Brown: R&D key to Interactive’s staying power

Interactive Intelligence recently turned 20, but the Indianapolis-based tech firm doesn’t appear to be slowing down. The firm, which sells corporate communication software, has more than 2,000 employees and plans to add more. And it’s transitioning to a cloud-based subscription business model instead of charging upfront fees. Founder Don Brown, 58, has been CEO, president and chairman since the company launched in 1994. The following are excerpts from a recent interview.

IBJ: Twenty years is not a small milestone for tech companies, especially these days. How does it feel?

Brown: It feels like it went by way too fast. I have to recalculate the numbers sometimes to make sure that they’re right.

IBJ: What’s the biggest difference between how you originally imagined your company and what it actually is?

Brown

Brown: I had started two technology companies already at that point. My experience was that tech companies grew for a while and either crashed or got acquired by a bigger company. I sold my first company to [Electronic Data Systems] and the second one got sold to IBM. And so I never in my wildest dreams imagined that this company would be stand-alone and the size that it is 20 years later.

IBJ: So why hasn’t it been sold?

Brown: We’ve really been successful in just continuing to grow. Partly, it’s being here in Indianapolis—we’re not in the center of the technology universe out in Silicon Valley where most of the acquisition activity is. It’s just allowed us to be the little engine that could.

IBJ: Lately, Interactive has been transitioning to a subscription-based model, which has been tamping down profitability. What prompted that transition?

Brown: Well, it’s just one of the many bets we’ve made along the way. Not all of them have been right, but enough of them have to put us where we are. And we made a bet on the cloud about six years ago that more and more companies would want to consume their software that way. 

It does hurt the financials on paper, but it is good for the underlying business. It builds this long-term growing base of subscription revenue that keeps on going.

IBJ: With so much disruption from startups in various industries, how does a big, relatively older firm stay focused and relevant?

Brown: The way we do it is by spending a ton on research and development so those startups don’t come up and kick our asses. We want to be in a position to kick their asses, as well as those of the big guys. 

And we do that by being nimble, staying focused on technology. I’m an engineer by training, so it’s kind of from the top down that we’re making sure we stay at the forefront of all these technology changes.

IBJ: After 20 years in business, what have been some of the biggest highlights and low-lights?

Brown: We went public back in 1999 during the dot-com craze and the stock soared. We priced at $13, went up to $54 a share shortly thereafter. And after three or four years, there was the dot-com crash and we hit a low of $2 a share.

Along the way, we had grown too fast. We had to do a couple of layoffs, which is one of the hardest things I’ve ever had to go through. But through all of it, we continued to spend as much as we could on research and development to make sure we kept our technology relevant.

IBJ: What are your thoughts about Indy’s tech industry? How has it evolved since you started?

Brown: It was about the time I started Interactive that things really took off. And a lot of that is attributable to my previous company, Software Artistry. We were the first software company ever to go public in the state of Indiana. We had a lot of smart people there and a lot of us made some money and then turned around and started companies like Aprimo and others in the area. And that led to companies like Angie’s List and ExactTarget. 

IBJ: What is on the front burner for Interactive in terms of goals?

Brown: International expansion is a big one. I just got back from Europe last week where I was meeting with big prospects in Germany and Sweden and the U.K. So we want to be more than an American success story; we want to be an international power.

IBJ: You’ve held your titles for two decades. Any plans to change that?

Brown: Well, I’m not the type of person to step back. But I continue to promote different people in the organization to take on additional responsibilities as we grow. Maybe at some point, that could mean I shed the president role in particular, bringing on a chief operating officer. No immediate plans for that, but that would be the next logical step somewhere down the road.•