Innovative Systems LLC grew up with local brands such as Volcom Inc. and Hurley, licensing software to help manage inventory, accounting, warehousing, merchandising and other aspects of the companies’ apparel business.
Changes in the apparel industry ecosystem have forced the Laguna Hills-based company—which still counts on revenue from big fish such as Nike Inc., Juicy Couture and VF Corp.’s Splendid, Ella Moss and 7 For All Mankind labels—to look for alternate sources of income.
Its flagship software, “Full Circle,” was developed for midsize to large businesses, the segment of the apparel market that includes companies such as Huntington Beach-based Quiksilver Inc., which has lost roughly 60% of its value this year.
“[The market] has slowed to where 90% of all the sales leads we were getting were for startup companies,” said Joe Schaefer, Innovative Systems’ cofounder. “And what we are seeing at trade shows—the smaller startups are the buzz right now. That gave us the business idea of, ‘Hey, why don’t we take our [full-version software] and strip it down to what these smaller companies need?’
“What we are trying to do, to use a fishing (analogy), is throw lines out there to find the next Volcom. I started with them in 1995 when they had 10 employees in the entire company, and now they do revenue close to $400 million.”
Full Circle Lite
The company recently launched its Full Circle Lite software, which has its big brother’s core features, such as sales, production and accounting modules, said Amy Rasmussen, Innovative’s senior vice president.
Missing from the “lite” version are preproduction, warehouse management and forecasting systems.
“We felt that those are more ‘nice’ to have as the business grows,” Rasmussen said.
Clients that are using the original Full Circle software had to pay a licensing fee for each concurrent user in their companies. They also purchased supporting hardware and pay a monthly maintenance fee to Innovative to perform upgrades and install new features. Buyers of the “lite” version don’t have to pay those costs.
Rasmussen wouldn’t disclose the company’s pricing structure, saying each client is custom-billed based on the size of the company and its business needs. Licensing fees for comparable products by other makers range from $2,500 to $50,000, depending on whether the client needs system setup.
The new release is “simpler, just a quick way to start and go,” she said, adding that it’s hosted by the software company, so “there isn’t a hardware component to it,” making it more attractive to startups with limited budgets.
“Because it’s just a monthly rental,” she said. “If they go out of business or if they decide, ‘Hey, this brand is not going to make it,’ they haven’t invested a large amount of money in the IT infrastructure and in purchasing licenses.”
Full Circle Lite’s first customers include brands such as San Clemente-based Depactus (see related story, page 1), Catch Surf, and Athletic Recon in Costa Mesa.
Transition to the original version of the software, if and when necessary, should go without a glitch, Rasmussen said.
“We kept all of the Full Circle core components identical, and that way, when that business decides they want to hire an IT team and build a hardware structure, they can run [the full version]. There will be no conversion that they need to do.”
Innovative Systems employs 27 at its Laguna Hills headquarters and has added about 120 clients over the past 20 years, Schaefer said. It competes with NGC Software, Computer Generated Solutions’ Blue-Cherry, and Oracle Corp.’s JD Edwards EnterpriseOne.
The company doesn’t work with resellers, Rasmussen said.
“We are the only ones that sell Full Circle and Full Circle Lite, and we are the ones that program on it.”
Schaefer, a programmer by trade, started the hands-on tradition after working in IT departments of apparel brands such as Catch It Sportswear and Beach Patrol.
He founded Innovative Systems with his partner and former boss, John Tengwall, whom he described as “bar none, the best programmer.”
“I went my way, he went his way, and then in 1994 I had the idea to start Innovative Systems, providing software support and programming for Richter Systems,” Schaefer said. “We were their West Coast distributor.”
The two parted ways with the now-defunct Richter in 2000 and decided to develop Full Circle.
“My first demonstration was set with Stussy Inc. in Irvine on 9/11,” Schaefer said. “We rescheduled.”
Stussy was the “high-level beta” tester of the software and is still a customer.
Innovative Systems has grown “a lot over the past 20 years” and has posted 15% to 20% annual increases in revenue each year, Schaefer said, but he declined to disclose figures.
“Competitors like to use my size against me.”
