Data that Works

Data that Works

TECHNOLOGY by Jean Gruss | Editor/Lee-Collier

Some of the biggest names in the hotel industry use DataWorks' software to manage their retail operations.

Now, the company has set its sights on international markets and other parts of hotel operations.

Tucked away in a small office park near the greyhound racetrack in Bonita Springs, a small software company is running as fast as the dogs across the street.

At the center of DataWorks Inc. is founder and chief executive officer Mark Cecil, who has quietly built his company into a leading software developer for the hotel management business.

Some of the biggest names in the lodging industry use DataWorks software to track sales and purchasing at shops located inside their properties. Customers include huge players such as Ritz Carlton, Hilton and Harrah's as well as smaller luxury brands such as the Don Cesar, Naples Beach Hotel, Peabody and the Sea Island Co.

How DataWorks became such as market leader in that niche is a lesson in focused management. One important lesson, Cecil says, is that offering more products is not necessarily better. Another is that you'd better follow customer trends carefully, a lesson Cecil says he learned the hard way during the technology bust that almost wiped out the business.

Save for some bank loans, the company has grown without outside capital. Before the tech bust, Cecil and Guy Ardizoni, the vice president of sales and marketing who owns a minority stake in the business, had dreams of venture capitalists swooping in and helping them take the company public. Ardizoni was going to retire and play golf seven days a week and Cecil planned to fly high-performance airplanes (he has a pilot's license).

Chastened by the tech bust, Cecil tells investment bankers today: "I'm 50 and have seven children. Come back later."

Tech artist

Cecil got hooked on computers in high school in the 1970s. His father, a retired jet-fighter pilot, taught math at Naples High School, which was one of the few in the country to have a computer with which kids could experiment.

In college, Cecil detoured and ended up with a master's degree in fine arts, specializing in painting and sculpture. But his fascination with computers led him to figure out how to mix that with art. For example, he animated sculptures using computers and wrote his own computer-assisted design software (CAD) before any existed.

Cecil returned to Naples in 1986 and met Ed Verdesca, a retired IBM consultant who started a chain of women's clothing stores called Jami's. Verdesca's son had written a rudimentary program to keep track of sales and inventory and after his son left town the elder Verdesca asked Cecil if he could update and maintain it.

"He had no idea how an invoice was paid," Verdesca recalls. But Cecil quickly learned and added new functions to the program, allowing Verdesca to track sales and inventory at 14 stores. "Ed taught me retail," Cecil says.

Armed with less than $100,000 in what he calls "family capital," Cecil started DataWorks using and improving on the Verdesca program.

For about the next 10 years, DataWorks targeted small, family owned fashion retail businesses like Jami's with software that managed information at the point of sale, purchasing and inventory management.

The business was good because smaller retail chains were making the transition from cash registers to computerized systems that linked the different parts of store operations. What's more, cash-register salesmen turned into DataWorks dealers as a way to maintain their customers.

Hotels on steroids

By the mid 1990s, a new trend was occurring in the hospitality industry as hotel companies realized there was more money to be made owning and operating hotel stores than leasing out their lobby space to third-party shopkeepers.

The challenge for hotels was that they didn't have the software systems that could link stores to their specialized accounting systems.

This became even more difficult as the lodging industry built ever-bigger resorts with multiple shops.

In 1995, Cecil got a call from the Naples Beach Hotel asking whether DataWorks could link up the food and beverage tracking software written by a company called Micros with the lobby shop and golf shop. "It had never been done before," Cecil recalled. But working with executives at Micros, Cecil and his engineers wrote the code needed to link the two systems together. "We put retail into hospitality," Cecil says.

That's when executives with Micros realized that if they partnered with DataWorks they could present a more integrated system to hotel customers. Micros' expertise was food and beverage accounting software and DataWorks' expertise was retail-shop accounting.

Micros was a better established software provider and it gave DataWorks clients access to big hospitality customers. Together, they could sell more than they could separately. "That pushed them to be friendly with us," Cecil says.

Then, the casinos started calling. Cecil calls them "hotels on steroids" because of the nonstop shopping and dining that occurs in these gambling resorts. Casino clients include Harrah's, Boyd, Ameristar and Miccosukee Indian Gaming. "I should have had a home in Vegas," Cecil chuckles.

That's when Ardizoni joined DataWorks. Ardizoni had been the No. 2 salesman at Micros and he was looking for a more entrepreneurial opportunity.

Because Cecil couldn't afford to pay him as much as Micros, he gave Ardizoni stock options. Cecil, 50, now owns 83% of the stock of DataWorks and Ardizoni, 52, owns 12%.

Other undisclosed investors own the remaining 5%.

"By '96 I knew the company had changed gears," Cecil says. It had 600 small retail customers and 20 large hospitality customers. "It's two different worlds," Cecil says. "We ended up splitting the company in two." The small-retail software company was "wound down gracefully" as competition drove prices down and software became widely available to smaller retail operations.

Today, DataWorks software for hotels costs from $30,000 to $500,000 per location. It requires an annual maintenance contract of roughly 27% of the price of the software, but a customer won't have to buy upgrades in the future.

IPO Dreams

When Ardizoni got his stock options in the late 1990s, the tech boom was well underway.

By now, Cecil and Ardizoni figured they'd have raised venture capital and had sold stock in an initial public offering. Ardizoni would be golfing and Cecil would be flying his own planes.

At its height in the late 1990s, DataWorks had 35 employees. By the time the tech bust was in full swing, another crisis hit their customers: the terror attacks of Sept. 11, 2001. Cecil and Ardizoni reduced the number of employees to 10.

The business hung by a thread: "Fortunately, Hilton kept buying," Ardizoni says, rolling his eyes.

As difficult as that period was, Cecil kept focusing on improving the company's core product. Now, its software can track retail sales at hotels regardless of taxation, currencies and other accounting headaches.

As a result, DataWorks' best year in business was last year, Cecil says (he declines to cite revenues).

But Cecil learned lessons from the bust and near-fatal collapse of his business. "I'm very, very slow to hire," he says. The company has just 18 employees now. "Ninety percent of our customers out there think we have hundreds of employees," Cecil says.

"The Internet has changed who we are," Cecil says, because employees can live and work virtually anywhere. Currently, employees are scattered in Portland, Chicago and Tampa.

The credit crunch that took Bear Stearns with it also scared Cecil into delaying some investments. He is leery of seeking outside capital, though he acknowledges that DataWorks could quadruple its annual revenue with more financing.

Still, the company is now big enough so it doesn't have to rely on companies such as Micros to get new business. DataWorks recently provided software for Ritz Carlton, bringing the total number of Ritz customers to 20 locations.

DataWorks spends a lot of money getting its name out. For example, it will spend $300,000 this year on trade shows.

Cecil and Ardizoni used to think: "If we stuck our head up someone would shoot it off." But no longer.

Beyond the border

Cecil and Ardizoni now have new ambitions to grow the company. Part of that is because its customers are demanding software that can account for foreign operations. "We're going to be forced by our customers," Ardizoni says. "That's going to be our entry into international." Already, DataWorks has provided its software for hotels in the Caribbean, for example.

In addition, DataWorks engineers are working on software that could handle more than just the retail-shop part of the hotel business. Other hotel areas include food and beverage and purchasing and inventory of fixed assets such as chairs and tables.

The software is getting more complex too in that it can help hotel managers make better decisions. "We're adding intelligence into the software," Cecil explains. "We're telling you what to order."

Still, the key to the software business is customer support. "We are selling an intangible," Cecil says.

REVIEW SUMMARY

Company. DataWorks

Industry. Software technology

Key. Survival and growth sometimes means focusing on a different customer.