OutStart, a global provider of software for learning and knowledge-sharing, closed its first quarter on March 31 by posting another three months of healthy profitability and positive cash flow. The recent quarter marks the eighth consecutive time the company has recorded such results. Samples of OutStart software contracts signed or renewed during the quarter were: Belgian Railways, the national railway of Belgium; Cardinal Health; Cisco Systems, Inc.; EDS; ExactTarget, a maker of e-mail marketing software; McAfee; Northrop Grumman Corp.; and Yahoo!.
“Our software facilitates knowledge-sharing and training by capturing, organizing and delivering both formal and social learning. By capturing employees’ real-world expertise, we help provide workers with the know-how they need to perform their jobs at the highest level,” said Massood Zarrabian, CEO and president of OutStart. “We’re seeing employers purchase our software as a catalyst for channeling and accelerating knowledge-sharing and learning within their organization.”
Q&A With OutStart CEO Massood Zarrabian
How has OutStart managed to tally eight consecutive quarters of profits and positive cash flow?
Massood Zarrabian:
It is a combination of our business model and software. Instead of forcing our prospects to adhere to a single way of acquiring the software, we provide the choice to our customers of acquiring it the way it fits their business. That means perpetual or subscription licenses as well as hosting and software as a service (SaaS). This model has provided us with recurring revenue, which is over 50 percent of our business. As for our software, we have a portfolio including knowledge-sharing software, online learning technologies and systems for easily creating and reusing content for e-learning courses. If we miss our target with one product, we hope to exceed our goals with the other products.
What is the market opportunity for knowledge-sharing software?
MZ: We feel that our market is in front of us, and that, over the next five years, the market opportunity will be well over $1 billion. To be competitive and productive, any person associated with an enterprise or an organization, anywhere in the world, has to solve problems and share know-how on the job. Potentially, any employee can be a user of our software.
What was the average deal size during the quarter?
MZ: We don’t really track deal size, since our strategy has an organic growth path to it. We start small and grow within an enterprise. The lifetime total business from our customers is much more important than the average order size in a given quarter. On top of that, with 50 percent of our business as recurring, the average deal size is becoming much less relevant.
What is the biggest opportunity and threat for OutStart?
MZ: The convergence of knowledge-exchange and e-learning technologies is the biggest opportunity. The threat is the noise and confusion about software for managing learning, talent and employee performance. These tools store data and facts. But they don’t provide the capability to capture, organize and make available the content needed to grow someone’s know-how – the kind of know-how that solves on-the-job problems. I wish analysts talked about this distinction more.
How would a U.S. recession affect OutStart and the products it sells?
MZ: We are reasonably diversified, with a major portion of our business coming from our international markets. We have a recurring part to our business, too. The ROI on our solutions is excellent, and that helps in recessionary times. So, I am optimistic that we will weather it and be able to continue on our path.
What are your plans, if any, for international expansion?
MZ: Through an acquisition, we established a direct sales presence and office in Germany. We also have an office in the U.K. and a technical center in Ireland. I expect we will continue expanding our direct presence in Europe, and, potentially, Canada. I believe we’ll stay with our indirect sales strategy for the rest of the world.
What OutStart products are you most excited about?
MZ: This is like asking a father which one of his children is his preferred one. I don’t have one. And if I did, I would keep it to myself.
Describe the typical buyer of OutStart’s software.
MZ: We have multiple buyers within an organization. But the typical buyer is in a business function, looking to address or re-engineer how they share knowledge – both formal (e.g., training) and informal (e.g., social learning). The majority of our enterprise implementations grew from a single initiative, or with the backing of a single department.
About OutStart
OutStart software powers formal and on-demand learning, knowledge sharing and community/expert collaboration solutions that enable knowledge workers – employees, partners, and customers – to perform their roles far more efficiently and effectively. AgustaWestland, Autodesk, British Telecom, CVS Caremark, the U.S. Navy, Verizon Wireless and others rely on OutStart to increase individual and organizational performance, improve knowledge transfer and lower operating costs. Located in Boston, Mass., OutStart has offices throughout the U.S. and Europe and can be found on the web at www.outstart.com
