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Company Perspectives:
Remedy, a BMC Software company, delivers Service Management software solutions that enable organizations to automate and manage internal and external service and support processes. With more than 7,000 customers worldwide and over ten years of product development and investment, Remedy delivers out-of-the-box, best-practice applications that help our customers align service and support with business objectives, improve service levels, manage assets, and lower costs.
Launched toward the end of 1990, Remedy Corporation was a pioneer in developing automated software solutions for managing the local area networks (LANs) of small and midsize companies. Specifically, the company's Action Request System served to automate help desk functions and allowed network administrators to better solve the IT (information technology) problems of a company's employees. Remedy built a loyal customer base through reasonably priced software that was relatively easy to install. It also expanded into enterprise relationship management. In 2001, Remedy was acquired by Peregrine Systems, Inc., a larger competitor in network management software. A year later, Peregrine filed for Chapter 11 bankruptcy protection and sold Remedy to BMC Software, Inc., which continued to operate Remedy as a separate business unit.
Producing Software for Network Management: 1990-94
Remedy Corporation was established in November 1990 by Lawrence Garlick and David Mahler. Garlick, formerly vice-president of distributed systems at Sun Microsystems, Inc., was the company's president and CEO, while Mahler, who was formerly a marketing manager with Hewlett-Packard Co., was its vice-president of marketing. Doug Mueller of Hewlett-Packard was also a co-founder. The company was launched with financial backing from venture capital firms Asset Management Associates of Palo Alto, California, and Accell Partners of San Francisco.
Remedy's first software product was released late in 1991. The Action Request System (ARS), as it was called, was a help-desk solution that was "designed to make it easier to identify and resolve problems regarding networking equipment from a variety of vendors," according to Mahler in PC Week. Help desks were the corporate support departments that assisted a company's computer users when something went wrong with their computers. The ARS enabled end-users to register network problems on a server at the help-desk site, either from their own computer or by telephone. ARS software then automatically generated a trouble ticket to alert the network administrator, who was supplied with a database of problems and solutions.
When the Action Request System was released, Remedy indicated that it was the first of a planned series of groupware products for LAN management. The ARS was initially supported by a wide range of OEMs (original equipment manufacturers), including Novell, 3Com, Hewlett-Packard, and Sun. The software was available through the OEMs, resellers, and direct from Remedy on a CD-ROM. Pricing began at $6,500 for a package that included server software, three client licenses, and related databases.
Over the next few years, Remedy evolved from a system management solutions vendor to a help-desk tools provider. Versions of the Action Request System were introduced for Windows and for Apple's Macintosh system. In June 1993, the company hosted the first Remedy User Group (RUG) conference, and in September 1994 the company expanded its operations to Europe. In October 1994, the growing company moved to 74,000 square feet of office space in two buildings formerly occupied by Sun Microsystems. That same month, 18 Internet service providers (ISPs) agreed to use Remedy's Action Request System as a help-desk standard to help them address user complaints about access reliability and service.
Automating Help Desks and Customer Service: 1995-2001
In January 1995, Remedy released version 2.0 of the Action Request System. The base price remained at $6,500. New options included a full-text searching engine that was licensed from Verity Inc. and cost $5,000, and a new Multiple Process Server option for $3,500 that allowed users to run multiple copies of ARS server software and support a large number of users or a high volume of transactions.
Remedy went public in March 1995 with an initial public offering (IPO) on the NASDAQ. The Dow Jones Industrial Average was then at a record high, and the IPOs of technology stocks were very attractive to investors. Remedy's was no exception. Initially priced to open at $15 to $17 a share, the stock opened on March 17 at $23 a share and closed at $34. The IPO raised about $43.5 million in capital. At the time of its IPO, Remedy had about 150 employees and had been profitable for the past 11 quarters. For 1994 the company reported revenue of $19.8 million, up from $8.5 million in 1993, and net income of $3.2 million, compared to $1.7 million in 1993.
By 1995, Remedy was recognized as the market leader in help-desk software, according to Information Week. Remedy's success was due to several factors. It was the first to enter the market, and it remained focused on its core market. Its point-and-click software was unusually easy to use. Meanwhile, the market for help-desk and customer-interaction software was rapidly growing, from virtually nothing in 1993 to $500 million in 1996. As Remedy's chairman and CEO Lawrence Garlick told the San Jose Mercury News, "If there's a problem with the network, the productivity of scores of people is affected." Based on its own growth in sales and profits, Remedy was ranked at the top of Business Week's listing of the 100 Best Small Corporations in America.
In late 1995, Remedy introduced a version of the Action Request System for Windows NT that also included a new Windows 3.1-based client tool for customizing and maintaining the system. The new version supported Windows, Macintosh, and Unix end-user desktops. For 1995, the company reported revenue of $40 million and net income of $7.6 million.
Remedy released several new products in 1996. One was Flashboards, a companion application to the Action Request System that gave help desk operators access to real-time and historical performance measurements. Flashboards could be customized by users as well as by the network administrator, thus giving workers the ability to streamline their own work. Flashboards was priced at $5,000 for a server and five client licenses.
Another new release included two new applications for its help desk software package, Change Management and Asset Management. With Change Management, users could maintain and track changes to their systems, while the Asset Management module tracked an asset through its entire life cycle and notified users of any changes to asset information. In July 1996, the company released ARWeb 1.1, an add-on package that allowed a company's help desk applications to be deployed over the Internet. Using ARWeb 1.1, users could modify and update information in the Action Request System through a web browser. ARWeb 1.1 also added a layer of encryption security and enabled field technicians to generate HTML forms without having to code them first.
Finally, toward the end of 1996, Remedy introduced version 3.0 of its Action Request System. The new version offered more control for network administrators and was designed to expand the application beyond internal support to managing company-wide operations. It had a new user interface that made it more intuitive for casual users, and it was also easier to customize.
From 1996 to 1997, Remedy nearly doubled in size, from about 300 employees to nearly 600. By the end of 1997, there were an estimated 5,000 sites using the Action Request System, about half of them Fortune 500 companies. During 1997, Remedy introduced three new products for Windows NT and also upgraded its Flashboards application. The three products for Windows NT were the Remedy Mail Server, ARWeb, and the Distributed Server Option (DSO). The Mail Server allowed customers to receive notifications, initiate queries, and submit new help desk requests. ARWeb provided end users with access to an Action Request System help desk via a web browser. The DSO enabled geographically dispersed companies to coordinate help desk activities. In mid-1997, Remedy released Flashboards 1.2, which was soon followed by Flashboards 2.0 in October. The latter was Java-based and provided network managers with an overview of the status of calls to the help desk. Other features included notifications of changing conditions in the network and the ability to allow users and customers to view help-desk status via any web browser.
During 1998, Remedy enhanced its help-desk software offerings by introducing upgrades to its basic packages and add-on applications. In the first half of the year, the company introduced Help Desk 3.0, a scaled-down version of its Action Request System for smaller businesses. It integrated change and asset inventory management and enabled help-desk managers to respond more proactively to user requests. Service Level Agreement 1.0 made it possible to better manage expectations and negotiate customized levels of service with different departments within the enterprise. ARWeb 3.0 featured easy-to-install software called Help Desk Central, which helped lead users to web-based Remedy applications for reporting problems and obtaining answers to their IT questions. ARWeb was designed to reduce phone calls to the help desk and make it easier for users to resolve their own IT problems.
In the second half of 1998, Remedy introduced its Strategic Service Suite for large enterprises. Modules in the suite included help-desk operations, service level management, change management, asset management, IT purchasing, and year 2000 remediation management. During 1998, Remedy also entered into several agreements with OEMs to integrate their network management products, including Intel, Oracle, SAP, and Palm Computing. Toward the end of the year, Remedy acquired BayStone Software Inc. for $10 million in cash. BayStone specialized in software for customer relationship management (CRM).
In 1999, Remedy launched software products for sales force automation (SFA) and CRM. It acquired SFA software developer Pipestream Technologies Inc., a move that was designed to fill out Remedy's CRM software solutions. According to Computer Reseller News, Remedy's CRM solutions averaged less than $50,000, compared to other CRM solutions that cost an average of $500,000 to $600,000. Early in 1999, Remedy released Version 4 of its Action Request System. The 32-bit system featured a new interface that resembled Microsoft Outlook. The company also introduced a set of self-service applications called Remedy@ Work, which included applications for purchasing nonproduction materials and services, setup for placing orders and services for new hires and employee relocation, and expense reporting. Toward the end of 1999, Remedy launched an asset management consulting service following its acquisition of Fortress Technologies, Inc., a consulting firm that specialized in asset management. The year was a good one financially for Remedy, which reported revenue of $228.9 million, a 45 increase over 1998 revenues of $157.4 million. Net income for 1999 grew 52 percent to $32.3 million, excluding one-time charges.
At the beginning of 2000, Remedy launched its application service provider (ASP) third-party partnering program. InsynQ became the first ASP to host Remedy's CRM software solutions. Remedy also began offering its software applications on a monthly subscription basis, with discounts for subscribers who eventually purchased the software. In April 2000, Remedy agreed to acquire certain assets of Ostream Software Inc., including its development team and its Migrator product. Ostream and Remedy had been working together to develop complementary software products. Other acquisitions in 2000 included Axtive Software and ESQ Consulting.
Recognizing the growing importance of CRM solutions to its product mix, Remedy announced that it would create separate partner programs for its IT help desk solutions and its CRM product line in 2001. The company also launched new mobile solutions for Palm-powered handheld devices.
New Parentage: 2001-03
In June 2001, Peregrine Systems, Inc. announced that it would acquire Remedy for about $1 billion in stock and cash, based on the current value of its stock. Peregrine was a larger competitor that offered software for infrastructure and network management, employee relationship management, and business-to-business (B2B) relationship management. While Peregrine and Remedy shared some customers, Peregrine focused on larger companies that paid $300,000 to $350,000 for software solutions. Remedy's customers tended to be smaller businesses that paid $40,000 to $50,000 for an installation. At the time of the acquisition, which was completed in September 2001, Remedy had about 1,350 employees, while Peregrine had 3,000 employees in 80 offices worldwide. Its headquarters were located in Carmel Valley, California, near San Diego.
Following the acquisition, Peregrine planned to offer a unified technology platform that included Remedy's Action Request System. Peregrine also planned to offer Remedy's IT Service Management suite as a flagship solution for smaller businesses. In addition, the company announced it would supports Remedy's established distribution channel to small and mid-size customers. Following the acquisition, Remedy's chairman and CEO Lawrence Garlick joined Peregrine's board of directors.
The year following its acquisition of Remedy was a turbulent one for Peregrine Systems. In May 2002, the company discovered significant accounting irregularities and announced it would file a lawsuit against its accounting firm Arthur Andersen, seeking more than $250 million in damages. Shortly thereafter, Peregrine's top management, including CEO Stephen Gardner and CFO Matthew Gless, resigned. In June, the company laid off 1,400 workers in a cost-cutting measure that left Remedy's workforce largely untouched. After Gary Greenfield was hired as Peregrine's new CEO, Lawrence Garlick resigned from Peregrine's board in July. He reportedly disagreed with Peregrine's board over the strategic direction of Remedy. Garlick also expected more autonomy and less oversight from Greenfield in running Remedy.
In September 2002, Peregrine filed for Chapter 11 bankruptcy protection and sold Remedy to BMC Software, Inc. for $350 million in cash and the assumption of Remedy's liabilities. BMC Software also agreed to provide Peregrine with up to $110 million of debtor-in-possession financing. Following the acquisition, which was completed in November 2002, Remedy operated as a separate business unit within BMC Software. The acquisition was part of BMC Software's strategy to evolve from a tools and utilities vendor to a leader in enterprise management solutions.
From June 2001 to June 2002, Remedy generated about $250 million in revenue. At the time it was acquired by BMC Software, Remedy had about 6,000 customers worldwide. As a unit of BMC Software, Remedy continued to release new versions of its Action Request System and its help-desk management tool Flashboards. In March 2003, Jim Grant was hired as vice-president and general manager to oversee Remedy's day-to-day operations for BMC Software. Grant was formerly in charge of Hewlett-Packard's OpenView business unit, which specialized in IT service management solutions. For the fourth quarter of BMC's fiscal year ending March 31, 2003, Remedy contributed revenue of $49.2 million, exceeding the firm's target of $44 to $47 million in quarterly revenue.
After leaving Remedy's parent company's board of directors in mid-2002, co-founder Lawrence Garlick described Remedy as a "very simple equation" against a fairly complicated backdrop in the San Diego Union-Tribune. It was the simplicity and low cost of Remedy's software solutions that made its products attractive to small and medium-size enterprises. As a business unit of BMC Software, Remedy continued to introduce upgrades and product enhancements to its basic help desk and relationship management software. Its parent company, BMC Software, offered support to Remedy's established distribution channel and its existing customer base.
Principal Competitors: Computer Associates International, Inc.; Hewlett-Packard Company; IBM Corporation; Network Associates, Inc.
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