No Strings Attached

No Strings Attached

COMPANIES by Janet Leiser | Senior Editor

CEO Charlotte Baker isn't after venture capital this time. She's clearly in charge, with no one else directing her moves, though she has two partners.

Charlotte Baker learned a tough lesson about rapid growth and bust.

And so Digital Hands has only 25 employees in its sixth year.

The company is nothing like 2nd Century, the previous company founded by Charlotte Baker and partner Vince Rocca. That company grew from three employees to 500 in 18 months and soaked up $155 million in venture capital before it crashed in the dot-com bust.

2nd Century's philosophy was, "Build it and they will come."

Digital Hands is just the opposite.

It only adds staff to meet demand as large customers' sign up for service, not before. The company remotely fixes glitches in desktops, servers and personal device assistants, such as Treos and BlackBerrys, for customers as far away as Hong Kong.

The bulk of the company's employees are technicians. Digital Hands doesn't even have its own salespeople. It relies on what's known in the tech industry as channel distribution, where other companies receive a commission to sell Digital Hands' service, as well as products and services of other businesses.

It's about economies of scale for Digital Hands' 3,700 customers, which pay a manageable, fixed monthly fee of about $15 per desktop.

Customers include MarineMax, the Hillsborough County court system and an international hotel chain. There are small clients with a couple employees and ones with as many as 15,000 workers.

An in-person technician is needed less than 1% of the time to fix computer problems, Baker says from her corner office on the 20th floor of the Colonial Bank Building in downtown Tampa, where poster size pieces of white paper, covered in notes, are stuck to walls.

Contract not required

In late 2001, after their non-compete agreements with 2nd Century expired, Baker and Rocca started Digital Hands with help from Huntington "Hunt" James, the son of Raymond James Financial CEO. Hunt James, who works at Raymond James, provided capital.

Baker declines to discuss revenue, but she says Digital Hands, now profitable, exceeds the industry return on investment average of 70%.

When it comes to customer service, she says about 92% of all calls are answered within 40 seconds, between 8 a.m. and 6 p.m. in the customer's time zone, and problems are resolved within 19.5 minutes on the average.

"No one in our industry can compete with those numbers," she says.

"Our techs are so good we don't even require contracts anymore," she adds. "We don't require our customers to pay up front fees. They're able to get on to our service within four minutes of the time they make the decision, and once they get onto our service, we earn their business every single month."

When a piece of equipment has to be replaced, a customer saves on the expense by sending one of its own employees to get it. Then Digital Hands reconfigures the system remotely.

"We're a friend to IT, we are not a replacement," Baker says.

As good as the numbers may be, Baker still isn't satisfied. She's constantly trying to improve response time.

Baker, Rocca and employees regularly go into the "wall room," where they write notes about the customer service process on large paper stuck to the walls as they seek ways to improve service.

"It's all about pre-planning the 'what if scenarios' and designing the system so the triggers come up automatically as opposed to having to rethink with every single case that comes in," she says.

In addition, Digital Hands' business model has moved beyond the remote help desk idea, she says, adding, "But the religion and philosophy behind it has remained true to the core of what we envisioned."

She even calls the help desk "yesteryear."

The new problem Digital Hands is solving is that of securing roving data as workers become more mobile with laptops and PDAs.

"That's a huge area where you're seeing crisis mentality," Baker says.

She points to a recent federal Veterans Administration's problem where millions of records were recently accessed through a stolen laptop.

"The problem isn't security," Baker says. "The problem is security on remote devices."

Where it's headed

Digital Hands isn't getting left behind the big push in the tech industry to make mobile devices secure, she says, adding: "We look at the marketplace to see what's available and then improve upon it and make it work the way we want to do it."

The company backs up customers' computers every time they plug into the Internet.

At the same time, Digital Hands uses encryption to protect sensitive data, such as social security numbers, financial info or medical records.

If a laptop or PDA with Digital Hands on it is stolen, the company's poison pill wipes it clean when the thief tries to connect to the Internet with it or the hard drive, Baker says.

If it's never again connected to the Internet, sensitive data is already encrypted to protect it.

"If you're dealing with theft, chances are they're not after your hardware," Baker says. "They're after what's on your hard drive."

"From an industry perspective, keeping the mobile worker up, productive, perfectly synced, backed up and encrypted is a challenge," she says. "Right now one of the challenges is encryption. There's a trade-off between backup and encryption. When you introduce encryption, there are some industry wide problems with back up."

Lessons learned

Baker declined to say which companies sell Digital Hands' services, but she did say one is a multibillion-dollar publicly traded business. In all, about six companies sell its services.

While those companies don't push Digital Hands as hard as in-house sales people would, she says, "They've got more people than I could ever have not pushing it as well as I do."

Channel distribution is now a common practice with technology companies, she says.

One of the challenges Digital Hands faces is that it can't lower it prices too much or it might lose its distributors.

"The lower the cost is on my desktops, the more attractive it is to the business owners out there," Baker says. "But the least attractive it is to the distribution channel because they have to make money on it. You have to play that balance."

There are no plans, Baker says, to bring in venture capitalists or even to one day go public.

"Our systems are fully developed," she says. "Why would I want another partner? You give up control, but you also spend a lot of time in meetings reporting. Right now we have the freedom to run as fast and furiously as we can."

Or to grow methodically and profitably.

REVIEW SUMMARY

Company. Digital Hands LLC

Who. Co-founders Charlotte Baker, Vince Rocca and Huntington James

Key. Profitability is dependent on a lean infrastructure and keeping up with changing technology.

Growing Organically

Digital Hands CEO Charlotte Baker says the company has a religion for growing organically.

"When we obtain a new customer that's a large customer with several thousand desktops, what we'll do is give them a time frame that includes us staffing to the new scale," she says.

"A lot of people in our industry put butts in seats, that's the measure, and you'd better go out there and sell and bring everything in. We staff to the customer, to the project, and we scale with our customers as they're brought on."

Digital Hands business model is streamlined, with all non-core functions, including sales, accounting and human resources, outsourced.

"We do so much with so little capital requirement because of innovative ways," she says.

She wouldn't say how much it took to grow Digital Hands to a strong player, but she did say the first two years, after 9/11, were anemic.

The company became profitable in 2002, but that still didn't mean a paycheck for Baker, she says, adding: "I didn't take a paycheck for a good four years."

All profit was reinvested in growing the company, in training people and establishing efficient systems, she says.

"You balance what you need with where the company needs to go," she says.

As for advice for other entrepreneurs, she wouldn't recommend venture capital, if obtainable, right away.

"There's a difference between funding a concept and funding a company," she says. "When you're in the concept stage, I've got a great idea, I've got a great financial model and I think I know where to go for the distribution, the best thing you can do is go get early adopters under coverage. You give price concessions or solve some kind of need. Perhaps you give a discounted price for them taking a risk on you and by proving the concept, that's when you can say I have examples of alpha and beta customers and move to the VC stage.

"I'm just not a big fan of doing the VC route until the business calls for it. That's not to say it's an easy road to go, but it gives you the freedom that we've experienced.

"You don't have to worry about the end game."

Any company, including Digital Hands, is for sale at the right price, she says. But that's not her goal.

She says that she wishes she'd truly understood the mechanics of dilution while she first started her previous company, 2nd Century, in 1998.

"I wish I knew what happens as you get to the A B C and D rounds so I could see really clearly how the mechanics of that works," she says. "It's not just the loss of control, I was really working for someone else. You're not an entrepreneur."