IPNet Solutions Inc., a company that lives and breathes ERP, EDI,and SCM,is looking to add ASP and IPO to its alphabet soup.
The Newport Beach company has begun its search for mezzanine funding, a round of investment considered the last step in the financing ladder before going public. Though officials won’t say how much they’re looking for, they called the round “substantially more” than the $13 million the company raised last summer.
Much of the money likely will go toward hiring. Officials predict they will triple the firm’s headcount from the current 90 over the next 18 months as the company opens offices throughout the country, the Pacific Rim and Europe.
At the same time, the company has entered a pilot program with computer giant Hewlett-Packard to offer IPNet’s software on an application-service-provider basis.
Jeff Anderson, a managing director at IPNet financier Mellon Ventures who called the investment one of his firm’s best ever confirmed that IPNet is initiating the mezzanine round and talking to underwriters for a public offering.
Virtual Trading
IPNet specializes in linking a business’ enterprise resource planning, electronic data interchange and supply chain management systems with those of their customers and trading partners. The “virtual trading communities” concept is designed to help forecast supply and demand by allowing companies to share information among one another seamlessly and automatically.
Company officials say while the idea is new, it’s a natural progression of now-standard ERP systems that help companies link their own disparate computer systems and departments. But instead of limiting the information flow to internal systems, IPNet promises to unleash its usefulness by integrating it with the systems of affected business partners.
How It Works
The software allows a manufacturer’s pending order for supplies, for instance, to automatically adjust as sales projections change, and to notify suppliers in real time. Those suppliers, in turn, could then immediately adjust their own forecasts and pass that information on to other partners, ad infinitum.
Ultimately, the sharing of information would help eliminate excess capacity, speed up the supply chain and make for better flexibility, not to mention the savings from eliminated paperwork.
IPNet founder and chief executive Donald Willis called the concept a perfect vehicle for so-called “viral marketing,” the informal, word-of-mouth promotion that occurs when customers urge their trading partners to get on a system.
He adds that the company’s progress validates the work he’s put into the company so far.
The 48-year-old says he left a “very comfortable life” as vice president of information systems at Irvine home improvement retailer HomeBase Inc. in 1996, and after getting the blessing of his wife, gathered $2.4 million from friends, family and his own savings to start the company.
“She’s a believer,” Willis says. “We figure we needed to do it now or the window of opportunity would close.”
Sales were slow during IPNet’s first 18 months of business, partly due to what Willis attributed to yet another acronym: the “FUD factor,” industry slang for competitor-generated fear, uncertainty and doubt about any unproven technology.
But as businesses began to adopt the Internet and find ways to milk more value from their ERP systems, IPNet picked up some significant customers, including Northrop Grumman, MotherNature.com and graphics card maker 3Dfx.
Willis says the H-P deal could accelerate that adoption rate by making it easier to use the software with businesses’ existing legacy computer systems.
Poster Child for New Service
Hewlett-Packard is launching an application-service-provider offering that features IPNet’s eBizness Suite and specialized software from one other vendor. IPNet and the other, still unnamed, participant were selected from a pool of hundreds of companies that wanted to participate.
“We’re literally a poster boy for the (H-P) service,” Willis says.
Under the deal, H-P and IPNet will offer the eBizness software in an ASP format, which means the applications will be hosted on H-P’s computers and accessed by customers over high-speed data connections. The ASP model is designed to make it easier to use complex business systems by leaving hardware maintenance and software upgrades to service providers rather than to customers themselves.
IPNet officials predict that at current growth rates, the ASP service will account for up to 30% of its annual revenue within the next three years or so.
H-P plans to add more software companies to its ASP roster as it ramps up the service.
And IPNet is moving ahead with its traditional software business. It recently appointed Hatem El-Sebaaly, a consultant for several area companies including Irvine-based Wonderware Corp., as its chief technology officer. El-Sebaaly will head the company’s software development efforts. And last week, IPNet appointed retail and investments consultant John Levy to its board of directors.
“We’re in just about the hottest spot in a hot market,” Willis says. n
