Company profile: Conchango

The software-development specialist has a unique approach to creating software, which is proving popular with companies that have grown frustrated with more traditional methods

Conchango considers itself an agile company in more ways than one. The small, flexible, London-based internet services company claims to be a leader in a software-engineering technique known as Agile Development.

The organisation adopted the Agile way of working about 30 months ago, after becoming frustrated with more traditional methods of managing projects and writing code, which it considered too regimented.

Richard Thwaite, Conchango's chairman, explains the rationale: "A lot of companies come to us when they find the traditional waterfall way of working hasn't delivered what they wanted. They prefer something that encourages innovation and change, and they get something that is more in line with what they actually wanted, rather than something that they thought they wanted at the start."

Agile methods are considered more a family of development processes than a single unified approach, and have a lot in common with the now mainly discredited rapid application development techniques of the 1980s.

These processes involve writing chunks of software over short timescales or iterations that typically last from one to four weeks. Every iteration comprises a mini software project of its own, and means that code is released at the end of each such initiative rather than in a big lump at the end. At this point, the team also re-evaluates project priorities, which means change can be reintroduced quickly if necessary.

But Agile methods also incorporate the Scrum method of project management. This concentrates on prioritising customer requirements and related tasks and emphasises face-to-face communication between the business and project members, who work in self-organising teams.

The focus here is on adapting quickly to changing circumstances, which means that Agile development is most useful in projects where requirements alter rapidly and are not fixed. More predictive development techniques, which involve long-term, detailed planning, are better suited to building very reliable mission-critical systems, however.

Conchango has a team of 250 working for the company. This includes 15 people at its offshore development arm in Vadodara, North West India, which was opened in October 2006, and a small outsourcing outfit in Romania.

"There's some separate working, but we see it as important to have integrated teams. The guys in India need to be as multi-skilled as those in the UK so when we bring someone in, they spend their first two months in the UK to understand how we work," Thwaite explains.

This means that everyone works in the same fashion and knows how to respond, which is crucial to ensuring the effectiveness of an offshore operation, he believes. "It's about training and investment upfront," Thwaite says.

One of the reasons for turning to India in the first place, however, was the UK's skills shortage. "It's difficult to grow as fast as we have over the last 18 months because we can't find the people in the UK. But India provides a rich seam of capable, well-educated staff and it's very easy to integrate them into the British way of working," he explains.

But this is quite a different scenario from when the company was first set up in 1991. At that stage, Thwaite and co-founder Mike Altendorf, its chief executive, who had known each other since university, financed the organisation using their credit cards. They had both worked in the IT industry following graduation, but spotted that the market was moving increasingly to a services- and open systems-based approach.

"So the issue was that people could buy hardware and software from wherever, but they didn't know how to put it together and build a technical strategy around it. So that's what our company did. We were very technology-focused initially, but as the web came along and changed the way things were done, it spawned more into our sweet spot," Thwaite explains.

Now Conchango is aiming to increase revenues to between £50m and £70m during 2007, in a bid to take on the big boys such as IBM and Accenture.

The organisation saw its sales grow by 50 percent this year to about £30m, but hired Altium Capital in October to advise it on possible strategic options in order to boost growth more quickly.

Thwaite explains: "If you're between £50m and £70m, you're moving into a position where you're a more significant player and you need to do that to take people like Accenture and IBM's lunch. We'd like more clients who will give us more big, long-standing projects and if you're on a certain scale, they're more likely to want to do that."

Although the company currently focuses on securing seven-figure deals with UK household names such as Boots, HBOS and Energis, the goal is to take on larger initiatives "as you only do the really innovative stuff if you're a certain size".

Another objective is to be more profitable and influential. "But really our strategic aim is to be the number-one choice for retailers, financial services and energy companies that want to do anything around web-based technologies," Thwaite says.

As a result, Conchango is currently exploring several avenues with Altium, both to bulk itself up and pull more money into the firm to support growth. "IPO [initial public offering] is one thing that I'm not going to rule out and I'd say it's a very real possibility, but there may be steps along the road. We've got no private equity to date, so that's a possibility if we found a good partner that would add more than just money. Or we could just IPO," Thwaite says.

The money raised would be used partially to fund the organisation's acquisition strategy, with an anticipated pot of between £8m and £10m. This will see it going after UK-based services companies working in similar or complementary vertical market sectors to itself and in geographical areas of the UK outside of its current South Eastern focus. The firm will also consider purchases in existing or complementary technology segments to those handled by its existing business that are known to be in growth mode.

For example, Conchango bought business intelligence and analytics specialist, Lateral, about two years ago, but the market is still a developing one "so if were looking at other companies, we might think of consolidating that area still further".

Thwaite would not be averse to the services provider being purchased too, although he indicates that it is not actively looking for a suitor. "I'm not too worried about being an acquisition target. People like to buy those companies that are doing well so I'd like the interest because it's a success problem. But I want to look really strong for our clients and to motivate employees to work here. We don't want to be acquired as such," he says.

What he does want, however, is for the organisation to continue its organic growth in the 30 percent range next year. He sees the firm's US office in New York as being one of the engines for this. Set up seven years ago, it contributes about five percent of total revenues and employs 20 staff.

"The East Coast office in the US does similar things to us and I'd like to think that it doubled in size next year. We'll probably not make acquisitions in the US as the office is so small, but there's a huge opportunity for it to grow organically," Thwaite says.

The aim in establishing a US site was to cater to the needs of UK customers with operations across the Atlantic because "the two markets are very closely linked". Over time, however, the office has developed its own set of clients such as Kraft Foods and Bank of Tokyo, with whom the UK operation has never dealt.

Another engine driving growth, meanwhile, is the advent of up-and-coming internet-based technologies. "The market at the moment is particularly strong and one of the things that's really going on is Web 2.0, which is exactly the space in which we play," Thwaite says.

But he also believes market demographics are moving in the firm's favour. "In the next 10 years, 16 to 24s will be in the 25 to 35 age group and they're much more into the internet. They use it in every facet of life, for collaboration, communication and purchasing, and they're expecting the web to do so much more," he says.

Moreover, Conchango provides a broad range of services in the web arena, which it believes differentiates it from its larger rivals. These include business and technology consulting, project management, systems integration, application and web development, database design and build, and creative services. The last of these, creative services, focuses on interactive design and branding, the user experience and online communications.

"We like to think we have a full agency approach because we offer creative services, specific line of business expertise and strong competent delivery of technology. So on the one hand, neither IBM nor Accenture are strong in the creative area, but on the other, people come to us because we're smaller and tend to be more agile in the way we deal with them," Thwaite claims.

Unlike the dot-com era, he does not believe the market is overcrowded, or overly mature. "A lot of companies were stripped out following the dot-com crash. The barriers to entry were quite huge then as there wasn't much business around and the rates were quite soft. But now the market is growing very fast," he says.

As a result, although Conchango is not aiming for world domination any time soon, Thwaite believes that maintaining rapid growth, particularly as broadband take-up continues to increase, is a realistic goal. "We want to be of the £100m turnover scale in three years and we're currently on track to do that," he concludes.