Software company weathers economic downturns

The Triangle is full of young startups with freshly minted MBAs and business plans.

Farragut, a 55-employee software design and services company in Durham, is not one of them.

It is, however, a survivor, and after 19 years in business, its story is one that any startup would be wise to heed.

"We had to reinvent ourselves in 2001 and reinvent ourselves in 2007," said Shail Jain, who owns and runs the company with his wife, Sucheta. Shail Jain, 55, is the CEO, and Sucheta, 53, is the chief operating officer.

With the economic downturn hitting their company hard, a misstep at either juncture could have led to the demise of the business, Shail Jain said.

But the Jains adapted to the ever-changing marketplace and expanded into new markets. They also had a solid client base to build upon. More than half Farragut's revenue comes from clients it has had for more than a decade.

That includes the N.C. Rate Bureau, which represents insurers when they make rate hike requests. Since the mid-1990s, the bureau has used software developed by Farragut to collect the data it needs to file rate requests with the state Insurance Department for workers' compensation insurance. Farragut software also is used to administer policies for employers unable to buy workers' comp insurance on the local market.

Farragut's software "enables us to do that effectively," said Ray Evans, the bureau's director.

Among Farragut's newer customers is Guilford County, which uses Farragut software to administer property taxes.

"We were pleased how much it has improved our ... processes," said Ben Chavis, tax director.

Altogether, 10 North Carolina counties accounting for one-third of the state's population - including Wake, Mecklenburg and Orange counties - use Farragut software for property taxes.

Farragut's revenue last year rose 20 percent to $6.8 million. But the key metric, say the Jains, is that the company has enjoyed solid profits in recent years.

Even so, last year's revenue was a far cry from the nearly $12 million Farragut generated at its peak when it was called Intelligent Information Systems and had more than 200 employees in the Triangle and in India. That was in 2001, when businesses were spending heavily on modernizing their information technology systems, which at the time was Farragut's specialty. Revenue plummeted the next year in the wake of the dot.com bust.

Determined

The down cycles that have buffeted Farragut made selling the business a tempting option, but in the end the Jains decided they just couldn't stomach such a move.

"That would be running away," Sucheta Jain said. "Whatever I do, it's for the long term." It helped that the Jains never raised venture capital from outside investors, so they didn't have to answer to anyone but themselves.

So after the latest recession stalled Farragut's growth, they acquired a small Colorado company to expand their software offerings for local governments. They also invested nearly $250,000 to develop the internal know-how to create customized business applications for mobile devices. And they rebranded the company, which had morphed from Intelligent Information Systems to IIS, renaming it Farragut - the name of the Colorado business they acquired.

Their five-year goal is to have 90 employees and $15 million in annual revenue, although Shail Jain allows that "there is definite uncertainty because of the economy."

Indeed, he expects that revenue for 2011 will be flat. That's because, although two segments of its three-pronged business are thriving - mobile applications and information technology consulting and project management - its local government software business is feeling the effects of the budget crunches its customers are facing.

Nobody ever said that reinventing yourself is easy.

Looking to expand

Still, the Jains already are gearing up for future expansion.

Last year, they spent $2.15 million to acquire a 16,000-square-foot building that will accommodate more employees along Meridian Parkway in Durham. Then they spent another $500,000 on upgrading it.

Why buy rather than rent? "Prices are low - and we're not going anywhere," said Shail Jain.

Natives of India, the Jains met in the early 1970s at the Indian Institute of Technology. In 1992, they left behind six-figure salaries at Data General to start what is now Farragut.

Four years later, the couple reached back to India, opening a software development office there. The move worked out well in the early years, but when corporate behemoths such as IBM and Microsoft began expanding dramatically in India the company found it hard to recruit top employees and even harder to retain them. Some employees would get two or three job offers over a weekend.

"We were losing people at a very high rate," Sucheta Jain said. "We would hire good people, train them, start expecting productivity from them and they would be gone."

By 2007, the Jains decided to pull the plug on its India office, which had about 80 employees. One sign of the hot Indian job market at the time: Sucheta Jain secured job offers for the entire IT staff.

Employee loyalty

Despite Farragut's rollercoaster existence, about half of its Durham employees have been with the company for more than 10 years.

The Jains credit that loyalty to the company's willingness to let people try out different roles. The head of the company's local government division started as a salesman. The human resources manager is a former receptionist.

It all starts with the company's recruitment philosophy, said Sucheta Jain. Rather than fixating on a prospective employee's skills, they look for a willingness to learn and grow.

"It's an environment that challenges you and supports you at the same time," said Jeff McDonald, the former salesman who is now vice president of local government solutions.

Robert Lanio, manager of technical infrastructure, joined the company in 1995 and didn't seek a job elsewhere even when the company struggled and initiated layoffs.

"I trusted that the leadership here ... would bring us through," he said. "And, fortunately, I was right about that."