Deal Radar 2010: Logic Software ,Toronto

Logic Software started as a custom development house and still does custom work, but in 2003 it started working on its first “shrink-wrapped” product – Easy Projects.NET, a Web-based project management software. Easy Projects now accounts for about 95% of the company’s revenue.

Logic Software has its headquarters in Toronto, with offices in Victoria, Canada, and Minsk, Belarus. It was founded in 1999 by CEO Vadim Katcherovski. Katcherovski studied computer science in Belarus and then became a network administrator and Microsoft Certified Systems Engineer. But he realized that he preferred interacting with people over machines. “So I decided to start my own software company, got in contact with some of my friends in the USA who were looking for applications to be developed, and I never looked back again,” he said.

Back in 2003, the Web-based project management software market was much less crowded (there are over 600 companies in this market as of now). Logic Software’s primary focus has always been to prove that project management can be easy. And that’s the sweet spot – right between Basecamp and MS Project.

The company says that Basecamp does an excellent job of educating a market about the need for project management software. It exposes thousands of companies to the concept of task tracking and project management. However, sooner or later if a company is growing, it hits the ceiling of the product and starts looking for an alternative, more powerful solution. That’s where Logic Software comes in. At the other end of the spectrum, an increasing number of companies are trying to find an easier alternative to MS Project. Not everyone wants to spend from one to four weeks attending training courses. And again, Logic Software aims to help these organizations.

According to Gartner, the project management market was worth $1.6 billion in 2009. Logic Software’s top segments are IT and marketing departments and small and medium-sized organizations, especially in the higher education and health services industries.

The company gained traction through its focus on early adopters, people who were not afraid to go against “Nobody gets fired for buying IBM.” Having an in-house/on-premises installation was a big advantage, since the initial target audience was IT, and “techies just love to be in control and tune and set up everything themselves. I’m not sure we would be as successful if we were to offer just SaaS licensing,” said Katcherovski. That group of users helped to spread the word, and the company solicited feedback and testimonials “like crazy.”

Katcherovski sees three main differentiators for Easy Projects.NET. First, it’s an all-in-one product that features not just project management but also time, issue, portfolio, change request, and resources tracking, and team collaboration packages (in partnership with California-based www.vyew.com). The company believes that customers should not have to pay for and learn how to use each of these functions separately, so it brought them together under a single umbrella.

Second is flexibility and freedom of choice. “A customer (or the main stakeholder in the project) should always have a choice. We allow customers the option between running EP.NET in-house (licensed software) or using our hosted SaaS service. If customers want to customize the product – no problem; the source code package comes to the rescue. If customers need integration with third-party tools or add-ons, our API is the answer” said Katcherovski. Third is customer support, which means talking with live people. The company also offers e-mail, instant messaging, and remote access support.

Revenues range from $1 million to $3 million, with profit margins of 20% to 30%. Logic Software has been profitable since its first year of operation and has been bootstrapping from the beginning. Katcherovski says that it helps that most of the development is done in the European office, which helps to keep costs low.

In the beginning of 2009, Logic Software was hit with the recession like most other businesses. The future was rather gloomy, and the company’s initial reaction was that it should lay off some people and lower its prices to attract more customers. However, it ended up actually raising prices almost 70%. “Obviously that wasn’t an easy decision,” said Katcherovski. “Our sales people thought I was crazy.” But Logic Software ultimately had its best year ever; sales grew by 73.5% compared to 2008. The company is considering raising some angel capital in the next six to eight months. Ideally, it would like to have someone who can bring not only money, but also expertise and connections to the table.

More than 2,000 customers customers on all six continents use Easy Projects.NET, including Symantec, Corel, Goodyear, United Way, The Mayo Clinic, the United Nations, Ernst & Young, Staples, and the Federal Transit Administration. The average churn rate is 5%, and the company has 20,000–30,000 visitors on its website every month.

Logic Software says that thanks to the constant feedback from the user base, it has a clear product road map. In the next six months the company is going to take a break from adding new functionality and concentrate on making the product more user-friendly. It’s also about to start investing heavily in outbound marketing, a territory that has been untouched until now.

“It might scare off some potential investors, however we don’t have any exit strategy at this time, said Katcherovski. “The product is profitable, we don’t plan to sell it; and the only thing we try to concentrate on is to add value for our end-users. If we can make them happy, I have a feeling, that they’ll make me happy as well.”

I don’t see a project management software company getting funded at this point, given the intensive competition in the market. Thus, my recommendation to Katcherovski is to continue to bootstrap, keep control, and keep going.

Recommended Readings
Deal Radar 2009: The Rubicon Project
Deal Radar 2010: Krawler

This segment is a part in the series : Deal Radar 2010