Fidelity Equity Partners

Problem: Information Overload
Relocating is one of life's most stressful events, made more so by the time consumers must spend establishing service with cable, satellite, phone and broadband providers - often a confusing and challenging process. When they move, consumers must comb through myriad websites or navigate complex service provider phone trees to make purchasing decisions on home services, on which an average household spends about $200 per month.

Solution: One-Stop Shop
AllConnect simplifies the process by providing consumers with the best way to compare, select and order essential home services. The company maintains relationships with more than 200 providers, whose services are passed on to consumers via AllConnect's proprietary technology platform. "No matter where you live, we can tell you down to your local street address exactly what is happening, and what is about to happen as Verizon brings in FiOS, or AT&T brings in U-verse," said Miller.

Because most people first contact power companies before a move, AllConnect's customers - which totaled 3 million last year - are primarily referred to the service by the nation's leading energy companies. Customers are not charged a fee for the AllConnect service - it is covered by the service providers - which makes it a win-win for the energy companies. "It's very simple: We move the needle on customer satisfaction for them," says Miller. "Customers are happier when [the energy companies] provide this free service to them to help simplify their lives." The relationship also benefits the referred home service providers, who can connect with consumers before they make purchasing decisions. Because they reach potential customers at the decision point, providers realize high redemption and retention rates through the partnership.

Once referred to AllConnect, customers have the option of a voice consultation with one of the company's 325 highly trained home services specialists or using a self-serve option on AllConnect's website. In addition to saving customers time, AllConnect offers a cost-effective alternative channel, where customers can optimize purchasing power within their budget parameters and save money. Other applications include direct marketing capabilities, which allow retailers such as home improvement stores to reach a target audience that typically spends about $9,000 within 90 days of a relocation event; and user-generated content, allowing customers to share information on the best services in their area.

The technology behind AllConnect drives its competitive advantage. VoIP provides flexibility for its call centers, and a complex back office allows for real-time integration with service providers. "We have a shop floor-like monitoring capability - if something is going wrong, we know about it immediately,- said Neil Singer, Executive Vice President and Chief Information Officer. This infrastructure will allow the company to expand its serviceable market to 110 million households, to include those reexamining existing services.

"Our entire business is enabled by technology," said Miller.

Q&A with Mark Miller, Chairman and CEO, and Neil Singer, EVP and CIO, AllConnect

Q: Given all the changes that happen in that marketplace, now that you capture the data for the customer, do you have an opportunity to go back and tell the customer, hey, six months ago you had a great opportunity. Now you have a different opportunity. Do you reinforce that?

A: The answer is, yes if they opt in for remarketing, if you will. So what we may do to that consumer is to say, Mr. Singer, you're moving in. Would you like for us to send you special offers from Lowe's when it comes time for you to buy energy-efficient appliances? As we look at marketing to that consumer, we look at advertising as a service. That means special offers. And we also may offer a product called an annual essential home services review, where we'll come back to you proactively and tell you, hey, here are the changes that have occurred. Here are special deals. How do you feel about your current service providers? That's just the world we live in, going back to a point that was made earlier. Our service providers would like to think that they'd capture that consumer's attention and keep them for life, and if they do a great job, they will. But we want to make sure that we're giving them unfettered information. So the answer to that is, yes, but it's an opt-in for us, not just a random call or anything like that.

Q: How do you maintain an agnostic relationship? You mentioned earlier that you were funded by Verizon. What would be the incentive for you, for them not to say, hey, you've got to direct business to Verizon versus Comcast?

A: We understand where our bread is buttered, and - I stole this from one of our early investors, Howard Schultz at Starbucks - the consumer experience is our product, and so we understand that, and that is cultural to the core. We try to level the playing field in terms of the bounties that we get from different categories of service providers, but the determining factor is choice for the consumer. We give them objective consultation, and if you come to our contact center, and you ask our people, our top performers, what is the most important thing that you do, I think two years ago they may have said, "I work hard to build the trust of the consumer," or maybe "I refuse to take no for an answer." But now what they would tell you is, they listen. They listen, and then they match the right service to that consumer based on their specific parameters.

Q: I'm curious if the "green" dimension is becoming a more significant factor for the consumer base that you deal with.

A: The answer is, there's not that much focus on it. It's something you have to proactively help them with. Even though they're coming to us from our Duke Energy Connections, they may not have green energy at the forefront, so we like our positioning in terms of being a proactive messenger to help them save money, potentially, by adopting green energy. One of the reasons consumers don't opt into green energy more frequently is it costs them more to do it, and while they may be very good citizens and want to do what's right for the planet, they can't afford the extra $5 a month. That's playing out now, and ultimately what we're trying to do with these three pilots that we're launching - and this is just emerging - is driving adoption rates by giving them an ROI for that decision. Our power company partners care very deeply about this, and so we care about it, and so it's a natural evolution for us.

Problem: You Can't Manage What You Don't Measure
In a world of product proliferation, how do consumers make the most informed decisions - and how do companies stay on top of the best ways to serve and market to their customers?

Online retailers must learn to harness an enormous breadth of new technology platforms that engage consumers, and make them work to their competitive advantage - with a measurable ROI.

Solution: ASP-based Social Commerce
BazaarVoice sits at the intersection of social media and sales generation, providing a social commerce platform that inherently relies on customer engagement to generate content in the form of ratings, reviews, stories and customer Q&As. This content, which BazaarVoice fully manages for its clients, is then used on customer websites, advertisements, in-store signage, circulars and even product "collars" to help consumers make more informed and rewarding purchasing decisions. Companies ultimately benefit through increased sales and customer satisfaction levels.

According to Hurt, "Customers talk to each other every day about the movies they love, the books they love, the products they love, and there have been many ways to try to get at that information, including focus groups. But what you're seeing online is a reflection of word of mouth, in a digitally archived format, which is incredibly powerful - it's testimonial-grade content without the taint of a testimonial."

Word of mouth isn't always flattering, but BazaarVoice has documented that even negative reviews drive higher in-session conversions than positive reviews because the consumer appreciates candor. Companies with high product return rates often find, after deploying BazaarVoice applications, that there is a direct correlation to low consumer ratings.

In addition to the technology infrastructure and expertise that encourages and digitally archives customer feedback, BazaarVoice also provides the moderation. Meta-tags are applied to the content to increase search engine optimization scores. Content is also monitored according the rules of engagement which prohibits fraudulent activity. This is accomplished primarily through a workforce of stay-at-home mothers - but what they miss in monitoring, brand advocates will catch.

According to Hurt, "The reason we've grown so fast is because this works. PETCO is a great example; they launched a top-rated products path on their website where you can get to the top-rated dog leash that's made out of nylon. The path didn't exist before and those that take it have conversion rates 50% higher than normal and spend over 60% more per order."

Named Vendor of the Year by PETCO; Marketing Innovator of 2006 by ClickZ, the largest online marketing community; and one of the top 100 start-ups in North America by Red Herring, BazaarVoice is, according to Hurt, on a tear. "In every category where word of mouth plays a role, that's a category where you'll see us - either today or very quickly," he says.

Q&A with Brett Hurt, CEO, BazaarVoice

Q: Clearly retailers like Wal-Mart or Amazon have some interest in having completely objective reviews. But when it's your own product or your own service, what do you do when the "one-stars" start rolling in?

A: We actually know that negative reviews drive a higher in-session conversion than positive reviews, because they hit people so hard to say, "Wow, OK. I now trust the positive content on this site." The chances of you leaving at that point are pretty unlikely. So go to Bank of America and look at their Bill Pay reviews. You can sort by most negative; you can sort by most positive. We also have the notion of featured reviews, which always appear at the top, and we hand-select those when we're reviewing this content. But it is very important to be transparent, and again, you have nothing to lose, because this content's going to be out there anyway. The content is going to exist, and the opportunity is to have it be much more voluminous in your site.

If you have serious issues with something, then you should expect some negative reviews. If a company is in a death spiral, we're probably not their best choice. But if they're a growing, healthy company, they have a lot of naturally occurring, positive word of mouth, and we're going to be a reflection of that.

Take Geico - they've got well over 2,000 reviews now, in a few weeks, with no promotion to get people to write it, and they get a 4.5 out of 5. Now, you know, you could say as a marketer, it should always be a 5 out of 5. But we don't live in that world, and everybody knows it, and it's OK. It's so powerful for Geico now, as compared to their competitors, because their competitors don't offer this. So if you are the person that shops that way for something, and you've ended up on a Geico page because of a search engine result that drove you to that content, your chance of converting at that point is really, really high, because you're in an environment now when you know that they're transparent, and you can trust them.

Q: What's your revenue model, pricing, packaging? Also, what about relevance? What about guerilla marking people who come onto the site, and they're really promoting something else, or competitors that come in and try trash you? How do you handle that?

A: The rules are posted upfront on what content we'll post and what won't. And we moderate based on those rules, which are client-configured. So when we do an engagement with a client, they say, "This is the type of content I'll allow, this is what I want.- Again, it can't be a rule that says, "Any one or two star, don't show it," because that's going to blow up in their face, and we don't want to be associated with that, and I wouldn't recommend that at all. We do catch fraudulent reviews all the time. It's a very small problem. It gets press when it is a problem, like the hoteliers have been kind of hammered on this recently. But it's less than .1% of all review volume. Because again, the brand advocates will overwhelm them. And the people that come in, where we do miss it that it's fraudulent, you'll actually see [other customers] respond to them, either if they're trying to be too negative or too positive. Like the 5-star reviews in our system, a lot of times they'll say, here's all the benefits, but I really wish it did x, y z; you're never going to see manufacturer write a review of their product and say, I wish it would do x, y or z.

As far as the pricing model, we are an ASP, we sign typically one- to three-year contracts with clients, and it's volume-based and product-based, so based on the amount of volume that we expect, and again, it is pretty formulaic at this point, we know how much volume we'll get for our business based on the number of metrics we get for them. And then the products they buy. So if they just start out with reviews that would be at one price - typical pricing for large brands is about $20-50,000 a month - because we know that they'll get content and a lot of traffic. And we're actually hosting this content on their sites as well, so we're incurring all the costs for that.

Q: You started your dialogue talking about dish soap. I was just curious as to whether that was a consortium of companies, or was it a specific company?

A: It was Procter and Gamble, dawn-dish.com, the site for Dawn dish soap. It's really interesting that you asked me about that, because Dawn now is rolling out a campaign in stores where around the collars of the dish soap are going to be summaries of the reviews, and, "Please go to dawn-dish.com to read and write reviews." And it's got phenomenal ratings, as you would expect, as that's been a very successful product. We also have five other Procter and Gamble brands that we're rolling out really aggressively across their category right now, they spend $8.4 billion on advertising a year, and this is a very high-leverage activity for them that could get integrated for that.

Problem: Complex Functions, Simplistic Technologies
In large companies, finance and manufacturing divisions have ERP systems. Marketing and sales have CRM. But human resources professionals, who are responsible for dozens of health and welfare programs (medical, dental, vision, disease management) for as many as a half a million active and retired employees, continue to rely on email, telephone and spreadsheets to get their jobs done.

Further, with globalization, M&A activity and union negotiations, these companies' programs are growing increasingly complex, yet the technology remains static - and the processes inefficient. Data is disaggregated, and institutional knowledge leaves with HR professionals when they resign or retire. As a result, Byers says, these organizations frequently pay third-party consultants top dollar to run administrative systems, rather than provide strategic counsel.

Solution: Point. Click. Save.
HighRoads offers a technology-enabled service that centralizes this disparate HR content into a single managed repository to automate the entire HR supplier management process. This centralization helps organizations achieve efficiencies, realize significant savings and, for the first time, easily analyze the impacts of shifts in HR strategies and providers.

Specifically, HighRoads' packaged solutions address HR processes including:

• Supplier management - tracks performance guarantees, helping clients evaluate suppliers
• Contract management - notifies clients when one of hundreds of HR contracts is up for renewal
• Third-party data integration - manages and aggregates client data for open enrollment
• Global data management - rolls up global data to ensure compliance with country requirements
• Procurement management - automates the RFP and renewal process
• SPD management - provides automated legal review and updates for mandatory documents
• Union negotiations management - reflects program changes as result of union negotiations
• Merger & acquisition management -- increases responsiveness following corporate divestitures

According to Byers, HighRoads does not encourage its clients to self-serve. "Human resources professionals do not have the time to learn a new enterprise system," he says. "We actually do the work for them." The company is working on a next-phase benchmarking solution that will allow companies to automatically, confidentially compare their HR programs with industry peers.

Byers says that about 20 percent of the FORTUNE 500 uses one or all of HighRoads' solutions, realizing significant efficiencies and savings. He points to one large client for which those savings are paying dividends. "The client established a tobacco cessation program with some of the dollars saved by using HighRoads," he says. "Their objective now is to save about $1 billion in [smoking-related] claims costs over the next six years, and we're proud to be part of that story."

Q&A with Mike Byers, President and COO, HighRoads

Q: The information you're dealing with is very confidential. What kind of controls are you putting in?

A: We are HIPAA compliant. We've gone all through the security regulations. We're not dealing with the claims data, though.

Q: Can you talk about the competitive landscape? As a company with a few hundred employees, we tend to get a lot of new HR platforms, and it sounds like you've got something very distinctive here.

A: We frequently get lumped in with the human capital management category -- the Taleos, Connexes, Authorias of the world. We don't compete with them at all. We compete with Mercer, Towers Perrin, and Hewitt. We are typically a third of the cost, and we don't have a technology-based competitor.

Q: I'm curious how you came to the conclusion that tools like MTorus and Ariba were not suitable for HR data.

A: Actually, the clients have told us that. I think those tools have been really specific for the procurement team. The complexity of an RFP and the way it gets scored for a medical plan design is so different than ordering generic parts.

Q: Do you have a mid-market solution?

A: We don't have a mid-market solution or a lower end. The smallest two clients we have are Monster.com and ABB with 5,000 lives. That end of the market we tend to find the traditional broker such as Marsh.

Problem: The Plan Is in the Mail
If there was ever an industry slow to adopt technology, construction management was it.

Before iSqFt, contractors sourced projects by going to plan rooms organized by local trade associations and selecting blueprints literally hanging on racks on the walls. From there, the real pain set in-the bidding process. General contractors mailed blueprints to subcontractors, not ever knowing if they were going to respond with a bid. If the architect made a change to the plan, every participant in the project had to then be alerted. For a $40 million new school construction project, that could mean contacting as many as 400 subcontractors to request that they amend their project bids accordingly.

Solution: An Innovative Foundation iSqFt set out to minimize the inefficiencies that exist in the estimating and bidding phase of the construction project life cycle. It first created a web-based application, which was met with interest from local subcontractors. Still, they said, "There is no way you will get a fat-fingered subcontractor to come online and use technology." But iSqFt persisted, partnering with a Georgia-based company that had determined a way to web-enable blueprints to build a subscription-based business model. Eventually, the power of the technology won over the resistant contractors, and iSqFt won the endorsement of the 100-chapter Associated General Contractors of America.

The application facilitates every aspect of the preconstruction process - from helping companies find work to streamlining bidding - bringing everyone together in one more effective, cost-efficient place. The Private Construction Office lets general contractors distribute project plans, specs, addenda and other documents to subcontractors and suppliers - securely and efficiently. With the ability to designate access to each document available in their Construction Office, contractors assume total control over the entire preconstruction process. The Internet Plan Room® provides subcontractors, suppliers, and professional estimators with around-the-clock access to project information, plans, specs and addenda for publicly bid construction projects. Software tools are included to view and print plans, specs and addenda, as well as conduct on-screen takeoffs (surveys of labor and materials required to complete a project). From a new business development standpoint, material suppliers also benefit from the ability to search an entire database of specifications for upcoming projects.

"This may sound odd to you, but we're not ever upset when one of our customers leaves and goes to another company, because the first or second call he makes is to us," says Conway. "He will say, 'I can't do this without you guys.'"

Q&A with Dave Conway, President and CEO, iSqFt


Q: You mentioned that you're able to download the actual source file, are you're able to do take-offs on a regular blueprint?

A: The only take-off that we enable is on the online version of the blueprint. We can extract data out of the source file, but we have to have the permission from the architect to do that.

Q: Do you see that as an opportunity?

A: Yes - I think the market's kind of moving in parallel. The more sophisticated owners - there's a group actually, based in Cincinnati, called CURT, Construction Users Round Table, 50 of the largest construction buyers in the world. And they're driving to really get the industry to adopt technology at a more rapid pace, and there's a product out there that uses 3-D and 4-D parametric technology that enables you to extract data out of that file and make it potentially available to subcontractors. The challenge, of course, is that there's a very disparate kind of level of sophistication. If you've got a graduate degreed mechanical contractor who's willing to go into a 4-D parametric file and use conflict resolution software to understand where the duct work crosses the electrical, there are some guys out there that are interested and willing and able to do that, and there's software out there that will do that for you. But if you think of the painter, he's not going to go into a sophisticated file and figure out how much wall area there is. So either companies like ours will translate that file, take that data, make it available in a format that the painter is willing to use, and comfortable in using, that's part of what will happen in the more sophisticated end of the market. The other part is that it's still going to end up on paper, and we're still going to end up scanning, and it will continue the way we're doing it.

We've thought long and hard about it, and I don't know. The only way that it would be feasible is for us to offshore the takeoff, and we haven't spent enough time to really understand whether or not we can do that. Plumbing is an example where you need fixture count. The image on a blueprint of a fixture is pretty simple. I think that that would be valuable to a building product manufacturer supplier, and they would price it out, and then we would post that price list and know who to post it to. So yes, I think that's where it's all headed, and how it gets there is going to be a function of whether or not we can generate enough cash to continue to invest.

Problem: Administration Trumps Innovation
Most large companies spend the bulk of their IT budgets on maintaining existing systems, at the expense of innovation. Sufficient ROI eludes these organizations as they focus on navigating the complexities of developing software while managing large IT organizations. According to Hughes, "It's simply the cost of time. If [software development] is going to take this long to do and if it's going to cost this much, it's not worth it."

Solution: Piecing it Together
TopCoder addresses this challenge by managing competition among a community of professional software developers representing every facet of software development, from architecture to coding. Hughes defines this community as "a diverse group of individuals, with an affinity in an area of interest. It's not as simple as saying that you can do a virtual work community, a professional network, in the form of a marketplace that looks like eBay. You very much need some set of structures, if you're going to manage a community, to get to some output."

TopCoder begins by looking for an application architecture outcome that can be worked on by a diverse group of programmers. The problem is broken down like a puzzle, in which components are built by individuals and assembly is collaborative. "This is probably the primary differentiator between our process and what others would do, from the standpoint that we're trying to get to an extremely granular level," says Hughes. "We're trying to get these puzzle pieces into a format and a package where we're talking about a de minimus cost profile -- thousands of dollars or sub-thousand dollars -- and timeframes that can be in hours. So we can go and build [software architecture], through a community, in some cases within weeks, in some cases days, and in some cases hours."

Competitions are held in both "Single Round Matches" held online once per week and "Tournaments" held both on-location and online twice per year. Once built by TopCoder's community, a solution is then brought back to the customer's environment, where it is deployed as software, a service or a set of services, or as an installed application.

"If I were to ask your children or grandchildren what they would like to be in the future, their answer would be pro athlete," says Hughes. "But their odds of making it are infinitesimal. TopCoder is trying to make the idea of software development very exciting and attractive, because if this country - and this world - is going to move forward, it's going to take people who find as much satisfaction doing that as trying to become the next Tom Brady." He says that those who pursue the field stand to gain; one TopCoder programmer is on pace to earn a half a million dollars next year.

"This isn't a cheap labor story by any stretch of the imagination -- this is a productivity and efficiency story."

Q&A with Jack Hughes, CEO, TopCoder

Q: How are you insuring that all of these components that are being built globally are coming together into a single system?

A: Because we put that system together. So we break the system down into pieces. We make sure those pieces have the right interfaces exposed, to be able to talk to each other. That's an oversimplification, but that's basically how the process works.

Q: So when someone employs you with a large or a medium sized project, do you break it down? Do you give the customer the tool to break it down? How does that process work?

A: Right now, it's every end of that spectrum, from us doing the entire project, to the customer doing all of that project. We would prefer that the customer do that work, that the customer have the domain experience in-house, the project management experience in-house, the architecture in-house, although architecture, even for us, is going more and more out to our community. We would prefer the client drive it, and look at Top Coder as a platform for two things: a large set of assets - our component catalogs, over 1,000 components, grows very rapidly; and access to a large virtual global development community.

Q: How do you foster trust amongst the members of your virtual community?

A: Trust is probably the most critical element of what we do. We have to be extremely upfront about what we're doing and why we're doing it. When we first started, TopCoder was a series of competitions that didn't have a necessary commercial outcome, but we were very clear to members, in the very beginning, to say this is a commercial endeavor. We're also very clear about [intellectual property]. If we pay you for your IP, we're going to take it. If we don't pay you for it, we're not.

Q: What does the profile of your customer base look like, in size as well as industry?

A: It's cross-industry right now. It's probably about 30 companies that we're actively engaged with. They are primarily large, Fortune 1000 companies. It's ESPN, Constellation Energy, Fidelity on a test basis. There's other financial services firms, there's hedge funds in there. There's manufacturing companies. We're fairly cross industry and we'll look to stay cross industry.

Q: You mentioned innovation. To what degree does a vigorous engineering approach either hinder or foster innovation?

A: Innovation doesn't work without quality. A high quality product takes rigor. A big part of innovation, and a big difference between say the manufacturing industry and the software industry, is that if you look at the price of a car today, it's much higher quality, it has many more features, and it is almost exactly the same price in real dollars as it was in 1960. That's innovation. Software today looks like much more complexity and an exponentially growing cost base, against every point of complexity that happens. So, the software model today, for even the largest companies is, I would argue, unsustainable. So there will be different models that come along, to change how software is done.