rules, do the calculations, validate data, produce reports for participants and produce analysis and payroll files for management. So outsourcing is when Synygy in essence becomes the incentive compensation operations department within a large company.

Back to your earlier questions, the first major transition for Synygy was going from a focus on sales analysis and some relatively fuzzy concepts to the very specific notion that we're selling incentive compensation solutions.

Angel Mehta: In other words, just getting it clear in your minds what exactly you were focusing on?

Mark Stiffler: Right. And in conjunction with that, making the move beyond pharmaceuticals. We realized that the value we were delivering applied to all companies, not just pharmaceutical players. In 2001, we began another major transition and that was a transition from being a services company to being a software company. We made our enterprise incentive management software, which we had built over 10 years and used internally to deliver our services, available for the first time as an installed software solution at client sites. That was a pretty big shift.

Then in 2003, our third major strategic transition was going from a single product company selling Enterprise Incentive Management (EIM) software to a multi-product company selling a suite of Performance Management solutions.

Angel Mehta: Did you anticipate those transitions or did the opportunities sneak up on you?

Mark Stiffler: In the early years, the transitions were more a function of client demand and market need. The later transitions, such as becoming a multi-product company, were a very proactive step to realizing that the future competitors weren't the best of breed vendors with a single product. In the future, we'd be competing against the larger software companies. Assuming the larger enterprise software players are able to catch up to us in terms of their EIM functionality, we had to be in a position where we could offer multiple solutions to customers as a single vendor.

Angel Mehta: Every entrepreneur has a few early moments that can help clarify or convince him or her that they're truly on to something and that it's possible to build a company around whatever the particular concept is. Tell me about what some of those victories were for you in the early days. What was the first win?

Mark Stiffler: Well, we were thrilled with our very first wins because we were earning revenue - that is thrilling in and of itself. Since then, we've grown every quarter, and made the INC 500 Hall of Fame. Things like that that convinced us that, yes, we were on to something. It comes back to those transitions you asked about. Going from a single-product to a multi-product company… moving from a client/server product to a web-based product…those are transitions that have put other software vendors out of business. So having hit them successfully, it gives you a great deal of confidence.

Angel Mehta: What one thing about Synygy are you most pleased with?

Mark Stiffler: Probably our recurring revenue model. It's incredibly important. A company like Callidus is going to face great risk, primarily because they lack recurring revenue. That's what's allowed us to grow over the years - a revenue stream we could count on, year after year.

Angel Mehta: Tell me why Synygy never went out to raise money from venture capital investors? How does one decide whether to raise expansion capital or just to continue growing out of cash flow?

Mark Stiffler: I think I have a very old fashion business model - make money and re-invest all of your profits back into the company. We've been doing that for 12 years. I have some pretty strong beliefs in sources of capital and my opinion is that equity is the most expensive thing you can trade. There are places that you go to as an entrepreneur to look for capital before hitting the venture capitalists.

The first source of capital is personal savings. We were in the hole about $100,000 with my invested savings when I first started Synygy. Other entrepreneurs use their credit cards. They go out to family and friends asking for money. The second source of capital is banks. Early on, even before I needed any money, I went and took out a $17,000 loan from a bank just to pay it back in a few months to show them that I was a credible guy to loan money to. The best source of capital is customers. Just negotiate favorable payment terms. Selling is the cheapest source of capital you can get. So there are other ways to build a business. Finding venture money is not the be all and end all.

Angel Mehta: What's next for Synygy? What are you key priorities in 2004?

Mark Stiffler: Well, 2004 is all about sales execution. We have is a situation where we're recognized as THE LEADER because of our web-based technology, the depth and breadth of our software, the quality of our management team, and our market share and awareness. 2004 is about leveraging that to further gain market share against our competitors.

Angel Mehta: What would your advice be to entrepreneurs that are considering starting a company right now?

Mark Stiffler: The most important thing is to have just one customer. If you can get at least ONE customer, that's really all you need to start a company - and that's my encouragement to any entrepreneur - find a customer, and take it from there. It's always a good time to start a company if you can do that.



Mark A. Stiffler is founder, president, and CEO of Synygy, Inc. Based in suburban Philadelphia, Synygy provides software and services for creating performance-driven organizations. Synygy solutions enable companies to better execute their strategies by "operationalizing" how they drive performance, reward success, and deliver results. Mr. Stiffler holds an MBA from the Sloan School of Management at the Massachusetts Institute of Technology (MIT) and bachelor degrees in Civil Engineering (Project Management) and Management Information Systems from MIT. Feedback on the interview can be sent to: stiffler@synygy.com

Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net










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