AIQ Profit Star

Celebrating a remarkable achievement

That team was headed by Larry Oeffinger, Keynote’s Senior Director of Production Operations, who received a well-deserved award that day. The ceremony also delivered awards to the Keynote CEO Jennifer Tejada and the VP of Service Delivery Shawn White, and many other team members. That in itself suggested that this was a special occasion. A special occasion that was due to an amazing number: the total cost savings that Larry and his team and AIQ had delivered to Keynote’s bottom line over the previous year.

Focus on process, focus on change

It was no small boast. It’s well known that there is often a disconnect between the driving concerns of top level executives, and the performance metrics of line managers tasked with carrying out specific initiatives and managing day-to-day operations. One is focused on total profitability and increasing EBITDA, and the other wants to get the job done. And these outcomes are not necessarily in sync.

Which is why, by relentlessly pushing for cost savings, and bringing in AIQ  to help achieve that goal, Larry succeeded both in delivering real value, and in dramatically enhancing his influence and leadership within the company. His insight and participation are now sought after, and he did it by placing the emphasis where it belongs: on process.

He made the first forays into changing a cultural mind-set that resisted change, to get people within the organization to “think differently about being a steward of the company. Now we’ve got that learning and it’s infectious. Saving money is infectious and people like it!”

AIQ sums it up in one simple mission statement: we help our clients get exactly what they need, fastest, and at the lowest possible cost.

On that day in San Francisco, Larry and everyone who worked with him—Tim and January, and Ray, David and Dave and Daisy and all the rest—took a moment to enjoy and be recognized for the results of their efforts. It was also a time for reflection, to consider how they got to this point from where they began. For Larry, it had started almost seventeen years earlier, when he had first met Brad Buxton, CEO and founder of AIQ.

Keynote is the global leader in cloud–based testing, monitoring and analytics for mobile and web applications. They help clients optimize the value of every digital interaction, enhance the user experience and drive business value through improved online performance. Keynote operates the world’s largest cloud testing, monitoring and analytics network that collects over 700 million mobile and website performance measurements daily.

When Larry first arrived at Keynote he was impressed. Ever since their start-up days seventeen years before, Keynote had been growing and growing fast. They were acquiring other companies, expanding their offerings and growing their global customer base. Keynote was truly a leader in their field. But Larry also noticed something that is true about many companies that grow quickly: there were not a lot of processes and procedures that were shared across the enterprise. He sensed that with some sections of the organization the feeling was “This is how we do it …because we’ve always done it this way.”

“So, my team started trying to change that.”

But to really effect the change he knew was possible, Larry knew he couldn’t approach it in a piecemeal way.

Fortunately, Larry had a strategy in mind. “The time was really ripe,” he said, “to call in the experts.”

He and Brad starting having meetings to map out some ideas and put a plan in place. The complicating factor was that, compared to Genentech, Keynote had very specific business requirements because of the unique value that Keynote provides to its customers.

Keynote’s core value is the ability to test and analyze specific products on specific networks in specific markets—worldwide. In other words, if a U.S. customer wants to test the performance of their mobile application on a Samsung Galaxy with Vodafone in Frankfurt, Keynote can make it happen. And there could be potentially thousands of completely different scenarios that Keynote has to be able to support.

This level of service is crucially important to their customers, but it means that Keynote’s systems are maddeningly complex to sift through. It’s not a job for the faint of heart. Larry was right to want to bring in people with expertise in handling exactly these kinds of situations. Brad told him, “Our track record shows that savings in the range of 50% are achievable and can be attained quickly, over the entire IT/telecom spend categories on a self-liquidating basis.” He knew why he could put his trust in AIQ —because he had seen them do it successfully many times before.

Convincing the skeptics

AIQ brought a lot of ideas, one of which was a dual-phased approach: discovery and delivery. The initial discovery phase includes things like assessment, inventory, auditing, and strategizing various options. It was necessary to take this thorough, coordinated approach to the problem for two reasons: first, the complexity of the task demanded it. And second, Larry had to win over his boss, Shawn White, the Vice President of Operations.

Shawn had been with Keynote for over 18 years. He built many of the systems that Larry now wanted to put under the microscope.

Needless to say, convincing Shawn that this was the right thing to do, and that it could really deliver impressive, measurable savings, was vital. And it was grounds for some nervousness, even for Larry.

Larry went on to describe the initial Phase One process with AIQ, and how it would identify opportunities for cost savings. He knew that if he could get Shawn’s buy-in, he would be on his way. He also knew that if he started throwing around numbers that were too high, it would heighten the skepticism. So he had to be a little conservative, maybe even lowball it.

Larry told Shawn, “This is completely new thinking. We’re going to reduce our cost by x percent, and I’m confident we’ll get there. I’ve already produced some initial results based on my $250K savings. And my discussions with Brad seem very viable, and will meet Keynote’s unique business requirements, I just need support.”

The problem for Larry was that there was skepticism within Keynote whether major cost reduction was possible. Some people thought it was too big a project. Some thought they were already getting the best deals so any savings would be minimal.

“How do you combat that tendency to be a little doubtful whenever a new initiative is proposed?” Larry asked. “How do you crack that nut?” He then went on to say:

“It comes down to credibility through results and past experience. When you demonstrate leadership in the process, you can speak with a level of confidence that you’ve done your homework. Failure means people will be doubtful of your abilities and your ideas may not get a second thought from executive leadership. It could also be career limiting. However, when you are passionate, confident and have drive, people will sense it and begin to line up behind you. Take care of some low hanging fruit and the process to change the doubters into cheerleads becomes easier. Results speak for themselves.” 

Let’s make it interesting

There’s no free lunch. Unless, that is, you have AIQ to help you find the hidden morsels. And it wasn’t the last time that Larry would be asked to make a wager on whether he could deliver on his promises.

So Larry plunged into Phase One with AIQ. Larry directed his team to gather details and AIQ reviewed about $50 million in annual spending spread over 1000 or more suppliers. Out of that data, AIQ identified 108 suppliers to focus on. These were the suppliers that had the potential of delivering the fastest and most meaningful savings to Keynote. AIQ reviewed over 600 files and dozens of billing sites that included detailed invoices and current contracts. After a two-week review, AIQ presented Larry and his team with an array of possible strategies that they could take with those services. These included negotiations, optimizations and competitive auctions, among other AIQ processes, and AIQ predicted the savings with all of them. Savings can vary with different categories but over all AIQ estimated that they could save over 43%.

Larry knew from his experience at Genentech that AIQ was extremely good at predicting and delivering savings based on their detailed reviews. He was ready to have them move forward with everything. But Keynote felt that they needed to begin cautiously and put a toe in the water, so they decided to start first with the collaboration sector. AIQ created a detailed baseline with dozens of bid items on which eighteen suppliers were invited to participate in an online auction. The suppliers also provided references and answered a detailed online survey that automatically ranked the responses. AIQ handled all the supplier communications and negotiation on Keynote behalf and with their review and approval. The bidders competed fiercely and by the end of the auction, when the winning bids were tallied up, the total savings were 60%!

Keynote was delighted, as you can imagine. But there were still members of the Keynote team that were not fully convinced. Could AIQ repeat this success with other categories? The next one up was mobility, and some team members openly expressed that there was no way AIQ predicted mobility savings could be achieved. There were just too many complications, too many interlocking requirements with thousands of devices and over $1 million in annual spending. The suppliers had already told them they were getting the best deal.

Oh really? Larry said to his team, Do you want to put your money where your mouth is?

So his team bet Larry that he wouldn’t break 30%. It’s so crazy, we’ll dye our hair blue if you make it.

And if he missed that target, Larry would have to wear some blue nail polish. (Perhaps he could audition for the Blue Man Group.)

Fortunately for the doubting team members, the bet was later changed to just wearing blue wigs. AIQ’s process had delivered savings within one half of one percent of their Phase One prediction on wireless savings of 34%!

It was a tremendous result. But now the stakes were about to get a little higher.

Enter Thoma Bravo

Keynote Systems was acquired by the private equity firm Thoma Bravo just as the project with AIQ was heating up. The initial success had the natural result: more people started to show interest, and more services were added to the mix that AIQ was evaluating.

Thoma Bravo focuses on software and technology businesses, and represents one of the longest and most successful histories of private equity investing. The company also invests in education, and business and financial services firms, targeting US companies with more than $20 million in annual earnings. They participate in management buyouts, recapitalizations, and growth equity transactions, typically buying and then building companies while partnering with their management teams.

It was natural from the perspective of Thoma Bravo that they would be uniquely and intensely focused on the bottom line. EBITDA was thus a driving concern. Their initial success meant that there was now a much higher level of interest in what Larry and AIQ were doing. It wasn’t just about informal office bets; now people were very serious about how the project could positively affect meeting the company’s year-end goals.

Things continued to progress. Larry said, “I think the process was very well done. We just got acquired, everyone was busy, but you know what? People kind of rallied around us, and got focused on what we were doing.”

They continued to uncover more opportunities for big savings. “We grew the process to look at everything. It went from just COGS to, let’s see if there’s something out there that we don’t even know about that we’re paying for because somebody signed a deal and it’s just bleeding cash.

“For example, we had a toll free arrangement with a thirteen year-old contract that was just siphoning money away. AIQ found it and lowered that cost by 84 percent!”

Larry didn’t realize it at the time, but Thoma Bravo was aware of his project at the time of the acquisition. They had already begun to factor the expected cost savings into the budget.

We all live with the need to follow through on our commitments, just like Larry. When you buy a house or car, you’re making a deal that you promise to live up to. It works the same way from individuals like Larry all the way up to companies like Thoma Bravo. They tell their lenders and investors, we can make this deal work on these terms. And then there’s no going back. You make good on it even if it means you lose the house or car. And at the top of the food chain, there’s only one response: you make it work. You make it work because the alternatives are not acceptable.

The savings number that was required was $2.8 million dollars in annual savings by the end of the year. This was not a request.

Down to the wire

Larry said, “It was no longer skepticism. It was more like anxiety. People said, “can you get it done sooner?”  There was more on the line. I’m new, the relationship hasn’t been built, and now you can’t get enough savings.”

A company, any company, can only survive and thrive on what their employees produce, and that’s a function of what those employees know and what unique skills they have. Cost saving measures can be a way to make choices that don’t force a trade-off between reaching necessary goals and sacrificing institutional memory. Larry and Brad had reached a point where their work was being framed in the clearest, simplest light. It wasn’t saving money for the sake of it. It was about people. It was the big bet. As always, they were all in.

“Aside from the incredible savings, the value-add is the education that the leadership team gains from working with AIQ. We’re getting people to question their decisions, question the business process, and they’re learning.

“It’s a really good, unspoken thing that AIQ does.”
Larry Oeffinger, Sr. Director Production Operations at Keynote

It came down to an emphatic phone call on Christmas Eve from CEO Jennifer Tejada to Brad Buxton. There was no beating around the bush. AIQ has to find a way to deliver this number based on the scope that Keynote selected, or there would be a very grim beginning to the New Year at Keynote.

There was little or no vacation for the team at AIQ or Larry’s team that week. They had the last remaining week of the year to pull together whatever additional savings they could create. And in the end, at five o’clock on December 31^st, they called Jennifer to say, we’ve got it.

“We did? Great!”

 Everyone got to go home, and have the most well-earned New Year’s toast ever.

To Larry, “AIQ’s process got people to talk and ask the right questions. That’s their real value, because it forces a conversation within the company.

 “It’s like the story of the engineer who doesn’t want to change out the old system for the new. He doesn’t know the new system, and he has a vested interest in keeping the old system around.

“Now, we’re looking more competitively at our suppliers. People stop and think, we’re the consumer – if it’s meeting the exact same business requirement, why am I paying a premium?

“There’s a buzz among the team. For example, we had to run some tests and the supplier came and said, here’s the rubber stamp amount it’s going to cost you. But after going through the process and working with AIQ, our managers have learned to question that. They say, wait a minute, why should I pay that much? Who else is doing this? Can we do a search of the other providers and see if there’s some variety in pricing?”

Larry said: “Aside from the incredible savings, the value-add is the education that the leadership team gains from working with AIQ. It’s happening almost by osmosis. We’re getting people to question their decisions, question the business process, and they’re learning. They might even be learning in their personal lives.

“It’s a really good, unspoken thing that AIQ does.”

Brad Buxton said: “AIQ’s job is to help clients understand their inventory of services and expenses, then help them reach their EBITDA and performance targets, typically by cutting costs in half across the client’s entire range of categories. AIQ sees itself as a business process supplier whose goal is to provide advice that helps the client reduce costs most efficiently so they can save or reinvest savings as they choose.”

AIQ succeeded with Keynote, as they have with many other clients because they know going in that the savings are there, waiting to be uncovered. The real job is profitability and quality. From there, all the other ancillary benefits—personal, professional, technical—flow naturally.

Tim Griffin, the Global Carrier Relationship Manager remarked that he had just sent another email to AIQ asking for more advice.

Shawn White, Vice President, Service Delivery at Keynote

 “I hope you guys are still available to help us in the future,” he said.

Ashli, CAO at AIQ, responded, “We’ll be around for a long time. We’re here for you…we’re not going anywhere.”

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