Technology One completes internal restructure

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ASX-listed financial software developer Technology One has completed an internal restructure which has seen it “decentralise” its operation giving state-based office bosses the power to drive sales and service and control their own destinies.

The restructure--conducted over the past six months--has cost the developer over $1 million and caused its profit margin to decrease by 25 percent last financial year, said Technology One CEO Adrian Di Marco. However, the developer would still report a $10 million profit on sales revenue of $50 million for its year ending June 30, 2003.

Since its inception, the company has operated under a “centralised” structure whereby decisions were driven from its head office in Brisbane. “We've got to be able to respond quickly to competitors [and] we were not being as responsive to customers [in each state],” Di Marco said.

The internal restructure has seen regional managers appointed to Technology One offices in NSW, Victoria, South Australia, Western Australia, Tasmania, the ACT, New Zealand, and Malaysia. Business managers have also been appointed in its research and development centre in Brisbane.

These managers are responsible for putting together a business case each year which is approved by head office. Managers would be responsible for deciding which Technology One products are suitable for each market, hiring sales staff and tweaking pricing. “They are renumerated based on the percentage of profit for the region,” Di Marco said.

A decentralised structure also lets each office tailor product and services offerings as customer requirements are often different across the region.

“It's a good structure to move forward with--we looked at [travel agency] Flight Centre which also has the same ownership concept, where [staff] are renumerated based on a percentage of profitability,” he said.

Di Marco agreed that the new structure shares some similarities with a “franchise model”, where franchisees take ownership of the day-to-day running of their stores. “If there are scratches on the wall he [the manager] can make sure they're fixed and painted,” he said.

With the restructure in place, Technology One expects to see a growth rate of between 10 and 15 percent this financial year compared to last year. The company now has 320 staff and unlike most tech outfits has added 120 staff in the past 18 months, Di Marco said.

Di Marco also claimed that the Oracle/PeopleSoft debacle is a positive situation for the local developer. He said that in the ERP software market “new customers are not being created,” rather the company has to increasingly take new business away from its multinational competitors. Despite this trend, Di Marco claimed the company had closed 15 new contracts at the end of last financial year.

“Oracle and PeopleSoft are trying to acquire customers through acquisition which we think is crazy because it's only going to make those customers unhappy. You can't buy customers, not in the sector we are in. Also they end up with two product lines.

“Over the next couple of years there are going to be some very unhappy Oracle, JD Edwards and PeopleSoft customers,” he said, claiming that these companies will continue to adopt strategies of over-charging, over-pricing and under-delivering.

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