One Zagreb company has impressed the Americans, yet prefers to keep its growth slow.
As Poslovni Dnevnik/Bernard Ivezic writes on the 6th of April, 2018, a little-known company in Zagreb, Syskit, is the largest manufacturer of enterprise packaged software in the Republic of Croatia. In the USA, the people involved in such work are Microsoft and Oracle, in Germany, SAP, and in Croatia, the first such company was Polar Split, which developed and sold the Croatian counterpart of MS Office, Polar Office, and earned more than a million kuna by doing so. Despite the growth of the software industry, the enterprise software manufacturer in Croatia is still rather small.
Zagreb’s Syskit, the largest domestic software company, has deliberately slowed its growth. It sold part of the business, focused on its own GDPR products and found a strategic partner. Besides that, the name changed. Gone are the days of the company under the name ”Acceleratio” (Latin for acceleration) but Syskit. Poslovni Dnevnik talked with co-founder and director of Syskit, Tony Frankol, about this turnaround.
Most of the software in Croatia is sold as a service, and you package it, paste it, and exhibit it on virtual shelves. Why did Syskit decide on such an approach to software development and sales?
We experience it as a software factory. We manufacture a product in the form of software, and for factories, it’s good to only manufacture products and to just focus on that. That way, they’re the most efficient. The same goes for us. We don’t know it all. We’re experts in a narrow niche. Let’s say, we’re working on Microsoft’s technologies and there we are, at the world’s top [of that business]. Whereas, if you were to ask me something about Oracle or SAP, I wouldn’t be able to answer you. Just as if my phone broke, I’d go and get it fixed, just like you would. Focus is the key.
What kind of services do you offer? Typically, software vendors also offer software development services.
With us, you can buy software. That’s it. No services.
So, no services at all?
Well, we’ll install the software you’ve bought from us, if we agree on that. But it will be free. We don’t sell services!
British Redgate, who invested in a minority stake in Syskit, states that it’s a VC investment, which means they see great potential and expect to expand their investment for a significant percentage. How did your software factory business perform business wise last year?
We rose from 26 to 40 employees, and our income in 2017 jumped 60 percent to 16.3 million kuna. Four years ago, we received the Deloitte Award for one of the three fastest growing technology companies in Croatia. We have grown 272 percent in three years. But that growth was too quick.
Why?
Sometimes slower growth is better. Generally, I think growth above 25 percent can be dangerous, to grow so fast, you need new people. But you can’t just shovel people into your system that way. Every employee is unique to us. No two of them are the same. In addition, each of our day-to-day employees are met with tasks they didn’t have to deal with yesterday.
But businesses usually like growth. Why are you trying to bridle it?
All growth needs to be accompanied by infrastructure. At the end of last year, we moved into a new office, because we no longer had anywhere to sit in the old one. Just that move alone was being prepared for more than half a year. And that isn’t the first move for us, but the third in the last three years. We’re now in a 570 square metre space and we’re quickly filling it up. It’s easier to scale business in Zagreb today, as more coworking spaces have emerged. But it’s still not ideal. What I mean is that speedy growth can result in issues that aren’t that nice. Quite the opposite.
Where did such an increase come from? Where is your income coming from?
From exports. 99.9 percent of our revenue was from exports last year. We had one buyer from Croatia, Zagrebačka banka.
What are the biggest markets for you?
We sell niche products. That means we have at least a few customers everywhere. That’s why our market is the whole world. We have buyers from everywhere. But most of them are from the US and Western Europe. Many of our products are also purchased in China and Japan. But these two markets are very closed off, and if you haven’t got the people on the ground, you can hardly break through and into them. As a rule, wherever English and Microsoft is used, that’s where it goes. Among us, our customer is the largest software manufacturer in the world, Microsoft. But Bayern, Lego and IBM also use us. There are lots of them.
Is there a difference between selling software to Microsoft, or to Bayern and Lego?
Selling to all major systems is equally complicated. Everyone has different purchasing processes. But that’s exactly why, from the beginning, meaning ten years ago, we started to sell software the same way that Apple and Google sell mobile apps today, through app stores. We produce PC apps, but the principle is the same. See, pay and download. All online. Immediately and without our intervention. Such simple and efficient sales and distribution made it possible for us to work from Zagreb.
What turned out to be the key?
A good product and good customer support. We respond to 60% of our requests within one hour. Whether you’re a big corporation or a small family business, everyone get’s the best support.
Who was the first customer for your software?
The first major user was Dell. It made purchases from us in the amount of a couple of thousand dollars. That was one year after we started, in 2010.
How did you begin?
Frane Borozan and I, the founders of Syskit, met in the Split software company, the legendary Polar, alongside Stanislav Prusac. He’s our role model and mentor. Polar is the first company in Croatia to develop and sell its own software package for one million kuna. That’s where we got our idea to build our own software factory. It wasn’t immediate. After Polar, we worked at Perpetuum Mobile where we got acquainted with Microsoft and its SharePoint collaboration solution. Only after that did we develop the SharePoint administration software, which is one of our major products today. Today, we also have the Office365 administration software, remote desktop administration, etc. The breakthrough was when the US introduced the GDPR pandan regulator, which the EU has now introducted. Then, they wanted to record every access through the terminal, and almost all corporate applications, such as accounting and the like, worked across the terminal, it suddenly created a big market for us. It was also very welcome for us that Borozan was advising large companies in the US.
But isn’t the cloud used more today than remote access is?
Ten years ago, remote access was the standard. After that, the cloud was emerging, but with large users, especially those in the US, remote access remained dominant. Even Microsoft realised that large corporations will not use the cloud for much longer when it comes to regulatory and security purposes. Maybe even never, not entirely anyway. Because of this, now that we’re in the second phase of development, we’re thinking about opening an office in the US in the next two years.
What about small customers?
For small users, the standard is Office365, and for them, we’ve got the administration solution that supports it. In addition, especially in Croatia, SharePoint is often used, so there’s a demand for that. But in the past few years, we’ve been developing for Microsoft’s SQL server. We had the impression that this would be a good opportunity, and it turned out that there were already a lot of other players on the market. The biggest of them was Redgate. This is a more interesting team, because as Polar was our inspiration, Polar was inspired by Redgate. This British company, at the time that we appeared on the SQL horizon, was looking for players who could buy such technologies. It was a series of good coincidences.
What separates an SQL solution, what is the database solution that you’ve sold?
We’ve developed a tool that automatically pops up all the SQL servers you use, and gives the administrator a complete overview of what kind of data actually exists. When you take the fact that from the end of May, the EU would end up asking a lot about GDPR data into account, well, it proved to be a very interesting solution. Redgate bought our SQL business. But when we realised that our knowledge could help us in further development, we agreed that Redgate would enter into the co-ownership of Syskit with its investment fund. It’s a minority shareholder.
Did you decide to invest in the capital because of a lack of capital? Previously you sold part of your business…
No. We literally agreed to transfer knowledge. Syskit is a member of CISEx. We regularly go to meetings and help the association. It brings together businesses that probably have the most potential in the Croatian industry today. But just because all of us produce software and export it doesn’t mean that we all do it the same way. I’d even dare to say that it doesn’t mean we all do the same job. Namely, when I listen to colleagues who have organised their work as outsourcing or as digital agencies, or those who’ve focused on exporting to the region, then I hear different problems. We all have different experiences and different good practices. We’re just a fourth in this: a software factory that exports all over the world. Redgate is the same, but on a larger scale than what we are and what we do. I can already say that we’ve learned a lot from them.
But they say from Redgate that they invested in you because you’ll develop business for GDPR?
Yes, we already experienced in our development what it means when the state introduces data regulation. In the United States. Now the same thing, but actually more strict, is being repeated in the EU. We’ve prepared our tools to help companies align with GDPR, track who’s using what data, and what data is being used, and where all of this data is.
You say that your jobs are mostly done online. Are you saying that Americans are buying your software without seeing you?
They see us sometimes, via Skype. Americans are not like Europeans. Here, for every job you’ve to go to eat lamb. In the US, it’s normal for you to negotiate a deal via Skype. What we did from Croatia was neither to an advantage, nor was it to a defect, because most people in the United States don’t even distinguish Croatia from the Czech Republic.
