By Frances Martin
Tuesday 1st April 2003
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That seems extraordinary when you look at the size and track record of the company he created, Peace Software. It employs about 450 people and in 2001 turnover rose 150% to $75 million. This puts it in a similar league to, say, much fought-over listed company Rubicon or Kiwi Income Property Trust. It ranks among the world's 500 biggest software providers according to the US's Software magazine and is the biggest operator in its chosen niche - providing customer information and billing systems to utilities companies. Its customers include North America's largest energy retailer Direct Energy Marketing and, in its time, Enron. Though Peace Software's global headquarters is now in Miami - Peace himself moved to the US in 1998 - its software development centre is still in Auckland and employs three quarters of the staff.
Peace's low public profile is even more extraordinary given that the company's success came from doing exactly what everyone keeps telling Kiwi companies to do - going global. Its browser-based suite of "Energy" software packages produces power bills for 13 million consumers in the US, Canada, Australia and New Zealand (here it has just one customer, the Palmerston North City Council). The company's software is technically advanced and was the first to give power customers internet access to their accounts. Peace Software was also ahead of the pack in spotting the impact deregulation would have on utilities and their relationships with customers.
So who is Brian Peace? He's hard to quantify. On one side, he's a man who attracted venture capital from one of the world's leading funds specialising in software companies, the $US1 billion New York-based Insight Venture Partners. On the other side, Peace is cautious about calling himself a success. He doesn't even own the house he lives in, or a car. He is known among friends as a social animal and party thrower, yet is rarely in the media. "Profile is not something I seek," he says. You can almost feel him shifting uncomfortably in his seat. "Interest from US analysts and the press is more on the company and what it is offering and is not driven by personality."
Peace was born in the Waikato in 1957 and his dad ran the Holeproof kids clothing company in Te Awamutu. He did two years of law at Otago University before dropping out to go travelling for a year. He then re-enrolled in law at Auckland University but decided to take a couple of computer papers, the first the university ever offered. From the word go he was hooked - not so much by programming as by the potential he saw in marrying IT and commerce. He graduated with a Bachelor of Science in computer science and a Masters of Philosophy in information technology. In 1984, after 18 months teaching at the university and a stint at consulting, he set up Peace Computers, initially selling computer systems and later concentrating on software. In 1989, the company narrowed its focus to the deregulating utilities sector. It doddled along happily for the next decade or so until signing its first US customer, former energy trading giant Enron, in 1997. Peace moved to the US a year later and hasn't looked back.
A runaway success? During a brief visit to Auckland in February, when he made one of his first high-profile appearances as a speaker at the Catching the Knowledge Wave conference, the software entrepreneur looks serious, almost preoccupied. 2002 has been a tough year for Peace Software. The weak North American economy and a slowdown in deregulation of the US energy industry have prompted many utilities to rein in capital budgets. Peace Software has felt the impact. Although the company was happy to publicly state that revenue leapt 150% to $75 million in 2001, it will not reveal 2002's figure, suggesting the result isn't as good.
It's hard to reconcile the downbeat, guarded Peace of the media interview and public appearance with stories that friends and associates tell about him. The Peace they describe is a bit of a wild man; unconventional, a master salesman who works and plays hard and doesn't get knocked back easily.
"He's very charismatic, positive, energetic," one former employee says. "He has a great sense of humour. He threw a 'Shagadelic' Christmas Party the year before last [themed on the Austin Powers movies]. I kept waiting for the speeches to start but Brian wasn't about to ruin a good party with speeches. He just danced around all night with a blonde wig on." Another associate tells the story of the dark days after the 1987 share market crash when Peace faced the prospect of going bust. "And what was Brian doing that weekend? Poring over the books, pulling his hair out? No. He went down to Wellington to race his Porsche."
Peace laughs at the Porsche story but doesn't seem entirely comfortable hearing it. "I was young ... too much testosterone." He still takes risks, but these days they're calculated ones. Take the deal that really made Peace Software: winning the contract to provide a customer billing and information system to Vancouver's British Columbia Gas in 1999. At the time, BCG had 750,000 customers - about half the entire New Zealand market. Peace Software had previously secured smaller contracts in Australia and with Enron, but going after BCG was a risky move. Although Peace Software was a front-runner during negotiations, BCG was concerned the company was too small to deliver the product and service the Canadians needed. Peace worked out he'd need another 200 highly skilled staff in his Auckland development centre before he could satisfy BCG's requirements - and he needed cash to fund the expansion. Failure to back up his promises to BCG would have been commercial suicide in the US, where the utilities sector - despite its size - has a highly effective grapevine.
The money, $20 million, came via US venture capital. Insight Ventures took a 25% stake and a fund manager specialising in utilities, Arete Ventures (later called Kinetiq Ventures), bought another 8%. As well as cash, the Americans brought credibility in the North American market and valuable management expertise. Kinetiq managing director Jake Tarr subsequently joined the Peace Software board, as did Insight founder Jerry Murdock along with an Insight associate, John Blend, as an independent director.
Bringing in US venture capital was a smart move because it brings with it a lot of American connections, says John Blackham, chief executive of Auckland software house Xsol and an early promoter of the local VC market for high-tech startups. Finding a New Zealand venture capitalist prepared to invest that kind of money in software wouldn't have been easy, he says.
Peace was successful in attracting American venture capital because he had set up his company as a US entity and also had the image they were looking for, Blackham says.
Insight approached Peace rather than the other way around. "They rang me - I was in Auckland at the time - and said, 'We've been tracking your company.' I thought that was a bit weird but they invited me to come to New York to pitch to them, so I did. They were just very interested in our story and investing." The problem wasn't so much finding someone willing to invest in Peace but finding someone who understood our business model and the utilities sector we were targeting, he says. "Something I have always appreciated with Insight is not only have they been helpful in recruitment and in terms of capital and connections but also very helpful in terms of working through the dynamics of the industry."
The BCG deal helped Peace Software with its next coup: winning the contract to supply billing systems to Xcel Energy, the US's fourth largest combined gas and electricity company. Other big clients now include American Electric Power (more than seven million customers worldwide) and Direct Energy Marketing (North America's largest energy retailer).
Although he says he would have liked Kiwi companies to buy his product, Peace doesn't seem too worried that they haven't. Let's face it - most of our utilities are tiny compared with Peace Software's North American customers and, as he says, he can earn much more money overseas. In fact, last year Murdock predicted that within five years Peace Software will be a top 100 software company, with yearly earnings of $US100 million.
But back in the boardroom, Peace is cautious. "Look, I don't want you to characterise this as a success. I don't like the word and I don't align with it. Enron was a $100 billion company and it went bust just like that." The US is going through a very tough time right now, he says. The country's on the brink of war with Iraq, its economy is flat, capital budgets are tight and electricity deregulation has stalled. "There was a point when we couldn't employ people fast enough, but now we aren't taking on anyone new."
After years of growing the business Peace now seems focused on protecting it, particularly from being dragged down by the collapse of a big customer. "We're trying to keep multiple revenue streams coming in so we can keep healthy and stable. Being agile is very important to us."
The company has already survived a near miss. Its first US customer, Enron, collapsed in 2001 leaving a legacy of financial and political scandals. Luckily for Peace Software, Enron had reorganised and exited the billing market by the time it began to fall apart, sparing the Kiwi company any direct fallout. With the US proving problematic Peace has now turned his sights on Europe, where he says utility deregulation is doing much better. Already he talks about the day he'll move there.
The precariousness of success is something Peace has experienced personally. In 1987 Peace Software had grown to employ 50 people - then the share market crashed. Peace, who'd been investing in shares, had used some of the scrip as security for bank loans. When the value of his shares dived, the banks wanted their money back. On top of that, one of the company's biggest customers was Goldcorp, a gold trader that went spectacularly bust after the crash. Other customers couldn't pay their bills or stopped buying.
Peace says he survived the crash by learning the most important lesson of his business career: how to brutally face facts and deal with them. "A lot of people don't do that. They think they're just one deal away from getting out of trouble. Then they gamble more and more." Peace went to all his creditors and bluntly told them he'd go bust if they called in the loans. He worked out a repayment schedule, slashed staff numbers to 15 and spent the next two-and-a-half years paying back the debts. "It's interesting because I came out of that period generating revenue faster than before. I was more focused." Since then he's stuck to his knitting. He has no investments outside Peace, other than some modest investment property. And the next time he needed cash to expand, he brought in shareholders.
After the sharemarket crash, Peace's next turning point was in 1989, when old university friend Ross Mathieson, now the company's vice-president of corporate strategy, approached Peace with an idea. At the time Mathieson was a consultant specialising in software planning for utility companies. "Ross believed the utilities industry was about to go through a massive change, where deregulation would bring more customer focus, and New Zealand looked likely to be one of the first counties to deregulate," Peace says. "My first reaction was, 'Why would I want to deal with big, monolithic organisations that appear to be very slow to change?' But he convinced me he was right."
The two decided to change direction from supplying software in the traditional commercial space - payroll, inventory and the like - to providing customer systems for utilities, in both the regulated and deregulating market. The company's first contract was to build a billing system for the Auckland Gas Company. "The deal was that if it worked, they paid us, and if it didn't, they didn't. The other condition was that we owned the code." At the time the company's entire workforce took up just a third of a floor in what is now called Peace Towers in Auckland's St Martin's Lane. Peace's living quarters occupied the rest of the floor. "My girlfriend used to cook dinners for us. We worked 24 hours a day to build it." Thankfully, it worked.
The company's next coup was winning a contract to supply the Hutt Energy Board with utility billing Customer Information System software. "I'll always remember they invited us all to a vendors' day. We were one of seven finalists [for the contract] and all the others were from big companies such as IBM, SAP and Unisys. When we walked in, the other companies just looked at us like, 'What are you doing here? You're too small to tackle this company.' But we always believed we were just as smart and good as the people working behind big brands."
The attraction in both cases appears to have been to Peace's innovative approach at a time of big change in the industry.
The next big step was to Australia in 1994, where Peace Software won a contract with small electricity company Ophir in New South Wales. Then in 1997 it hit the big time, signing the Enron deal. "As soon as we started generating US dollars, our business started to accelerate. They saw us as a low-cost, innovative solution. But for us it was like four or five times what we could generate in New Zealand or Australia. It meant we could buy better computer systems, get more infrastructure, pay for our airline tickets."
So how did he do it, crack the US market? Peace looks impatient. "That's a crazy question. At 8.30 every night there's a plane that leaves Auckland airport that will take you there. They all speak English. Sure, it's a lot bigger, but you find a place to hang out and you start knocking on doors. You tell them, 'You need to talk to me because I've got this great product.' That's how we are going to get into Europe. We will keep knocking on doors until someone gives us a chance."
That makes it sound easy, like all you need to succeed in the US is tenacity. But Peace's experience suggests that's not true. You need an outstanding product, a world-class sales pitch and loads of stamina. "We used to go over there and do roadshows out of a suitcase. We'd visit three companies or consultants a day and fly to different cities in between. We'd get so dog-tired we couldn't even speak to each other, we were so sick of each other."
In America you get two minutes to make your pitch, he says. "We'd tell them a bit about the company, then quickly demonstrate our web technology and they'd go 'wow' and run out of the office to get Bob or whoever to show them, too. That's what got us in. You'd have to visit numerous times, working your way up the organisation until you got your 15 minutes with the chief financial officer or chief executive who made the final decision."
Peace Software's technology clearly has the wow factor. Meta Group, a Connecticut-based organisation that ranks customer information systems, judged Peace Software one of the top three in its global market - up there with heavyweights such as German giant SAP. But having Peace as chief salesman obviously helped it succeed. "Brian's a great showman, he knows how to create a buzz around his business," says software industry veteran John O'Hara, a director of systems integration company Gen-i.
"I remember being at a trade show with him in late 1999. There were three of us exhibiting from New Zealand. Brian put a full-motion flight simulator on his stand and there was a queue a mile long to get on it. Full marks to him, he left us in his dust."
Although no slouch in the technical department, Peace knows his greatest skill is making deals and winning business. "People buy from people," he says, when asked how he does it. "It's about building relationships. They have to have confidence that you understand their problem and that you will deliver." When people buy from Peace Software they buy from Brian Peace, that's why his name's over the door. The 18 months he spent lecturing at the University of Auckland also taught him to explain complex issues simply. Throughout his interview with Unlimited, he uses not a single word of business or IT jargon. When talking about Peace Software's customer system he describes it as a giant cash register.
These days Peace's management style is one of empowerment rather than holding the reins tightly. He sees himself as the leader providing vision rather than a manager. The company has a flat organisational structure and he believes a participative culture where any employee can give their opinion is pivotal to innovation. He likes to bring people on board and allow them to grow within the organisation and make mistakes. One of his favourite maxims: "Figure out how much it costs to do something, then pay the price."
But that hasn't always been his approach. As an entrepreneur you tend to want to keep close control of everything going on in the organisation, he says. "That can be somewhat limiting as you're trying to grow the company. The most difficult challenge for me personally is trying to reinvent myself away from the trading mentality to standing back and dealing with a smaller group of people who then deal with another group of people who make things happen."
Peace considers his biggest failing to date has been not recognising quickly enough he couldn't do it all. "The constant challenge of trying to find the right people or grow them through an organisation becomes your number one job. Your number one priority is to find the right people for key positions."
Old university buddies say Peace was always marked for greatness. "The difference between Brian and the rest of us was that he had a plan," says Ian Scherger, Vodafone's director of consumer markets in Australia. "There were some incredibly bright technical people in that class but where he left everyone for dead was on a commercial level. He always viewed himself as a businessman." Scherger's first job was a programming contract that Peace arranged with the Devonport Borough Council. "He organised a group of us to do it and turned up once a week to check that everything was okay."
Peace was always a class act, Scherger says. "In those days most of us were on the bones of our asses and weren't great examples of fashion. But Brian always turned up to university looking like something out of GQ, carrying a briefcase." Old friends say he was fun to be around and was a hit with the babes. Peace hasn't lost his taste for beautiful women: he is married to former Miss Auckland Sherin Garratt. The couple recently had their first child, Bianca. But despite his wealth, jet-setting lifestyle and glamorous wife, Peace is no Eric Watson. There are no brawls with Hollywood actors or stories of Sherin being caught in compromising circumstances with sports stars. As Peace tells it, they live a pretty simple existence. There are no art collections, villas or sports cars. Peace has learned to fly planes and helicopters but the company has no corporate jet. When asked what the couple do for fun, he replies, "Go to the beach." They both like travelling, but the destinations are cultural not ritzy - Machu Picchu in Peru, Egypt's pyramids, Varanasi in India. Last Christmas they trekked into the Ugandan hills to see the region's wild gorillas.
That said, however, acquaintances describe the couple as "real Miami people".
"Looks are important to Brian," one says. "He's at home with the suntans and showmanship of the US business world. He's an American at heart." Take his haircut. Kiwi business blokes wouldn't be caught dead sporting that kind of blow-dried look. Short and greying is the order of the day here. Peace has also picked up that American salesman habit of telling cute moral tales: "When I was growing up we had a bach in the Coromandel. We didn't have any chairs so we sat on apple boxes. Those boxes had nails in them and every now and then you got a nail in your bum. Operating a small business is like that - you sit on an apple box. You don't get a big chair in a big office. But the good thing is you feel that pain and it keeps you awake and alert."
Despite his American exterior, Peace is still a Kiwi. In April 2001 he moved Peace's global headquarters from Atlanta, a US business hub, to Miami, an IT backwater - a move the company's board opposed. His motive? "Sherin and I didn't know what to do in the weekends. In Atlanta everybody goes to the mall or restaurants and that didn't appeal to us." Miami's beaches and outdoorsy atmosphere reminded him of Auckland, he says. Kiwis are still his people. "New Zealanders are great team players. I noticed that as soon as I came to the US. Don't get me wrong - the US has been kind to us. But Americans don't socialise like we do. We'd have Christmas parties and by 12 o'clock all the Americans would've gone home. But at 5am I'm kicking out all the Kiwis."
And the company is still a Kiwi one. It is New Zealand registered, pays tax here and about 70 long-standing Peace employees - mostly Kiwis - own shares. That includes Peace, the biggest shareholder, and chief technology officer Paul Grey who also owns a substantial parcel. The company's software centre is firmly in Auckland and New Zealand universities provide much of its brainpower. Peace Software actively seeks out top students and digs deep to support universities. It contributed $20,000 to the startup of the Auckland University Software Engineering School and provides teaching staff to the university and to the Auckland University of Technology. The company employs eight students every summer in internships and provides up to $100,000 a year in undergraduate scholarships.
Xsol's Blackham says Peace has done great things for New Zealand business and particularly its software industry. Peace was the first to see that keeping the software development centre in Auckland was an asset, he says. "He's shown that New Zealand can be a high-quality, low-cost engineering centre. And he's shown that we can make it in the US market. I think he ought to be knighted for that."
At the very least, when New Zealanders think of famous sons of Te Awamutu, Brian Peace should come to mind, along with the Finn boys.
Brian Peace's top tips for going global 1. Refine your product at home, test it and be sure it's proven before taking on the world
2. Don't rush in without a beachhead. Identify and secure strategic partnerships to use as a springboard. Peace Software, for example, used the BC Gas deal as an entry into the North American market
3. Stamina is key. Develop a world-class sales pitch, fly to your market and knock on doors. Keep knocking until someone gives you a chance
4. Create a strong local presence. Peace Software established a US headquarters, recruited a US sales force and executives and adopted US spelling in company literature
5. But don't forget what's behind your success: your Kiwi heritage. Peace Software retains its Energy Development Centre in New Zealand, taking advantage of good old Kiwi ingenuity, IT talent and work ethic
6. When things go wrong, stop, look and listen. Face facts and act fast. Don't rely on the next deal - the one that's just round the corner - to get you out of trouble
Peace time 1984 Brian Peace founds Peace Computers (later named Peace Software)
1987 New Zealand deregulates its energy sector; Peace Software develops its browser-based "Energy" software
1988 Peace Software wins its first New Zealand utility client, Auckland Gas Company
1994 First Australian utility client, Ophir Electricity in New South Wales, is signed
1996 Peace Software installs world's first energy internet customer service solution
1997 Peace Software signs first US client, Enron subsidiary Portland General, and pioneers browser-based customer care software for utility call centres
1998 First Canadian client, BC Gas signed; Peace Software opens US office in Atlanta, and receives $20 million from American venture capitalists
2000-2001 Peace Software signs large-scale North American clients - American Electric Power, Xcel Energy, Centrica North America, CustomersWorks
2001 US headquarters move to Miami, Florida
2002 Direct Energy deploys Energy for Texas and Ontario (one million customers); Brian Peace named New Zealand Technology Entrepreneur of the Year; and Peace Software ranked in top 500 software companies in the world
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