eRoom CEO: More Room to Grow

Collaboration provider takes aim at profits, IPO and competitors.

eRoom Technology Inc. CEO Jeffrey Beir, a veteran of Lotus Development Corp., founded eRoom in 1996. The company provides software as well as a hosted service that enables collaboration among far-flung team members. Although the company benefited from interest in virtual-meeting technology following last Septembers terrorist attacks, eRoom is seeking to turn the corner from venture-capital-backed startup to established, profitable company while fending off competitive threats from companies such as Microsoft Corp. and Groove Networks Inc. Beir discussed these issues with eWeek Executive Editor Stan Gibson and Senior Writer Dennis Callaghan at eRooms corporate offices in Cambridge, Mass.

eWeek: Whats the importance of Web services to eRoom?

Beir: eRoom was created with a view to the Web as an application infrastructure. In eRoom 6.0, we have support for Microsoft [Corp.s] .Net, including [Simple Object Access Protocol] and XML. But its the early dawn of Web services—theres a lot of work still to be done.

eWeek: Are you embracing J2EE [Java 2 Enterprise Edition] as well as Microsoft .Net?

Beir: To be able to create applications that span architectures, we need to have both a J2EE interface and a .Net interface. The power of the Web services world is that we can bring together applications on multiple platforms. On the client side, we support Netscape as well as Internet Explorer. I havent found a CIO today who has a homogeneous environment.

eWeek: Now that eRoom 6.0 is shipping, whats on the drawing board for the next release?

Beir: Weve been on 12-month release cycles with quarterly maintenance releases. eRoom 7.0 will have enhancements in manageability and scalability. It will also have project management capabilities and support for richer collaboration data types—CAD drawings, for example. Were also looking at integration with analytic tools.

eWeek: You are browser-based and client-agnostic, while your emerging competitor Groove Networks is not browser-based and is Microsoft-specific. Why do you think your strategy is superior?

Beir: A proprietary, fat-client, peer-to-peer, replicated, $49-a-client strategy is not a modern strategy. Its a very 90s strategy. Lets step back to the business problem. A team of people needs to come together rapidly to collaborate on a mission-critical project. Theres rich content, and there are lots of applications. That dictates an architecture that must work very easily across enterprises; it needs to be agnostic about the platform; it needs to be thin-client so its easy to deploy; it needs to be enterprise-scalable and 24-by-7.

eWeek: Microsoft has SharePoint. What is the danger that Microsoft could decide that products such as yours are part of the operating system, as it were?

Beir: Its been done before countless times. I spent 10 years at Lotus competing with Microsoft. You dont sleep peacefully when Microsoft looms large. That keeps us sharp; that keeps us competitive. Id love it if Microsoft were to bundle SharePoint in Office because that would doom it. Once its buried, it loses its unique presence in the marketplace. But we need to remain paranoid about Microsoft. They use the classic tactic of low-priced ubiquity.

eWeek: Which vertical markets are hottest for you now?

Beir: Initially, we went after professional services firms. Then we went after new-product development in manufacturing and high-tech companies. Now, government, energy, financial services and the pharmaceutical industry are important to us.

eWeek: After 9/11, did you see a bump in interest in eRoom?

Beir: We certainly did. But there has been a more permanent effect, too. People realize they were using airplanes like buses, and perhaps there is a better way to collaborate across the world.

eWeek: How have you addressed the security question?

Beir: We support Secure HTTP and Secure Sockets Layer, and were working with partners like RSA [Security Inc.] and Authentica [Inc.] to provide deeper levels of security. Weve had ethical hacker organizations try to break the server both for our own understanding of vulnerabilities and to help our customers understand the robustness of the platform.

eWeek: Where are you seeing the most growth—with your hosted service, eRoom.Net, or with products that corporations host themselves?

Beir: Last year, we saw eRoom.Net grow dramatically, about 25 percent per quarter. Fifteen percent of our business is hosted, and about 85 percent is licensed software. Hosting may go up to 20 percent or so. Interestingly, were seeing some customers deploying both. In some applications, they want to run the servers inside the firewall. In others, they want it outside the firewall, so theyre on a more equal footing with their partners.

eWeek: What are your annual revenues?

Beir: We dont disclose our revenues because were a private company. However, we grew 100 percent last year. We had a record first quarter; we have close to 750 Global 3000 customers today; and weve been cash-flow positive the last couple of quarters. Our strategy this year is to reach profitability and to bring the company public at the appropriate time.

eWeek: When will that be?

Beir: No earlier than late this year or early next year—when the public market rebounds for software companies.

eWeek: Would being acquired be just as good as an initial public offering?

Beir: If an acquisition looks like a strategy to create greater value, then certainly we would look at that seriously.