Some companies like the spotlights, the balloons and the fanfare. They issue press releases at every turn, they keep a prominent public profile and seem to be in perpetual self-promotion mode.
Not that there’s anything wrong with that.
Then there are those companies that seem to just grind it out. They stick to their mission, they execute their business plan, they are efficiently innovative and they generate huge profits. And even though they may serve a global market, they’re almost invisible to their neighbors, who are oblivious to the fact that a company offering a world-class product is right in their own back yard.
Put Penta Technologies Inc. in that latter category.
For 38 years, the Brookfield-based company has worked to develop technology to help large construction companies automate their processes and increase their profit margins.
The firm’s flagship product, Penta, was released to the market in the mid-1990s as a financial and accounting software application for North American construction firms.
Penta Technologies re-released the Penta product in 2004 with features that enable large firms to run their entire operations on one software application.
The industry has responded quickly to the offering.
After the re-release, Penta Technologies increased its new orders by 100 percent, and the company plans to double its revenue within the next three to four years, according to Karl Koenig, chief executive officer of the company.
“The world is filled right now with people who are running 20 different systems, where they may be running an accounting system and a whole series of side systems to do various operational functions,” Koenig said. “What people really want is something that does it all.”
As a direct result of the all-in-one application and the addition of mobile capabilities, Penta Technologies increased its annual revenue by 10 percent in 2005. The company expects to have at least a 30-percent revenue increase in 2006 and plans to increase its revenue by at least 30 percent annually for the next few years, with the goal of doubling the firm’s revenue, Koenig said.
Koenig declined to disclose the company’s annual revenues, but the combined annual revenues of its clients equaled $15 billion in 2005, said Mike Pandl, director of marketing for Penta Technologies.
The company’s clients range in size from 100 to 15,000 employees.
Employees of Penta Technologies are dedicated to improving the Penta product while listening to what customers want and need, Koenig said.
For about 20 years, Penta Technologies has taken its profits and immediately reinvested the money back into the company as it rewrote and redeveloped its software application for the 21st century.
“We wrote in a way that allowed us to have portability across applications, creating a kind of bulletproof foundation that let us keep adding to the product without having to loop back and rewrite things over as the technology changed. And that has been huge,” Koenig said. “Many of our competitors that weren’t able to do that were never quite able to get the financial wherewithal to rewrite and found themselves kind of dwindling because their technology base was no longer in fashion.”
Over the years, Penta Technologies has invested more than $30 million into the development of its product, Koenig said.
In the beginning
Penta Technologies was founded as System 5 by Koenig’s father, William, in 1968 as a response to a need for a financial and accounting system in the construction industry. William was in the construction industry with his brother and father and at the time served as a contractor. The company, like Penta Technologies, was named after its flagship product.
“The original system was mainframe batch technology, and we were a little different in that we offered a time-shared service, which is semi-analogous to the ASP (application service provider) model, or software as a service model of today,” Koenig said.
The System 5 product was a partnership between System 5 and Electronic Data Systems, Corp. (EDS) of Plano, Texas. System 5 sold the product and supported it, and EDS ran the mainframe and the network, Koenig said.
In the mid-1980s, when Koenig took over as chief executive officer, his team began a long, arduous process of rewriting System 5. They called it Penta, changed the name of the company to Penta Technologies Inc. and spent about 20 years developing the software.
Penta Technologies rewrote the application on a middle-tier platform from Redwood Shores, Calif.-based Oracle Corp. in the mid-1980s but did not officially launch the new Penta into the market until the mid-1990s, Koenig said.
The neutral platform positioned the Penta product for growth, because features could easily be added and the software was compatible with any customer hardware system, Koenig said.
That versatility enabled the company to withstand the dot-com bust of 2001.
The company bounced back as Team Penta with the reinvented flagship product in 2004. In addition to financial management features for financial reporting, accounts receivable and accounts payable, Penta is now a robust system that can run and automate the entire operation of a multi-million dollar construction firm.
New operational features include mobile solutions, document management and workflow, business analytics and project management.
Irrelevant competition
Companies that offer more broad-based and horizontal applications, including Oracle, SAP America Inc. and Microsoft Corp., do not have the industry-specific functionality that Penta provides to the construction industry, Koenig said.
“There are probably a couple dozen systems that all would do the basics as far as what we were looking for, but Penta was bar none in that they have the best technology and best scalability,” said Phil Rose, president of Milwaukee-based Roman Electric Co.
Roman Electric will go live April 1, 2007, with Penta and has been training its staff on the application for the past three months, Rose said.
Roman Electric has 250 employees and $30 million in revenue. The company needed to replace an outdated system. With the features Penta offers, Rose plans to fully automate and mobilize Roman Electric and grow its profit margins.
“We have a pretty significant service business with 65 service trucks, so we are going to start with 15 remote service units to allow our guys in the field to get their work orders wirelessly transmitted to them,” Rose said. “This will allow them to put cost information in almost a real-time basis.”
The mobile solution for Roman Electric will include the central dispatch office in Milwaukee to wire work orders for the day to handheld units for service people. Workers can punch in time and materials and have the costs for a project on their handhelds almost immediately, Rose said.
“Our industry has gotten increasingly more competitive. The ability to get real-time information is absolutely critical,” Rose said. “Without that, we are running blind, because you can’t know how you are doing unless you get that feedback.”
As he sought to upgrade and update Roman Electric’s software, Rose had no idea that another local company would have the world-class solutions he would need.
“We were really surprised when we came across a great software company in our own backyard, and as we looked into it more, we thought it would be worthwhile,” Rose said. “Penta being local definitely helped from the standpoint that the other company we were looking closely at was based out of Portland, Ore.”
“We are investing in Penta, and our goals are to really see our bottom line grow,” Rose said. “We are not really interested in the growth in sales until we see our margins grow, and we think the system will help us increase our margins by providing faster feedback.”
Penta is priced based on the number of users. So, Roman Electric was able to purchase 12 user licenses for now, and as the company grows and more workers depend on the system, the company can purchase more licenses.
“In our industry, people tend to use these applications longer than other industries, so our typical customer might keep the solution for 15 years,” said Harvey Shovers, vice president of sales and marketing for Penta Technologies. “If halfway through that time, we say to our clients that they have to make a major upgrade, that is not going to be something that companies are interested in doing. So, for companies to be comfortable that they know they can move from new release to new release and add all of this new functionality without having to switch vendors is a real comfort factor when they choose us as a vendor.”
Downstream data
The scalability of Penta also was what attracted Kansas City, Mo.-based CECO Concrete Construction LLC, a $300 million company, to invest in the software.
“Behind this is the theme that what we build is driven by what our customers need,” Koenig said. “We are trying to pay extra close attention to what they need to make a difference in their companies from an operational perspective.”
CECO started training in August and plans to go live with Penta in April 2007, said Mike Moorhouse, vice president and chief financial officer of CECO.
CECO, which is made up of six construction companies, started to lay the groundwork for a changeover to a new system in 2004. CECO is currently working with a back-end system developed by J.D. Edwards & Co., which was purchased by Oracle in 2003.
“After being bought by PeopleSoft and Oracle, they were no longer interested in serving the construction market, and from what we could tell, they were not going to put much more development into that area,” Moorhouse said. “We felt we had a good run with them, but they were going in a different direction, and we wanted to find a product that spoke directly to our industry.”
CECO primarily will use Penta for its financial management capabilities, but the company also plans to use the application to manage labor productivity and project management.
“The system will also allow us to take advantage of the Internet so we will be able to push access to the data much further downstream than the current system allows us to do,” Moorhouse said.
CECO also is currently operating multiple side systems that will be merged and integrated with the implementation of Penta.
“There are not that many large players in the industry, and my sense of where we got comfortable (with Penta) was not so much because they will be around for the next 20 years, but because they had a good enough product offering and install base that they may be a target to someday get bought by somebody,” Moorhouse said. “Whomever that may be, you never know, but we think they have enough business base that they would look at it as an investment to grow.”
Growing in Wisconsin
Penta Technologies is constantly plotting strategies for additional growth, Koenig said. The company is currently preparing for 2007 releases of updates to the Penta application that will include an expanded human resources management program, a document management imaging workflow capability, expanded business analytics capability and the addition of mobile applications, Koenig said.
“We are growing the product, and we are growing the management team, and it is the combination of those two that I think are going to be the key drivers (of growth),” Koenig said.
Penta Technologies’ customers sit on the company’s advisory boards for product development. The closer Penta gets to developing additional features, the more involved the advisory boards are. That way, it is as if Penta team members are in the field alongside the construction crews.
“Underlying it all is our commitment to the industry and to keep on adding there,” Koenig said. “I think the opportunity to do more and more for the contractor will be keeping us busy for as far into the future as we can see. There is no end of new things people could want or need.”
The Brookfield headquarters is Penta Technologies’ only office, but a handful of its 50 employees operate independently across the country.
As Penta Technologies grows its product and its people, the company has no plans to move out of Wisconsin, Koenig said.
“We are going to continue to serve this industry, and where it makes sense to open offices, we will, but there are great efficiencies right now in having the bulk of our people in one office,” Koenig said. “And with the way Webex and the Internet work, we can connect and be dealing with people all over the world.”
Wisconsin is also a good central location for Penta Technologies, Koenig said.
“Ninety-six percent of our revenue, we are importing into Wisconsin, and we are spending the vast majority of it here, in Wisconsin, pumping it back into the local economy, where it gets rolled over and over and over,” Koenig said.
Only about 4 percent of Penta Technologies’ revenue comes from Wisconsin businesses.
“We are in the type of business that once you get in and you’ve got customers and you are serving them well, there is no end to the opportunities to do more for them,” Koenig said. “Perpetual opportunity is a way to look at it. And then there is just the satisfaction of having customers served well and happy, the fun of competing and winning deals, having something to grow and be successful and creating good jobs for people.”
Penta Technologies Inc.
Leadership: Karl Koenig, chief executive officer
Location: 250 S. Executive Drive, Brookfield
Industry: Software development
Employees: 50
Web site: www.teampenta.com
