acreinc@20: 2nd Phase of the Corporate Journey

As I write this article, stockholders of SPSS, Inc. are preparing to decide on IBM’s offer to acquire SPSS, Inc. With the concurrence of management and an attractive premium for all common stocks, the acquisition is almost like a done deal. I believe that IBM will greatly benefit from this acquisition. First, it will fortify its consulting portfolio with downstream software applications. Second, it will acquire the capability to provide predictive analytics to growth-driven sectors. Third, SPSS is the leading analytics company and offers unique products and experience.

Acreinc has been SPSS’ partner in the Philippines for most of its corporate life. We share and are committed to SPSS’ mission of driving the widespread use of data-driven decision making. The time and resources Acreinc has invested to carry out this mission is I believe disproportionate to the predictive analytics’ current market size which. We call it advocacy and our social contribution towards improving the competitiveness of local companies.

We are not certain how IBM would restructure the distribution system in the Philippines. As an advocate of data-driven analytics and decision making, Acreinc will continue to invest on people, resources and marketing in the areas of predictive analytics and statistics. We are too deep into this advocacy to retreat. Hopefully, we will be given the same opportunity by IBM to provide decision makers with a powerful tool for analysis and decision making.

Predictive analytics in fact underscores the very essence of the second phase of our corporate journey. It is in this phase from 1995 to 1999 when we re-engineered Acreinc’s corporate business – from a research company providing IT solutions to an IT Solutions company providing research. There is a world of difference between these two major corporate strategies.

Acreinc Reengineered

In research, we were more focused on the implementation of a contract and less focused on marketing to get the contracts. In analytics, we were more focused on sales and marketing to get the contracts and less focused on the implementation. That difference alone needed a major shift in our corporate resources and methodologies.

Going though the second phase of our corporate journey, we had mostly technical persons and had little resources in marketing and market development. Re-engineering our human resource was probably the most challenging task. We needed to change the orientation of our programmers, data analysts and statisticians. We had to make them more customer-centric and sales oriented.

In the beginning, most of our people avoided answering the phone afraid that the caller was a sales prospect and would be asking questions about products and services. Slowly, they got the essence of customer service and how analytics could value add to the customers’ business. It took all of three years to re-invent our human resource from a strictly technical orientation to a customer-driven orientation. There were some Acreinc employees who responded to the shift in orientation with flying colors. They became the backbone of our new operations.

We activated a sales team whose members had the competence to not only provide the technical part of a consulting engagement but to also attend to very demanding pre-sales activities. The sales cycle for analytics products at that time was about eight to 16 months. Sales funneling and client management systems had to be customized because none were available.

That phase was an important learning experience. It provided us with the competence in sales and marketing layered on top of our technical competencies. Our sales profile reversed. In the beginning, research revenues accounted for 70% of total. Towards the middle part of this phase, software revenues accounted for 50% of total even if the volume of research continued to grow. It was this combination that enabled us to venture into other downstream software applications.

New Solutions

It was during this phase when we decided to expand our product mix to include other downstream applications, that is, software products that were used for decision making and analysis.

First on the block was a German product whose objective was to optimize production in heat-generated power plants. In this type of operation, efficiency (higher production) was inversely related to plant integrity (plant maintenance and sustainability). Performance of executives with responsibilities in efficiency was based on total production. Conversely, performance of executives in plant maintenance was based on the upkeep and continuing operation of the plant.

In this environment, the higher the heat level in the plant, the bigger the production volume. However, the higher the heat level maintained in the plant, the higher the chances of breakdown. There was a mismatch in the objectives. To make decisions, executives were using primarily experience and gut feel. The product that we sold provided an optimal solution based on linear programming. It defined optimal levels of production and plant maintenance.

Second on the block was a U.S. product whose objective was to trace and mitigate system losses in the transmission of electricity from the power generating plant to users and clients. At that time, government allowed distribution and production companies to incur system losses of up to nine percent. Companies absorbed system losses over and above the nine percent hurdle rate. The majority of distribution companies were in fact incurring losses that were more than the cutoff rate of nine percent.

Third on the block was a U.K. product on performance management, Balanced Scorecard in particular. We later supplement this with a U.S. product that included other performance management frameworks such as activity based costing and activity based management. This became acreinc’s third division. We continue to maintain this division and provide software and consulting services to many companies in the Philippines.


(This is Part 3 of a series of articles on the history of acreinc@20. It is about organizational and corporate transformation from 1995 to 1999. There is usually a time in the life of an enterprise where management challenges the business and the concepts that gave the enterprise its corporate life. Should we continue to be a player in the industry where we now operate? How can we leverage the resources and experience that we have to expand or venture into other businesses? How do we create an enterprise that grows faster and earns more? This is one of the most challenging moments of Acre, Inc. It was at that time when the environment was changing and business was growing fast. The speed by which technology was changing was also very evident, putting pressure on capital investments and process improvement. For comments, write to abfontanilla@yahoo.com or nick.fontanilla@gmail.com)