Azad Madni, Intelligent Systems Technology

My interview today is with Dr. Azad M. Madni, President and CEO of Santa Monica-based intelligent Systems Technology (www.intelsystech.com).

BK: What is Intelligent Systems Technology all about, and what is your primary product?

AM: ISTI provides products and solutions to support collaborative decisionmaking teams in planning and managing business initiatives in the face of ongoing changes. Examples of such initiatives are e-business enablement planning, ERP/CRM implementation planning, ISO 9000/Six Sigma planning. Common to all these initiatives is the need for distributed collaborative planning and timely execution of these initiatives to realize the business benefits from these initiatives. ISTI believes that collaborative planning, process management, and knowledge management techniques are at the heart of conducting successful business initiatives. It is these technologies that are embodied in the Company's products:

* ProcessEdge Standard Edition - for process mapping, design, visualization, reporting * ProcessEdge Enterprise Suite - for process analysis, virtual enterprise supply chain integration planning, re-engineering * TeamEdge - collaborative planning and management of business initiatives and product development projects

BK: What operating system platforms does your software run on?

AM: Our software is written in Java, so technically it can run on all platforms. However, Windows NT and Windows 98 environments are our preferred platforms.

BK: Who are your typical customers, and any of them we might recognize?

AM: Our typical customers include business unit executives, product managers, project managers, supply chain managers, process owners. Target industries include IT companies, defense/aerospace contractors, Government agencies, and environmental and biotech companies. Representative customers include: Northrop Grumman Corporation, The IT Group, Naval Surface Warfare Center, U.S. Navy's SPAWAR, Raytheon, Department of Defense's Advanced Information Technology Services Joint Program Office, Informix Software, Amgen, and Soft Consulting Corporation.

BK: How many employees do you have?

AM: We have a dozen employees (all technical or business). We outsource everything else including accounting, payroll, benefits administration, legal, insurance, and public relations.

BK: How did you decide to found this Intelligent Systems Technology?

AM: We recognized that there was an unmet need in the marketplace for productivity and performance enhancement products that help distributed teams in successfully planning and executing business initiatives. Tools on the market helped either with planning or execution (workflow), but not both. However, in the real world, planning and execution are inexorably tied in that after creating a partial initial plan we need to execute the partial plan and use the feedback from the partial execution to plan further. Recognizing this unmet need, we positioned the company to exploit this opportunity and create products that offer these capabilities.

BK: I understand you used SBIR funds and other government programs to get your company off the ground. Could you describe how you did that?

AM: We used SBIR (Small Business Innovative Research) and other R&D funding from various agencies of the Department of Defense, along with personal seed funding, to get our products off the ground. Our strategy was quite simple but needed impeccable execution. The highlights of our strategy follow:

* Start with a clear vision and value proposition of products that we want to develop. * Identify and selectively bid on only those SBIR topics that supported our technology and product objectives. * Use prototypes created on SBIRs as a competitive discriminator to win follow-on SBIRs to further advance our technology development and commercialization objectives.

This strategy required a good deal of discipline because we found ourselves qualified to bid on several SBIR topics, but we avoided that temptation by bidding on only those that supported our company and product vision. We supplemented SBIR-related revenues by selectively bidding on those Broad Area Announcements (BAAs) that supported our technology development objectives. This strategy resulted in our garnering $9 million and producing two exceptionally well-received commercial products. The products were released in late 1999 and mid-year 2000. We are starting to rack up sales and an impressive list of clients.

BK: How difficult was it to obtain SBIR funds, and how long did the process take?

AM: The likelihood of winning an SBIR Phase I is 1 in 8 on average. We were exceptionally fortunate to win the very first couple that we bid. We believe our success was in large part due to carefully following instructions and by being totally responsive to the evaluation criteria. From the time of submitting the proposal to notification of award was a little over three months. It took another month to have the contract in place.

BK: Where are you in the stage of your company? Do you plan on raising venture round or new funding?

AM: We have our first two products ready and selling in the marketplace. We have an e-commerce enabled site for web-based purchases. We have more than adequate funding for our next product. We intend to raise a round of equity financing (which will be our first and last round) to beef up our marketing, sales, distribution, and customer support infrastructure. We hope to provide an exit for our investors in two (no more than three) years.

BK: Finally, what has been the most challenging part of starting up you company?

AM: The most challenging part of starting the company was recruiting top notch talent in a tight labor market. We had to be quite creative to accomplish this objective. We put in place a stock option plan, retained the services of a Professional Employer Organization to provide Fortune 500 level benefits, and set up our offices in a highly desirable, but affordable, location in Santa Monica. This strategy, coupled with exciting work and promising growth prospects, allowed us to attract and retain top notch talent.

BK: Thanks!