ISSI’S PAPERLESS-CUSTOMS EFFORT GETS BOOST FROM PRICEWATERHOUSE
A tiny Huntington Beach software company eager to feed a burgeoning appetite for international trade is about to get a lot bigger, fueled in part by a $5 million investment from PricewaterhouseCoopers.
Importers Software Services Inc., a 25-person operation that aims to eliminate customs paperwork and bring the promise of globalization to the still-balkanized world of e-commerce, expects the deal to bolster its position in the emerging market for automated international shipping. The money will help hire new employees and launch a marketing campaign.
ISSI plans to seek out another $10 million to $12 million in the next year or so and go public in about 18 months. The company is a subsidiary of The Laxmi Group, which operates a separate information-technology consulting business that employs about 70 people.
The Laxmi Group as a whole generated about $7 million last year, a figure founder Shankar Ram expects to double this year. Ram expects a similar increase for his companies’ combined workforce, to about 200 people.
Under the PricewaterhouseCoopers deal, the accounting firm’s consulting business will use ISSI software for customers that do business overseas. ISSI and PwC are also considering a joint venture to sell complete systems, targeting firms involved in international trade. One of the ideas would be to create an Internet hub for importers and exporters, customized for individual clients. Though the site will generate revenue through advertising and referrals to other service providers, Ram expects that to be a small part of his business. The site’s real benefit, he said, will be directing viewers to ISSI’s own automation products and services.
PwC will pay $3 million now and the remainder later this year.
Forging a Relationship
Ram said the deal has been in the works for about a year as he and the accounting giant mulled the best way to work together.
“They have the knowledge, and I have the software,” Ram said. “What a good marriage.”
Other Big Five accounting firms also occasionally recommend Laxmi’s software to some of their customers. But Ram said he was especially eager to forge a closer relationship with PwC because it has one of the largest international trade consulting practices among the Big Five.
Meanwhile, Pricewaterhouse-Coopers, like many large professional-services firms, has been eager to cash in on businesses’ migration to newer technology, a sector that has been dominated by hundreds of small independent IT consulting and integration firms.
Despite the borderless nature of the Internet and the hype surrounding the so-called global economy, even the most basic international shipments can run into a stack of paperwork and a labyrinth of regulations.
“We have so much confusion with domestic e-commerce, you can just imagine what it’s like internationally,” Ram says.
His company hopes to streamline the process with a suite of applications that handle everything from paperless customs declarations to inventory management to shipment tracking. Pricing ranges from $5,000 per software module to $100,000 plus licensing and renewal fees that vary by customer.
It wasn’t too long ago that Ram was an import himself, emigrating from his native India in1979 with less than $200 in his pocket, to get a master’s degree at Louisiana State University.
After joining a computer mapping company,the first step in what he calls an almost lifelong commitment to the paperless office,he became an independent consultant and formed his own company in Tustin. He left that firm after a disagreement with his partners and went into business for himself designing software that automated the process of producing shipping “manifests,” or cargo inventories, for courier DHL Worldwide Express. In those days, the system used a pre-Internet standard called electronic data interchange, or EDI.
When the Internet entered the mainstream, a light went on for Ram, who quickly scraped up $50,000 of his own money and began designing Internet-compatible customs software. He named the company after his grandmother, which, incidentally, is also a variation of “the Hindu goddess of good fortune.”
Idea Catches On
Thanks to the Internet and the concept of enterprise resource planning,the idea of connecting disparate business databases into a single system that can integrate and manage information in a more holistic manner,business finally began to embrace the idea of automating export and import functions. Stihl Inc., a German manufacturer of power tools, signed on as Ram’s customer in 1989, and soon after, U.S. toy giant Mattel gave Ram’s company its first big shot of credibility.
Today, dozens of large companies use the software, including Minute Maid, Wal-Mart, Epson, Toshiba, Toyota and Eastman Kodak.
Competitors, who also are quickly ramping up their efforts with outside funding and marketing, include Trade Point, Expo Soft, Micro Software, Theta Systems and others. Ram says none provide his company’s comprehensive suite of applications.
Ram is making a push toward the application service provider model, in which his customers would remotely access the software kept on machines operated by Laxmi. The company is still figuring out pricing and licensing details and recruiting test customers. Companies that do business under NAFTA regulations are expected to be the largest initial segment, though the company also is pursuing customers in Europe and Asia, Ram said.
Ram is confident the concept will take off as importers and exporters look for an easy way to bring their business into the computer age and as e-commerce retailers look to expand their reach overseas.
“We’ve just begun to scratch the surface,” he says. “The scope is unlimited. I can’t put an exact number to it, but we know it’s big.” n
