I talk to Phil Gale from Red Jungle about successful partnering, running a company with a major customer, knowing when to say no and exiting a software business… PLUS where the software ecosystem is at and what it means for any CEO.
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Ryan Jennings: This is the Ryan marketing show and you’re listening episode 11 of 100. Today I am at Red Jungle with CEO, Phil
Gale. How are doing Phil?
Phil Gale: Hi, Ryan how is it going?
Ryan Jennings: Good, man great to be here. A good question because right on the door is Red Jungle where did that come from?
Phil Gale: It was a very complicated process of meshing together two random words and seeing whether the dot.com was available and that’s the best that I could come up with at the time. I wanted something a bit interesting and a bit funky and it’s what has got us thus far. It has been quite a good point of difference, good brand.
Ryan Jennings: So the brand followed the name there was nothing specific to do with red or jungle.
Phil Gale: No not really it was just trying to come up with something interesting.
Ryan Jennings: Do you think it’s important for companies not just to have the dot.co but the dot.com. I guess that’s something you were thinking going to a global market place from day 1 or you just preferred a dot.com?
Phil Gale: I don’t know if it’s essential for most businesses but given that we were going to be doing mainly web stuff I wanted a dot.com. I’m not entirely sure why I thought it was important but it was for me at the time.
Ryan Jennings: When was that?
Phil Gale: 2005.
Ryan Jennings: So that’s a long time in the software business?
Phil Gale: Yeah.
Ryan Jennings: What’s your secret?
Phil Gale: I think there’s a couple of things going, one is we’re quite good with empathizing with end users so the software we build tends to be well received and a little bit of luck and coincidence in terms of getting into the industry right as it was undertaking a big change to software as a service and everything moving online and things like that just a little bit serendipitous to be honest it was a good time to be in software the last 10 years.
Ryan Jennings: So explain a little bit more about what that change has been for people that maybe don’t understand the buying the server with all the software on it versus buying a license to a server that you never see or software that you don’t necessarily own. How do explain that out?
Phil Gale: It was sort of the traditional model was you’d have your P.C. for your desktop. Accounting was a good example with Xero, you buy a piece of software off the shelf potentially even in a retail store install it and it was yours and that was it. And you may get free upgrades or something along those lines. So that model has a very long turnaround for updates and potentially bug fixes and things like that. So your software and also because you have to pay for upgrades all the time you tend to have people legging on older versions of that software. So there’s a long tail on support and getting features and things like. The new sort of software services as a service, is about switching that model up so you’re not actually buying the software you’re renting a license effectively for it but it means that, that recurring revenue can be used to continually improve the software that you are using while you’re using it. So there’s a quicker turn around for getting new features or change the way something works but doesn’t work well which over all just leads to much bigger software I think. You’ve got a much tighter feedback loop as well from customers. Yeah. So that’s the model that most software is moving towards if not already. And that’s firmly where we set in terms of what we build as well.
Ryan Jennings: And so what makes you different is that you’re not software as a service company? You’re actually the people who build software as a service companies? So over the last ten years what would have been some of the real successes for the building cloud software?
Phil Gale: Our model is more around partnering with people who are perhaps industry experts. So people in say real estate for example, which is the best example I have because they are by far my successful customer. They are very good at real estate they know the industry they’re very good. They have all those connections. But what we’re really good at doing is building software. So partnering with people in industries that know those vehicles and know those niches really well can lead to some really strong relationships and some really strong Software offerings.
MINUTE 5 AND 15 SECONDS
Phil Gale: So we’re sort of Chameleons in terms of every project we take on we suddenly learn a new industry almost as well.
Ryan Jennings: So by having someone who’s a subject matter expert in the domain of knowledge in the industry it makes it much easier to create great software because you’re building a (inaudible@05:37) around someone who knows in depth the problems and opportunities within their industry?
Phil Gale: Yeah and perhaps we will generally do a better job of translating that into software than perhaps they would if they took it on themselves which has happened over the years as well.
Ryan Jennings: So for the Release one that you mentioned what does that mean in terms for them and then for their customer. What are some of the things that have changed their industry because of that software their way of approaching things?
Phil Gale: I think primarily it one of the big things it’s giving people as a lot of third party services or integration points, a lot of expansion across different areas probably spans a lot of different areas across that sort of horizontal stack right through from leasing to selling properties and all sorts of things. So being able to build a platform for those customers, that has grown over time and start integrations with those things is sort of bringing it all together into one very cohesive product which perhaps would be arguably very difficult to do in a traditional model. And we’ve sort of seen that become something that their customers really desire going forward it’s become I guess the norm almost marched over this time frame. People get quite frustrated with software that they have to install now and they have to go on to something else to do something else. That’s from their customer’s point of view from the (inaudible@07:12)themselves I guess they feel they’ve gained a development partner out of it. And it’s been quite a strong relationship it’s a very one on one or a very tight conservative process because I think the translation from their requirements and how we build software works quite well.
Ryan Jennings: So then going back in time and looking at some of the customer opportunities that maybe you’ve said no to along the way. What are some of the things that you know that are not necessarily going to be as successful when you’re working with an area that may not yet be suited to software or they may not have that full understanding is that part of what you do as a qualification process?
Phil Dale: Absolutely we’ve turned away plenty of people trying to do projects or we’ve been or we’ve done our best to consult with them and give them honest feedback on what we think about the chances of success of their software. Generally speaking it’s little things like they underestimate the willingness of end users to input information all the time. They’ll make an assumption that users will always come and enter some information about what they’re doing. Users are generally pretty lazy I would say so if you trying to build a product based around collecting information or something of that nature the incentive or the reward for providing information needs to be very, very strong. But then there’s always the classic examples of trying to take on auction sites and things like that and they come along quite frequently and I think it’s a really good way to throw a lot of money away. The other classic one we see a lot is people who come to us with a budget for development that has absolutely no further thought into the in the selling and marketing their products. Because if you’ve got a budget to build software and you assume that it’s going to be successful on day one you’re probably wrong. So marketing is a huge part of selling software or building a successful product I should say. So those are sort of the classic mistakes I see.
Ryan Jennings: For Red Jungle early on how did you market yourselves?
Phil Gale: So I built a brand around Red Jungle and a little logo and again it was timing because it was when social media was starting to kick up as well. So although I still all over Twitter but I have less time for it now and I use to go along to all tweet ups and got involved with a really cool bunch of guys at Geekzone.co.nz which is really cool technology website.
MINUTE 10 AND 15 SECONDS
Phil Gale: Got involved with those guys and went to a lot of meet ups and things like that. By far it word of mouth and just going and meeting people. I’ve never made any sort of formal marketing approaches to anything else other than going and seeing people to be honest. And then from that most of their works come through referrals and it just built up over time.
Ryan Jennings: So I guess in those early days working on the right projects then lead you to the right type of referrals to the next types of businesses. When did the release one which is your major one when come along ?
Phil Gale: So that was four or five years ago. I think and it actually came about because we were at the time one of only two companies who are certified Xero add-on developers. So again a bit of marketing through being at Xero’s add-on directory. We happen to be the one closest to them as a as a local company as well and so we pick them up but there was a pretty answer before that so we get on very well and that’s how we came across those clients.
Ryan Jennings: That’s interesting actually you said by being in that situation where the market place is growing around Xero ecosystem and being very early on with only one other there that became a very easy route to get what has become quite a large client for you.
Phil Gale: Yeah well it was certainly a very deliberate action to get listed there because I mean ultimately developing with the Xero I.P.O. is not terribly difficult. So it was more just going through the paces and showing them we know what we’re doing and then listed there. I don’t think we generate more work than it has over the of the time frame but it’s certainly the ones that has generated work for has being very important. So there’s a heck of a lot more all around the world and various partners.
Ryan Jennings: So then looking internally to business here; you’re based in Ahuriri and Hawke’s Bay and we bumped into each other early on today when we were getting our early morning coffees and you introduced me to a new staff member. How big has it grown and where do you think you’re going with the business?
Phil Gale: So we started out with me working out of a spare bedroom 10, 11 years ago. And then sort of form some business partnerships with business partners. Like Gerard and another guy Matthew who’s since gone back to the States. I’d say about 5, 6 years ago we set up just up the road in Ahuriri with the three of us there started taking on interns out of EIT. There are some very talented people coming out of EIT.
Ryan Jennings: Oh good because I’m doing a mentor session there tomorrow.
Phil Gale: We’ve had a lot of luck with students coming out of EIT over the years. So we sort of went on for a few years working on projects and got to about 5, 6 over that time frame in the last sort of 3, 4 years. Once we started getting a lot of success through some of these products like Release. The requirement for developers shot up and we started a real recruitment drive. So right now we’re (inaudible@13:44) and we’ve got two staff permanently based in Wellington at the moment. And one guy who’s having a bit of a sabbatical over in Thailand of all places actually but he’s been working full time in his time zone as well for about a year now. It fluctuates a little bit we found over the time from anything above 10, fluctuates up and down throughout the year. So we’ve had people come go in that time but around about 10-13 is we’re we sit most of the time .And that’s quite a good number for taking on at least a couple of very good size projects at any given time.
Ryan Jennings: How do go about training to make sure that you’ve got the right balance of people that are learning from those EIT grads through making sure you’ve got the right senior people who can look after that and that technical debt that does get incurred over a few years of doing this type of work.
Phil Gale: So we’re quite picky about whom we hire which is hard in Hawke’s Bay. There’s not a lot of senior level software developers floating around in Hawke’s Bay. So we work hard to try and track them and we have in recent years when it’s become a problem for us we work hard to try and track them which is why we opened an office in Wellington for example trying to tap into a pool of people there.
MINUTE 15 AND 9 SECONDS
Phil Gale: But we (inaudible@15:12) quite hard. But one of the key criteria for us is that we have to like them. So we make sure they come to Hawke’s Bay and that they spend some time with us we take me out for lunch and all those things and we just chat we just see if we get along. So that’s half of it, once you know you get along with them and then. You can talk fine then you need to make sure that you can cover up for the actual technical requirements for them as well. And I think generally speaking you know pretty much straight away whether they know their stuff or not and what level there are at. So finding people at the top tier is quite hard in Hawke’s Bay it’s a continuing challenge for us and we’re in fact probably putting it out tomorrow in Oregon as well but.
Ryan Jennings: Would you consider it importing?
Phil Gale: We have done that certainly. Yeah. But I don’t have any particular preference. The main criteria for us I think in Hawke’s bay is they need to have a really good reason to be in Hawke’s Bay because it’s very easy to slip out and go I want to head off to Auckland or Wellington because that’s where all the opportunity is. They want to be here for the right reason because we don’t want to be trying to hold them here either. We want them to enjoy the lifestyle that we have here that’s why we’re here. And we want them to understand that there are those opportunities for good software developers in Hawke’s Bay as well. But yeah this is a senior level in terms of them balancing junior and intermediate level people we just watch that happen of course. You have a bit of a problem because all your junior people become intermediate people eventually. So we try not to get too bottom heavy. So in some years we will take interns and in some use we might not for that reason. It just depends on who sticks around potentially as well.
Ryan Jennings: In terms of looking at industries out there maybe after I know I do it with looking at you how can a business potentially market themselves better. Do you have an on off switch where you go home and it’s turned off or you’re looking at things on the news or in social and go man if they had cloud service on that industry it would transform it?
Phil Gale: I would generally do quite a bit of work in the evenings that said I’ve got a new daughter. So it’s a bit easier for me to spend less time on that at the moment because time is short. But generally speaking I do quite a bit of work in the evenings. That’s when I do a lot of reading and if I’m going to do social media stuff that’s when I do it and catch up on Emails and things like that. So yeah I don’t tend to switch off in the evenings. There’s a healthy mix of it for me I’d say the moment for me. It certainly as I’m getting older it’s getting less, let’s put it that way.
Ryan Jennings: Now we’ve talked about this before you are actually running the business but not necessarily owning. The business has been (inaudible@18:19)?
Phil Gale: Yeah.
Ryan Jennings: Talk us through that process.
Phil Gale: So we had an opportunity, so Release has been a very successful by far most successful clients. They’ve had a number of pretty exciting opportunities appear with partnerships overseas and going into new countries new territories doing some really innovative things in the industry which is quite exciting. And as part of their development requirements are increasing all the time as well. So when we looked at costing that up in terms of what they were looking at doing. They seemed an obvious business case the data put forward to them that perhaps they should actually own Red Jungle rather than lease developers effectively for about three projects. And they agreed. So we went through a due diligence process and they basically they are the only shareholders in the company. So what they meant for us was they wanted to maintain pretty much the status quo. So Gerard and I are still directors and run the company but we just have a couple of additional seats on the board now. So from a software point of view and from a staff point of view nothing’s really changed. But it’s given us an opportunity to perhaps find a more solid approach for them as they grow. And it’s allowed us to focus in a little bit better rather than running around looking for work I would say.
Ryan Jennings: It gives you some breathing space to be able to look longer to the Release side of things while also you can still pick up other projects?
Phil Gale: Yeah absolutely we’re right about 50/50 at the moment.
MINUTE 20 AND 5 SECONDS
Ryan Jennings: So the best of both worlds really you’ve got that assurance but the same time you’ve got that flexibility that keeps people interested and keeps the creative side of things going when you’ve got different code and problems to solve.
Phil Gale: Yes so there is still plenty of opportunities to work on different things here which is nice. I’m sort of relishing the office of it because I used to be across a number of clients and now I’ve got an opportunity to actually focusing on something which is quite a nice change for me for a while at least I would think. It’s nice to do good job of one thing for a while.
Ryan Jennings: Where do other coding houses sit in the marketplace versus Red Jungle? And if a client’s or a person out there has got not only a great idea but maybe a proof of concept that they want to take further do they just go to an organization like yours or they farm it out for (inaudible@21:07) or bids to multiple coding houses?
Phil Gale: It depends both of those things happen. Some people will come to us and have a discussion and they’ll just feel comfortable. I think a lot of it especially if it’s going to be a big investment a lot of it is about just feeling comfortable.
Ryan Jennings: Because these aren’t small investments right, they’re six figures?
Phil Gale: Yeah absolutely. So we do occasionally participate in RFPs but it’s very rare to be honest. It’s not generally something that I want to be involved in, an R.F.P. process because I tend to think it is probably not going to end up with the best result for the customer. So it’s more about those relationships and levels of trust and just being honest and trying to actually give genuine feedback about these are the problems I see with your with what you’re proposing and things like that as opposed to just saying yes, you can do it, sign here that sort of thing. But yeah I mean in terms of other software houses around I mean I’m not involved too much so I can’t really say what they get up to but I know the way that we work is pretty open and honest.
Ryan Jennings: And that’s going to be important because it’s one of those things that once the bill happened and you’ve launched the software that’s just the beginning of it and the market gives you feedback? And that feedback requires changes to the software and to the business roles and that’s never ending.
Phil Gale: And that’s a good point because it is important if you are planning to build software as a service. You’ve got to understand that you are effectively becoming a software company in terms of it’s never finished. If you have a successful product it should be (inaudible@22:50) on.
Ryan Jennings: Do they understand the whole model that this is 7 – 10 years potentially before getting a full return and it is much cost up front and the bill part and then reengineering the bill to affect and aligned to a market and once you conquer that market localise for another? Do they have that mindset?
Phil Gale: No I would say most don’t. There is an education process in there in terms of what they’re doing. It depends you know some customers come in and what they want what they’re planning to do is very low scale so they just have an idea and they want to try it out and they’re prepared to spend a bit of money and that kind of think well yeah that could take off and if it does then they’ll probably re-evaluate or something or like that. But people that are planning on spending decent amount of money here it’s certainly something that we discuss with them. Because from our point of view as well I mean that’s our business model we want to partner with people. So we want to make sure that the people we’re planning with are successful in what they’re doing as well it’s good for us in the long term.
Ryan Jennings: We’re there’s not that that marketing need and so for example, (inaudible@24:00) some internal processes for a large organization or the operational side of things. Is that something that you look at for businesses as well?
Phil Gale: We’ve just completed a very similar sounding project to that for a local port for example where it’s becoming the norm that if you’re going to take a piece of infrastructure or software based infrastructure inside your organization that you should be looking to future proof it. It doesn’t necessarily mean sort of full SAS or it has to web based but you should certainly be considering the fact that you don’t want to host it internally generally speaking you want to get rid of your (inaudible@24:43) you want to be able take advantage of scale and things like that out on these cloud platforms that are becoming very cheap and very reliable generally. So it’s certainly more and more we’re seeing things like that. But equally we also see a lot on people underestimating the cost of doing it as well.
MINUTE 25 AND 3 SECONDS
Phil Gale: I think the software industry in general is moving towards (inaudible@25:09). I think the business of the businesses with all their internal internet based models are getting there as well but I don’t think they’re quite there yet because it’s still quite difficult for them to find budget to do things like that. But yes certainly it’s happening more and more.
Ryan Jennings: Do you think it’s like a religious kind of thing where you’ve got those that just believe in Cloud and SAS and know that it will have better productivity gain versus the business case one’s where it may not have a clear business case or return?
Phil Gale: I think is a bit of a mix I think we’re probably in terms of internal (inaudible@25:45) when you’re done with those that still very much a hard sell. But it depends a lot of the time on who we’re dealing with because sometimes the contact you’re dealing with is very much understands that they just need some kind of education process needs to go up the line so the people that sign off to that to say well yes this is a serious investment that you’re making. But it makes sense for these reasons and there is a payoff for long term, it is a sensible decision to make and that can be quite hard sometimes for some of those people who are actually making those decisions to understand because they’re not in the industry and that’s fair enough I can understand it. But it will happen.
Ryan Jennings: And for those Tech geeks that are listening right now thinking, Phil’s talked a lot about his business but he hasn’t talked about software like what’s the really cool stuff you working on the nitty-gritty at the moment? The software, the languages, what’s the cool stuff right now for you?
Ryan Jennings: That’s what I’ve heard is that Microsoft actually the cool kid now that they’ve realized open source is the way to go. They’re actually the ones to watch out for.
Phil Gale: I think they realize that the way forward is to get everyone using their platform so they want to be one on Android which is where we host everything. They should just focus on making really cool tools and giving them away and getting as many people using them as possible and making it really easy to get your stuff up on to this infrastructure because that’s actually where they’re going to make their money going forward. But yeah they’re doing some very cool things they’ve got some really cool people in the right places at the moment.
Ryan Jennings: Well it sounds like you’re really well positioned for the future and you’ve done some fantastic things to get to that point that you’re at now. So, hey, thanks very much for your time Phil. It’s been a pleasure talking with you.
Phil Gale: Yeah you too, thanks Ryan.
MINUTE 28 AND 50 SECONDS