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Interview with Dave Hood, Troux

Today, our interview is with Dave Hood, CEO of Troux (www.troux.com), a developer of strategic IT planning software tools which is based in Austin. Troux has been recognized in a number of awards for their growth, and we thought it would be interesting how the firm has transitioned from startup mode to where it is today, as well as on hearing about its future plans.

For our readers not familiar with Troux, explain what your products do?

Dave Hood: At Troux, our roots are in a space we call enterprise architecture. We really focus on what we call strategic IT planning. Forrester and Gartner have both rated us as a leader in the space. We really help businesses and IT leaders to transform their businesses. Companies today are dealing with a faster pace of change in business. Transforming is now a practical matter, and IT is no longer in the back room, because IT is the business. If business transforms, IT has to transform. However, right now they don't really have the necessary tools to do that in a strategic or sustainable way. What we do is give our clients a very robust platform, which allows them to reduce costs, reduce risk and improve their agility. When I talk about agility, I'm talking about growing the top line. Either they can react more quickly, their time to market is lower, or they will just be more efficient in going after market opportunities. So, fundamentally, what we do is help IT leaders identify where they are spending, what programs are redundant or not optimized with business strategy, or projects which do not support business goals. Once they are identified, Troux has a platform to plan out programs to implement changes, and which can be used to manage the product, giving them live status information and guidance to key stakeholders, including both someone on the business side or the IT organization.

Who are your typical customers?

Dave Hood: We really targeting big companies, like the Global 2000, and government agencies. By Global 2000, we're talking about any company with one billion or more in revenues. The reason we're targeting them, is the issues we are talking about are because of complexity, because of their size and pace of change. It's a horizontal play, and we play in various verticals. We don't find that certain verticals need this more than others. Any company trying to be competitive in this very dynamic space has to change, which is all Global 200 companies. We are also finding government agencies have some of the same characteristics as the Global 2000. We're initially targeting the federal government in the U.S., we're doing business with the State of California, and some other governments in Europe. We are finding that more and more Global 2000 companies are not only reducing costs, but making sure that, top to bottom, their projects are lined up with business strategy.

There's been lots of talk about slowdown in the enterprise IT market, has that affected your growth?

Dave Hood: It's definitely given us stronger headwinds. We've seen sales cycles increasing, and saw that in these Global 2000 companies the decision making just got more risk adverse. Despite that, we're still growing at a very health rate. It's slowed down a little bit, but we haven't slowed down as much as the economy, because our value proposition is focused on cost takeout--it's one thing we do very well. The Global 2000 over the last quarter has focused on cost takeout, and that kind of thing resonated in their ears. We can give them a very short payback, in 30-, 60-, and 90-day digestable chunks. We are able to go in with proposals that say: here's how you can strategically and sustainably reduce your costs, here's some near term payback, and within a couple of months you'll see it return results. That has helped a lot. While we were growing well into double digit growth rates, we still are, even if it's just taken us down a little bit. Interestingly enough, we're starting to see things turn a little bit. We are seeing companies starting to get out of cost cutting mode, thinking that it's looking more and more like the recession is over, and thinking how to get ahead of things.

You're venture backed, aren't you?

Dave Hood: We've been around since 2001, as an enterprise software company. We're venture backed by Austin Ventures here in Austin, who are our primary backers. And, we also have Greylock, which is on the East and West Coast, along with a consortium of Scandanavian investors. Those investors ended up with us when we bought a company back in 2004 based in Norway.

Given you've been growing and it's been some time since you gained funding, have you thought much about exit opportunities, especially how you handle that in this market?

Dave Hood: You're always thinking about that. Our primary goal, however, is focused on making sure that both short and long term, you have a strong, independent company. But, you are always looking at what makes sense in the broader ecosystem, and what makes sense through the eyes of the customers. Right now, we are on the path of grodwing this organically, at a very healthy, sustainable rate. Our focus will be on continuing as an independent company. We'll just see how it plays out. We find as we play in the ecosystem, we've leveraged and improved system management vendors such as BMC, HP, and Computer Associates. Their customers find that when they bring Troux into their environments, it helps to liberate their data silos and brings value to the client. We're in partnership with some of these guys, and we don't know how that will play out. But, our primary focus is on delivering to our clients, and continuing to be independently viable.

You've had some recognition of growth and seem to have made it over what--at least from other enterprise software firms we talk to--is a very difficult hump from startup to a company enterprise customers trust to buy from. How did that happen?

Dave Hood: I would have to say, first, that it is hard doing this. I'm not surprised you hear from lots of companies about that. The enterprise software space has been around for a long time, and is a pretty mature space. I think the overall trend, over time, is consolidation--not a lot of new entrants. In the case of Troux, we found an unmet need that was becoming much more visible globally, in a very dynamic and competitive market. We see lots of customers who were engaged in M&A, and they not only had to cut costs 4 percent across the board, they were looking to strategically cut 25% of their costs. They found that in that kind of marketplace, you need to do that much more smartly. We found an unmet need that was hard to solve, and our timing was right. Number two, our technology was purpose built for this opportunity, and it we didn't have to convert something else for this opportunity. The third thing we did was, we tuned our message with languages that CIOs and business leaders can related to. We didn't go in with feature specs, feeds and speeds--we went in with a solution orientation. We found if we did that right, it would attract customers, and they would look right past issues of going with a smaller company. Lastly, we teamed up with people who have credibility, and have mass, working with thought leaders like Gartner and Forrester, who they listen to; to convince them that we had something that is very credible. Plus, we worked with partners to help us deliver some of our service and capabilities--the Accentures of the world, PricewaterhouseCoopers, Infosys, Deloitte -- relationships with some of the bigger system integrators. All of that adds up to a credible story that people believe, and momentum for us. It's also the snowball effect. When you're selling to global 200 companies, if you can sell to them, success breeds success. If you're trying to close a sale at USAA, if you can tell them you are the key platform at Boeing, used to revise some important reports for the board of directors, that gets their attention.

Finally, how big is the company now?

Dave Hood: We are well above double digit rates in revenues, and are very credible in the marketplace. We've got 100 employees, a little bit over 200 Global 2000 customers, and over 60% of the agencies of the federal government as clients. We're profitable, growing at double digits, and have excellent critical mass in the marketplace.

Thanks!