Innovator Of The Year - Speaking the Same Language Richard Schultz's Metaserver has defied the dot.com odds by creating a business process-integration product that actually works
By: Lisa Micali	Business New Haven

When it comes to pure innovation, there really are no rules. But for those who dare to dream big, life ought to be an adventure - and so should your career path. That's the philosophy of Metaserver's founder, president and CEO, Richard K. Schultz, winner of BNH's 2003 Innovator of the Year award.

Schultz isn't exactly your typical techie entrepreneur. He's an aficionado of thrillers (books and movies), a big music fan, mostly rock (he's a classically trained pianist but also a former rock 'n' roller who plays guitar, bass and drums), loves comedy (Austin Powers is a favorite) and of course, computers. Schooled in computer science, classical music and business, Schultz espouses the dynamic, fundamental qualities driving successful entrepreneurs today: abnormal doses of will, courage and risk-taking - not to mention enormous amounts of motivation and energy and a sense of doing whatever must be done to get the job done. The only thing he's a little short of, is time.

"There never seems to be enough time," Schultz says. "When you're at a start-up company, you're always working on it. The business is always with you whether at home or on vacation, you can't really leave it behind."

The challenge is not for everyone. "Luckily, my wife and I enjoy this lifestyle," he claims. "But with the birth of our second child on the way [Schultz and his wife also have a two-year-old son, Trevor], I realize that you never actually have any time to yourself. Don't get me wrong, it's great. But there's absolutely no downtime."

Juggling a young family and building a demanding software start-up, the 35-year-old Schultz is driven by challenges. But that's not nearly enough. He is passionate and committed, perhaps to a fault. And in contrast to many entrepreneurs of the dot.com era, Schultz desires to create a lasting and influential software company devoted to delivering a best-in-breed product into markets that need it most.

Schultz cut his career teeth in Fortune 500 advanced technology groups (including IBM and Dunn & Bradstreet), and along the way became fascinated by how some companies seemed able to change and adapt to new market forces seemingly at the drop of a hat - a quality sorely lacking at supposed powerhouse "innovators" like IBM, where he worked. What shaped him as an entrepreneur, he says, was this desire to take a more proactive approach to rolling out solutions quicker. "I wanted to try to latch onto opportunities while the opportunity availed itself to become a leader in the space," he explains.

Like Schultz, New Haven-based Metaserver, the company he founded in 1996, is swift and wholesome in its business philosophy, quick with a laugh and ready to take on just about any challenge thrown its way. Metaserver is a business process-integration software provider, a hot and growing market. (In 2000, the development-and-integration segment reached $169.4 billion, and in 2005 the market is expected to grow to $368.9 billion, according to Gartner Dataquest.)

Schultz's company is focused on transforming the financial and insurance industries by helping their customers resolve pressing business issues in a matter of days, not years. The impact of Metaserver's technology on the real economy, as opposed to the now moribund "new economy," is revolutionizing the entire way legacy and disparate systems are integrated into a new, easy-to-deploy architecture that takes the sting out of integrating business processes.

Metaserver's out-of-the-box solution targets mid-market insurance companies such as property and life annuity carriers that need to implement nimbler systems that drive ROI. Metaserver recognizes that a company's IT initiatives are less about technology and more about customers reaching their business objectives and providing value through underlying processes.

Most enterprises today rank automating business processes as a top IT priority. But many executives flinch at the daunting technology challenges inherent in today's integration tools - to say nothing of the potentially hair-raising costs associated with deploying them. Metaserver's solution bypasses the pain at relatively lower cost than its competitors without custom coding. The idea behind Metaserver's BPI is to leverage the applications infrastructure to carry out business functions in an automated, easily changeable fashion.

Visual modeling tools play a big part of this. Essentially, these tools have entered the market to help design and map processes across applications and enable users to change rules on the fly, such as raising or lowering a threshold for certain insurance approvals.

A champion innovator? Says Schultz: "Our best source of innovation is really keeping our minds and our ears open. We focus on listening to what the customers have to say and go out of way to make our customers happy. In a sense, people think of us as 'innovators' because we've built some leading-edge technology," he says. "But the real innovators are the people who use that technology to solve real-world problems. Our customers are the real innovators; we're just the tool. True innovation is giving our customers the ability to dominate their market."

Colleagues describe him as the visionary force behind Metaserver Inc. Focused, he's a big-picture think yet tactically astute, able to work and play hard. He expects the same from his colleagues and his employees. The quintessential cheerleader, Schultz brims with enthusiasm for his company and its products. Adjectives most often used to describe him: "jovial," "hardworking," "fun-loving." As a leader, he is highly engaged and prides himself on open communication, informing his staff of every goal and milestone the company needs to hit to reach their targets. He also empowers his employees (or, as Schultz calls them, "teams of individuals who are contributors, but also builders") to take ownership in their jobs as well as in the company, something that comes across in the team's responsiveness and unparalleled focus.

Based in the Connecticut Financial Center in downtown New Haven, Metaserver has successfully adopted a high-performance, Silicon Valley mentality in a region better known for its steadfast and sure methodologies. Like its tech brethren on the West Coast, Metaserver's landscape revolves around long hours, hard work and fun. The culture, still burning the midnight oil, is friendly and free-spirited as scooters whiz by and a bout of fooseball starts heating up in a game room peppered with programming code and jokes.

Nurturing the people and the culture needed to pioneer technological ideas is a not an easy endeavor, but it's something the folks at Metaserver take seriously. In a soft economy where more work-and-life balance is sought, the employees who work at Metaserver are a breed apart. With uncharacteristically low company turnover, most employees stay years, committed by both the challenge and desire to build a world-class organization.

Recruiting hasn't been a problem either, Schulz says, despite the fact that he likes to hire people who are better at their jobs than the ones already there. Most new employees are eager to join an agile, passionate and highly focused organization. Schultz says his company's growth ambitions have been infused with pragmatism since Day One.

"Part of our plan was to recognize that things will never go exactly to plan," he says. "We never had the bubble and downfall of some of the Internet companies because our model was to grow based on our successes. But we're living in troubling times, and the hardest thing we had to do was lay off employees after the economy softened and the events of September 11 occurred."

Metaserver's core product was created by the advent of a distributed supercomputing architecture conceived at Yale and developed by Scientific Computing Associates (SCA) for the U.S. Department of Defense. The architecture, known as Linda, applied the theory of shared network memory to allow researchers to efficiently link the processing resources of multiple existing computers rather than loading the problem onto one expensive supercomputer. Working at SCA, Schultz decided that the Linda architecture could also be applied to business computing processes, so he and Ashish Despande (also of SCA) founded Metaserver in 1996 with seed money from Connecticut Innovations Inc., the state's high-tech investment arm. The company also developed a visual modeling system to simplify the handling of those remotely located processing resources. Today, that modeling system is what Metaserver refers to as its business-process-integration, or BPI, modeling tool.

Metaserver's flagship product optimizes peer-to-peer technology, enabling organizations to identify, diagram and deploy business processes so they are accessible in a Web environment. The availability of Metaserver 4.0., the latest version of the company's software, enables enterprise departments and mid-market companies to quickly and easily automate existing business processes, create new ones and integrate them with legacy and incongruent systems. As the software is rapidly deployed throughout a business, companies save time and money, and experience a radical business change within days, rather than months or years as is the case with other products. The software, explains Metaserver marketing director Steven Nguyen, was specifically designed to satisfy the BPI needs of mid-market organizations. But integrating systems has traditionally been a difficult and expensive proposition, he adds.

"BPI was mired with infrastructure upgrades, customization and consulting services, all of which can be costly. With 4.0, companies can be running at full speed in no time at all and experience maximum value with minimal costs." And customers are noticing. Indeed, 2002 was Metaserver's best sales year to date.

"We continue to see tremendous growth in terms of customers and partners," says Schultz. "Early signs from [2003] indicate that that growth will continue. We're building a business focused on solving a very important market problem, which isn't going away. In 2003, what you can expect to see is more press and visibility about some of the customers that we're doing work with now that have yet to be announced, some new customer wins that are in the process of coming up and partnerships with other technology companies so that we can work together to solve even bigger problems in the market," says Schultz.

In October Metaserver secured a $10 million Series D round of funding from new strategic backers, many in the insurance industry, a market on which Metaserver is especially focused. (The company currently counts Providence Washington, Liberty Mutual, Phoenix Wealth Management and the state of Oregon among its 20 customers.) The pre-money valuation of the company was $53 million, compared with Metaserver's $45 million pre-money valuation in 2000 when it raised a $25 million third round. Metaserver has raised $41 million to date and is also backed by Century Capital Management and Madison Dearborne Partners.
Schultz says Metaserver will use the new capital for continued growth and expansion, particularly the areas of sales and marketing and customer support. With a staff of 50, the company's biggest challenge is gaining visibility by getting its name out in the marketplace. The company projects reaching profitability by the end of this year.

"For us this year, it's heads-down, focus on what we're strong at, which is solving business process-integration problems, and continue to grow our market penetration," says Schultz. "We've done a lot here in Connecticut and locally in New Haven. We're starting to see some seeds of information technology and software clusters coming about but of course, that's slowed a little bit. But we continue to see the opportunity to innovate in looking at new business models out of universities and out of other local companies. I think we can expect to facilitate some of the incubation happening here locally to augment what we're doing as a company ourselves."

Regarding the most important technological innovations in recent years, Schultz says, the Internet and wireless have of course revolutionized all our lives - but we're seen only the tip of the iceberg. "Areas where I think a fundamental transformation is in progress include biotechnology and medicine like genetic manipulation. Not cloning, but real-world applications that help us eradicate disease based on our DNA, for instance. Of course, our work here at Metaserver in information technology is also important."