Turning a Services Company to a $30M Product Company: Bridgeline Digital CEO Thomas Massie (Part 3)

Sramana: A services-based business is a good business to bootstrap because customers are paying for all of the services. How long did that mode of doing business go on?

Thomas Massie: We were a services company for our first six years.

Sramana: What kind of revenue level did you reach in those first six years?

Thomas Massie: We got to $15 million.

Sramana: What changed in 2007 that led you away from the services model?

Thomas Massie: When you start a services business, things are manageable. When you get larger, it becomes more complex. The problem with the services model is that you are chasing your next deal every six to nine months. It is not a scalable business model. You have a difficult time consistently showing differentiation. We realized those were big flaws at that time. We also were implementing other solutions, such as e-commerce platforms and CMS platforms.

We saw gaps where those products could do a lot better and offer a lot more. We laid out the architecture to develop our product suite. We invested a lot of money into the iAPPS product suite. That product was intended to improve our margins and let us create a scalable business. It was also going to let us create an ecosystem that would let customer retention be far higher.

Sramana: Let’s talk about the process of how you came up with the product.

Thomas Massie: We came up with the product idea by listening and having great observation skills. We had strong blue-chip customers who were able to tell us what the ultimate web engagement product would be. At the time we called it a web application management product. We listened to John Hancock and other customers. They told us what they did not like about the other e-commerce platforms out there.

There are analytics and marketing tools suites out there, and we saw an opportunity to bring it all into a single solution. When we first developed the product and launched it, we went to the analysts and showed them its capabilities. It had CMS, e-commerce, web analytics, and e-marketing all built into one unified platform. The analysts at Gartner and Forrester shrugged their shoulders and were not sure if they agreed with that philosophy. They discounted it, and we found that to be discouraging. We kept our conviction and reconfirmed our approach with our customer base.

Meanwhile we have had phenomenal growth with the iAPPS product. Fast forward to today, and the analysts have come out with a new category called web experience management or web engagement management, and they are all predicting that the four legacy categories will merge into this new category. That is exactly what iAPPS is.

This is a lesson on sticking to your convictions. Analysts have a hard time being visionary. They are always experts after the fact.

Sramana: Our philosophy in 1M/1M is to always listen to customers. It doesn’t matter what analysts or investors think. True experts are the ones writing the checks.

Thomas Massie: Our customers gave us the support to keep our convictions. Today analysts think we are brilliant. Four years ago they did not embrace us at all.

This segment is part 3 in the series : Turning a Services Company to a $30M Product Company: Bridgeline Digital CEO Thomas Massie
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