Xata's Growth Vehicle

So Xata set up its own services division to assist XataNet users with implementation, training, maintenance, and custom report development. “We [were] just selling customers stuff, not getting them to use it,” Coughlan says. “We needed to help them learn how to use it so they could get our true ROI. Not only did adding services help us in the marketplace from a competitive point of view, it added another revenue line.”

One year after Coughlan took the reins, revenues were flat, usually a cause for alarm at a public company. What’s more, net income had declined. Coughlan reassured shareholders by pointing out that his first year was all about building a new foundation. “I didn’t panic because I knew the revenue would come, long term,” Coughlan says.

It has. For the fiscal year ending September 30, 2008, Xata’s revenue came in at $53.7 million, up 75 percent from the previous year. The next quarter brought even more good news: Sales jumped 91 percent, from $7.7 million to $14.6 million. Nonsoftware-related sales remained flat as a percentage of total revenue. “As long as our customers want us to sell hardware to them, we’ll sell it to them,” Coughlan says. “But it’s not the emphasis.”

Perhaps just as important to the company’s success as fixing its business model was rebooting its culture. “Before Jay arrived, Xata was an entrepreneurial type of culture, meaning there was never a bad idea,” Ties says. “Jay and the management team brought in a real focused business-strategy culture. The employees know what our strategy is, they can articulate what our strategy is, they know what they contribute to the success of that strategy, and they know how their success parlays into the company’s success.”

Putting It All Together

The buzzword in the fleet optimization industry these days is consolidation. “If you’re a CIO of a large fleet of trucks, what you don’t need is a bunch of $20 million or $30 million companies coming in and each selling you a point solution that you’ve got to put together,” Coughlan says. “You want somebody to provide a total, integrated solution. It’s like the [enterprise resource planning software] industry, which consolidated over the last 15 years. The same thing will happen in this space, with two or three players doing the consolidating. We hope to be one of them.”

The biggest player, with 57 percent of the market, is the fleet management division within Qualcomm, the San Diego–based wireless telecommunications research and development giant. Xata is the biggest of the little guys, with 16 percent. Xata, however, ranks number one in the private-fleet segment: 34 of the top 100 private fleets in the U.S. use a Xata solution. Private fleets are typically cost centers within larger companies. For-hire, the other chief industry space, comprises third-party trucking companies.