Journal North 12/15/03 - Informatics

[Roger D. Jones]

*  Monday, December 15, 2003

Local Software Firms Vanish

By Emily Van Cleve

For The Journal


    Where have all the Santa Fe informatics companies gone? Roger Jones
asked himself this fall.
    Times have been hard for many small businesses, but Jones, who is
CEO of the informatics company Complexica, has been concerned about the
failure of a number of Santa Fe-based informatics firms that were
thriving in the late 1990s.
    Informatics is defined as the use of advanced pattern recognition
techniques for the purpose of managing companies that operate in complex
business environments. Informatics companies provide custom-made
software and consulting services to a variety of businesses, including
those in the insurance, finance and health care industries. That
software helps with risk management and catastrophic problems as well
increasing efficiency in general day-to-day operations.
    There were almost three dozen informatics companies based in the
Santa Fe area by 1999. Most of them spun off from research projects
begun at Los Alamos National Laboratory or the Santa Fe Institute.
    Scientists, engineers and computer whizzes have been looking at
problems faced by many large businesses and realizing that, by
predicting problems in advance, the outcomes could be changed.
    "A number of informatics companies began experiencing problems a few
years ago," says Jones. "I did my own survey to find out why this was
happening. Some failed, some are living on a razor's edge, some are
surviving well and others have achieved their goals. I have a personal
interest in keeping Santa Fe a leading center for informatics companies.

    "If there are more of us in the marketplace, we all end up doing
better."
    Worldwide interest in the products and services offered by these
companies has not lessened, says Jones. Software that can improve
business efficiency and ultimately save money is a great investment.
    He was surprised to find that failures were mostly due to the way in
which companies were funded.
    "Out of 12 companies that failed, 10 of them used the venture
capital model," says Jones. "Venture capitalists are looking for high,
fast growth. First there was the dotcom collapse, then there was Sept.
11.
    Business slowed down the summer before Sept. 11, but it was
absolutely quiet after Sept. 11 for a full year. That's when some of the
companies funded by venture capitalists failed."
    According to Jones, a small group of companies that use the venture
capital model of funding are alive but struggling. Most of the surviving
companies or those that have achieved their goals to date used the
strategic partnership model. In that model, a small company works
together with a large corporation that is providing crucial funding, or
the bootstrap model, which involves a company finding its own private or
public funding and living off of its own profits.
    Jones puts his own company, Complexica, in the category with
companies that have survived and are well positioned. Complexica's
funding has followed the bootstrap model.
    "Complexica is a company that scouts for new projects and is
involved in research and development for these projects," says Jones.
    "We created Commodicast as a sister company that builds these
projects. Complexica opened a European office in Venice, Italy, on Nov.
10 called EuroComplexica. EuroComplexica will do research, development
and project building. While Complexica focuses on developing tools for
the health care, banking and telecommunications industries,
EuroComplexica will focus on developing tools for the European
telecommunications industry. Telecommunication technology in Europe is
happening so fast that people's heads are spinning. We'll be creating
new software and technological tools to work with this growing
industry."
    Data Ventures, a spin off from Los Alamos Laboratory that was
co-founded by Jack Stafurik a decade ago, didn't fare as well as
Complexica even though it followed the strategic partnership model.
    "We were trying to raise capital and no one was willing to put up
capital," explains Stafurik. "My partner and I eventually left the
business, although Data Ventures still exists with other owners."
    Stafurik continues to believe in the software created by Data
Ventures, so he recently founded Standard Analytics with several
partners.
    Standard Analytics is focusing on software that helps retail stores
analyze all kinds of data, such as how sale items will affect the
purchase of merchandise not on sale and how to best determine when items
are out of stock.
    Standard Analytics has created a pilot program for an Albertsons in
the San Francisco Bay area. If this program is successful, Stafurik
hopes to be able to interest other Albertsons stores in working with his
company.
    "I think one of the problems in my industry is that it can take five
to 10 years to build the technology that we're trying to sell to other
companies," Stafurik says. "Then there's the issue of selling the
software. Businesses are used to doing things in a particular way, and
if they decide to change their business tools they have to retrain
managers and their employees and make major changes in the way they do
business. When times are financially difficult, it's hard for companies
to have the impetus and the financial resources to make these changes
even though they know they will save money in the long run."
    Both Jones and Stafurik see a resurgence of informatics companies
taking place in Santa Fe as the economy slowly recovers.
    "I think the Santa Fe informatics community will grow again," says
Stafurik. "We do have a disadvantage being in Santa Fe, because it's
harder to get to our out-of-state clients to help them work with the
software they buy from us."

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