In an industry growing at 8%, any company boasting revenue growth of 20% and above is most likely to be in the first flush of youth, meeting new demand with a hot, niche technology. But database and application management tool vendor, Quest Software, which has sustained just that level of growth for three years straight, is no start-up.
After almost 20 years on the IT circuit, Quest is still little known outside of the rarefied world of database administration, yet it has built an annual revenue base that will hit half a billion dollars this year. The secret behind that success has been a focus on behind-the-scenes, nuts and bolts management technology, and a knack of acquiring the right tools at the right time.
Quest’s acceleration began a decade ago when a former Oracle sales chief, Vinny Smith, took over as CEO. Smith moved the original focus beyond systems management to centre the company on database administration for Oracle systems, an area the database sector leader had neglected.
Quest bought the rights to SQL Navigator, and turned it into a best seller. But a freeware package known as TOAD (Tool for Oracle Application Development) was also spreading rapidly through the Oracle database development community. Quest added that too in 1997.
“TOAD was becoming the de-facto standard tool for Oracle’s PL/SQL [database management language],” recalls Simon Pearson, Quest’s UK MD. “It became so ubiquitous that it needed a commercial vendor to pick it up.”
But not content with being a mere pilot-fish to the Oracle shark, and perhaps wary of tying itself to the fortunes of just one company, Quest decided to diversify into other markets including application management (for Oracle, SAP and custom web applications based on the Java platform, J2EE) and infrastructure management, with a strong focus on email and directories.
A crucial acquisition in that process of diversification was that of Windows directory management vendor FastLane in 2000, says Pearson, taking the company into the Microsoft space.
Once inside, Quest built up its Microsoft practice to include email management, application management and identity management. (It had already expanded its DBA tools to work with the Microsoft SQL Server database). An early focus on Microsoft’s identity repository, Active Directory, proved to be a prescient move that Pearson attributes to Quest’s canny CEO.
“Timing is everything,” he explains. “[CEO] Vinny Smith realised there was a going to be a shift in the industry to Active Directory, and that the time was right to acquire technology in that area.”
Quest’s most recent acquisition, that of New Zealand-based email management vendor AfterMail, exemplifies the company’s buying policy, says Pearson. “The kind of companies we buy have world leading technology, but they are not globally established.”
“AfterMail had this world beating product, but was stuck down in New Zealand with a small sales force.”
As part of Quest, Pearson continues, that product can now reach the IT departments of Fortune 500 companies.
Quest acts as a global talent scout not only in its selection of acquisition targets, but also in its R&D personnel. “We spend 30% of our revenues on research and development. And we spend that money wisely – our research labs in Russia recruit from the Moscow State University, so we get cutting edge technology development at the fraction of the cost.”
This ‘buy or build’ strategy has paid off; as well as sparkling growth, Quest boasts the top spot in market share for both application management software (according to Gartner research), and ‘distributed data management facilities’ (according to IDC).
Quest’s rise from the obscurity to the higher echelons of the software industry seems like the very model of a good strategy execution. Or it did, at least, until the company came under scrutiny in June 2006 with suggestions of irregularities in the way its stock options scheme was used to reward senior executives. Along with a dozen other US-listed companies, mainly in the high-tech sector, Quest has undergone an informal investigation by the Securities and Exchange Commission.
Pearson is tight-lipped about the future of Quest, but suggests that a hot market for management tools may emerge around Microsoft’s SharePoint collaboration server.
“SharePoint is a great tool and is going to become ubiquitous,” he says. “However, at the moment it is fairly uncontrolled, and that means companies are going to need management tools.”
With no indication that either Oracle or Microsoft are likely to fall from corporate grace any time soon, Quest can still point to lucrative furrows to plough by surrounding those company’s products with powerful management tools.
