59.5 F
Los Angeles
Tuesday, May 24, 2022

Outsource, of Course



No. 1

CaseStack Inc.

Logistics


2001-2003 Growth:

990.6 percent


Founded:

1999


Origins:

As an executive in the logistics group at Nabisco, Dan Sanker saw a need among small businesses for the sort of supply-chain logistics systems employed by their larger competitors. Sanker formed CaseStack, which brings integrated inventory and tracking systems to small and mid-sized players by acting as an outsourced logistics arm. “We wanted to level the playing field with an outsourcing distribution solution including national transportation, warehousing and the software to manage it all,” he said.


Greatest Contributor to Revenue Growth:

Its clientele includes companies that need national supply-chain systems. CaseStack’s clients can adopt its system without spending months downloading and integrating the company’s software. “Every company spends $1 million on the same software package,” said Sanker. “With us you don’t need to. We’ve already spent a couple of million dollars on our software, and it stays on our server.”


Risks Inherent in Rapid Growth:

The company is growing faster than its ability to hire qualified employees. “It’s hard to find really great people, and there’s not an existing industry to take them from,” said Sanker. The workforce has increased from 16 employees in 2001 to the current 87, and in the coming year he expects to hire 25 sales, logistics and technology personnel.


Biggest Competitors:

UPS and FedEx are entering the market with turnkey shipping services. British-based logistics giant Excel Plc is offering domestic beginning-to-end logistics services, including freight forwarding, warehouse management, multi-modal planning and information technology. CaseStack also faces competition from regional warehousing and transportation companies.


Biggest Challenge in Coming Year:

Continuing to overcome the resistance to logistics outsourcing. CaseStack must convince a company to change its way of doing business before it can make a sale. “Competition these days isn’t product versus product,” Sanker said, “it’s supply chain versus supply chain, and some clients need to understand that.”

Eric Berkowitz



No. 2

Outsource Partners International Inc.

Finance and Accounting


2001-2003 Growth:

941.5 percent


Founded:

1998


Origins:

OPI’s predecessor company was formed when a group from New York accounting firm MLZ Partners started itAccounts, an accounting outsourcing company. After the 2002 passage of the Sarbanes-Oxley Act, which bars accountants from doing certain finance and accounting work for their audit clients, itAccounts acquired the business process outsourcing practice of KPMG LLP. In 2002, itAccounts changed its name to Outsource Partners International.


Greatest Contributors to Revenue Growth:

The acquisition of the KPMG outsourcing practice and infusions of capital from venture capital investors. OPI also employs 300 workers at its service center in Bangalore, India, which has reduced its overall finance and accounting operations costs by about 50 percent, according to the company’s president, Kishore H. Merchandani.


Risks Inherent in Rapid Growth:

The rapid expansion of the accounting outsourcing industry has prompted some states, including California, to consider protecting jobs with legislation barring certain offshore accounting processes, Merchandani said. The American Institute of Certified Public Accountants is also considering a requirement that CPAs disclose their use of third-party service providers to clients.


Biggest Competitors:

Electronic Data Systems, IBM (which bought PricewaterhouseCoopers’s outsourcing practice), Associated Computer Systems and Accenture compete against OPI for contracts.


Biggest Challenge in Coming Year:

Maintaining a steady pipeline of prospective clients and acquiring management and operations employees, both in India and the United States. The salaries of OPI’s Bangalore employees have also gone up 15 percent in the past year. Further salary increases would reduce OPI’s net income.

Eric Berkowitz



No. 3

Soltre Technology

Computer Support


2001-2003 Growth:

629.7 percent


Founded:

1999


Origins:

Soltre’s partners first got together to form Metier, a technology implementation and consulting firm. In 1999, Vivian Chow, Ronald Kong, Arabella Lam and Yayoi Christiansen sold the business to Syntel, a publicly traded information technology firm. After six months in the Syntel fold, the partners left to found Soltre, an application service provider that handles technology functions for organizations running Oracle Corp. software.


Greatest Contributor to Revenue Growth:

A focus on non-profit organizations. Chow said clients including the YMCA, Screen Actors Guild and Los Angeles County Museum of Art find outsourcing IT functions more cost effective than employing a staff, and Soltre’s flat monthly fee means no budget surprises.


Risks Inherent in Rapid Growth:

Ineffective expansion. Soltre stumbled in an attempt to expand into the Texas market, setting up shop and then finding it was unable to lure customers.

Biggest Competitors: “It’s kind of funny,” Chow said, “but it’s Oracle itself.” The $10 billion company, she said, is a good partner when it comes to sales, often referring them business, but it’s far more competitive on the hosting side. Soltre also competes with other regional companies servicing Oracle systems.


Biggest Challenge in Coming Year:

Continuing to grow, cautiously. Soltre is looking to leverage its relationship with the regional YMCA into new business with organizations in Central Florida and Hartford, Conn. On the staffing front, Chow said that finding solid technical people has been relatively easy, but bringing on quality sales personnel remains a challenge.

Jonathan Diamond



No. 4

Madison Partners

Real Estate Brokerage


2001-2003 Growth:

578 percent


Founded:

1997


Origins:

Robert Safai started Madison when he left Beitler Commercial Realty Services in Los Angeles after eight years as an agent. He was joined by colleague and partner Lynwood Fields.


Greatest Contributor to Revenue Growth:

Madison has taken advantage of a heated real estate market that has seen companies once committed to leasing look to acquire properties. It has built on both transaction volume and value by adding a handful of agents culled from the large commercial brokerages with which it competes.


Risks Inherent in Rapid Growth:

Growing too large. Safai believes smaller is better, and keeping the firm at fewer than 15 brokers allows for faster, easier communication and a more tightly knit atmosphere.


Biggest Competitors:

Safai wouldn’t cite specific names, but in a market with national players including Studley, Cushman & Wakefield Inc., CB Richard Ellis Inc. and Grubb & Ellis Co., he considers each of the top brokerages in L.A. County a competitor.


Biggest Challenge in Coming Year:

Adapting to the inevitable end of the current real estate cycle and the beginning of the next. “There’s a capital flow today that’s unparalleled in history, and interest rates have stayed low,” Safai said. “When those two items shift, the volume of investment sales will diminish, so we have to be prepared to make a shift along with it, to have our leasing arm shoulder more of the activity.” Anticipating that change, Madison is expanding its leasing business its brokers close 40 to 50 investment sales and about 100 leases a year. In March the firm added six agents, including four partners, raising the number of employees to 10. The new partners were drawn from Studley and CB Richard Ellis.

Matt Myerhoff



No. 5


DSL Extreme

Internet Service Provider


2001-2003 Growth:

484.2 percent


Founded:

1999


Origins:

A spinoff of co-founders Ari Ramezani and Jim Murphy’s first company, Rampage Cellular, which sold cell phones and pagers. In May 1999, they started selling dial-up services, and a year later began using revenues from those operations to fund a high-speed digital subscriber line product. Sales have since gained momentum, and the partners have expanded into 13 states and continue to move eastward.


Greatest Contributor to Revenue Growth:

Customer service has proved essential for growth, Murphy said, because it has kept word-of-mouth referrals high. “We could have grown faster,” Murphy said, “but we hindered that growth to not stretch resources too thin.” The company’s goal is to answer all phone calls within 90 seconds.


Risks Inherent in Rapid Growth:

Keeping up with changing technology is always the biggest challenge for Internet companies. If a company fails to stay current, it risks falling behind its competitors rapidly.


Biggest Competitors:

Cable companies offering Internet access and the big telecom players such as Verizon online or SBC Yahoo. Competition is in the midst of consolidating now, and smaller mom-and-pop operations are being driven out of business. With more than $11 million in 2003 revenues, DSL Extreme officials said they have “gotten over that hump.” While larger firms offer 24-hour customer care, they often charge for it by the minute.


Biggest Challenge in Coming Year:

Balancing declining prices and a growing customer base. Demand for fast Internet access is growing, but consolidation is forcing downs prices. This means revenue will drop, too. Murphy said DSL Extreme has an advantage because its costs associated with acquiring new business are low given its reliance on referrals.

Kim Holmes



No. 6

David Lewis Co.

Financial Planning


2001-2003 Growth

: 395.5


Founded:

1993


Origins:

After spending nearly a decade placing senior level executives in Big 4 accounting firms and Fortune 500 companies, David Lewis shifted the focus of his business.

Formed originally as an executive search firm, Lewis moved to financial industries consulting in 2001. Key sectors serviced include planning and analysis, accounting, reporting, and financial systems. “Many top firms send out an army of consultants focused on very large projects,” said David Lewis, the firm’s chief executive. “My vision was to create a more effective employment model, sending in one or two consultants, with management experience in large corporations, to execute functional finance work.”


Greatest Contributor to Revenue Growth:

The number of consultants hired the company nearly doubled its roster to 120 this year from 70 employees in 2003. Lewis has a plan to monitor growth to ensure plan markers are being met.


Risk Inherent in Rapid Growth:

Concentrating too heavily in a single industry poses substantial risk: Lewis never absorbs 100 percent of any client’s consulting budget. His largest single client accounts for only 6 percent of overall revenues. “Companies that grow too fast think they have some kind of divine wind at their backs,” he said. “We are obsessive about risk mitigation and losing that mindset is the biggest risk of all.”


Biggest Competitors:

The firm’s staffing model is less volatile than most large consulting firms that staff up rapidly then downsize after a project is finished. Competition has had little impact on growth. “There is more business in the market than we can absorb,” he said. If demand remains balanced with the company’s resources, “competition will not be a factor in our ongoing growth rate.”


Greatest Challenge in Coming Year:

To replicate the success the firm has achieved in Southern California in new markets. Lewis wants to continue to grow regionally while expanding into two of four markets: San Francisco, Dallas, Chicago or Silicon Valley. “We think our business model is portable to locations outside Southern California,” Lewis said. “We deploy people in small teams and match them to projects near their home base, which limits travel demands. We’ve found that’s a key to attracting the Price Waterhouse CPAs and the senior level Fortune 500 people.”

David Geffner



No. 7

Etelecare Phase 2

Call Centers


2001-2003 Growth:

357.1 percent


Founded:

1999


Origins:

Co-chief executives Derek Holley and Jim Franke had led call center operations at McKinsey & Co. and eTelecare with a $10 million round of venture capital in 1999. The company took its first call in September 2000; earlier this year it acquired call center provider Phase 2 Solutions and Holley said a public stock offering could come next year.


Greatest Contributor to Revenue Growth:

Higher prices. Holley said eTelecare’s investments in recruiting, training and performance management result in better service that clients are willing to pay more for.


Risks Inherent in Rapid Growth: ”

The biggest risk in growing this fast really is stretching your people,” Holley said.


Biggest Competitors:

While the call center industry continues to grow, Holley still considers Convergys as the only serious competition. The Cincinnati-based company is one of the largest call center companies in the world.


Biggest Challenge in Coming Year:

Sales specifically, proving to potential clients that spending extra money upfront will bring significant savings in the long run when consumer problems are resolved on the first call, dispatch rates go down and customer satisfaction rates increase.

Lizbeth Scordo


No. 8


Intelli-Tech

Computer Equipment, Services


2001-2003 Growth:

338.4 percent


Founded:

1992


Origins:

Company president Darrell Johnson and his wife Cynthia were toiling in careers in the recreational vehicle and teaching worlds, respectively, when they decided to start their own business. Though it was not part of their backgrounds, the Johnsons targeted computing as an industry of the future. The main criterion: avoiding a cyclical industry. Darrell Johnson took a job at a Glendale computer company to learn the business, spending a year there. The couple then used their savings to launch Intelli-Tech. They have never taken any outside money, funding growth through earnings.


Greatest Contributor to Revenue Growth:

Intelli-Tech targets industries that are doing well even in a down economy. Last year the company focused heavily on the real estate, mortgage and health care markets. The education market, another key segment, has increased spending over the past year and Intelli-Tech has sold thousands of notebook computers and hundreds of wireless packages to schools.


Risks Inherent in Rapid Growth:

“We’ve been profitable since we started so I don’t see our challenges as risks,” said Johnson. “We have more business in the pipe than we know what to do with. Our problem is how are we going to handle and keep our level of service with the employees that we have and the facility that we have until we can get to a larger facility and hire more people.”


Biggest Competitors:

Intelli-Tech is up against other computer value-added resellers with strong service staffs such as CompuCom and Inacom Information Systems, but does not compete with retailers such as CompUSA.


Biggest Challenge in Coming Year:

Finding a new facility. Intelli-Tech has outgrown its space in San Dimas and will most likely have to build a facility since it has been unable to find an available building in the area to suit its needs.

Lizbeth Scordo



No. 9

It’s A Grind Inc.

Coffeehouse Chain


2001-2003 Growth:

307.4 percent


Founded:

1994


Origins:

Marty Cox, a salesman for an office supply company, and his wife Louise Montgomery, a trainer in the telecommunications industry, were coffee fans who felt they could make a better cup than they were served at their local java joints. Financing the business with their credit cards, the pair opened the first It’s A Grind location in Long Beach in 1995. Two years later, they had three stores nearby. The company grew over the next five years before starting to franchise stores in July 2001.


Greatest Contributor to Revenue Growth:

A nearly 50-50 split between company and franchise stores. While there are 45 locations to date, by the end of next year the company will have twice as many coffeehouses due to franchising, nearly 90 percent in California. It’s looking to open 10 to 20 more company stores in the greater Long Beach area to help build the brand locally.


Risks Inherent in Rapid Growth:

Finding the right real estate and making sure franchisees know how to properly set up and run their stores. It takes eight to 12 months for franchisees to open, giving the company’s management team time to work with them on everything from design to construction to employee training, thus filtering out potential problems. “It’s controlled growth,” said Shoeman. “We’re always six months ahead of the curve.”


Biggest Competitors:

Starbucks. The Seattle-based giant is everyone’s rival in the industry, and Shoeman claimed there really isn’t another company on a national scale that is a competitor. Other regional players include International Coffee & Tea LLC’s Coffee Bean & Tea Leaf (No. 87), with more than 240 stores in the Western U.S. and abroad.


Biggest Challenge in Coming Year:

Infrastructure and manpower. The company is adding to the marketing, store development, training, operations support and real estate departments.

David Lott



No. 10

American Apparel Inc.

Clothing


2001-2003 Growth:

286.5 percent


Founded:

1997


Origins:

Dov Charney was selling T-shirts on the streets of Montreal before he came to the United State for high school. Once here, he began buying larger and larger lots wholesale, eventually contracting directly for manufacturing. American Apparel was formed in 1997, outsourcing to plants in the United States and Mexico. Charney eventually found it more efficient to vertically integrate, which fed his desire to sell clothing produced in a “sweat-free” environment. The business expanded manufacturing and distribution to open seven local retail operations.


Greatest Contributor to Revenue Growth:

Demand for quality T-shirts from an emerging population of young adults. It’s a demographic Charney said cares most about style, fit and design of the products.


Risks Inherent in Rapid Growth:

“That you’ll run out of cash,” Charney said. A business like his tries to raise as much money as possible and then watches it closely.


Biggest Competitors:

American Apparel produces a large line of white T-shirts that are sold to others that customize them. In that realm, it competes with major clothing manufacturers such as Hanes, Fruit of the Loom and Gildan Activewear.


Biggest Challenge in Coming Year:

Sales are up 50 percent over the like period last year, and American Apparel is focusing on all aspects of design, from systems to product to retail experience.

Stephanie Stassel

Featured Articles

Related Articles