High-Tech Retail

Retek, a Minneapolis-based software developer, specializes in providing solutions to the retail industry. The company generates roughly 70 percent of its annual $139 million in sales from software and licensing and 30 percent from services, according to vice president of supply-chain solutions Duncan Angove. Its target market includes retailers with sales of $500 million and up. In most of those implementations, including Gap's, it relies on solution providers to do much of the integration work, though Retek typically provides its own on-site services team.

"We focus and invest our money on the product-services side," Angove says. "We haven't built out a large services practice. We rely very much on having the Big Five [integrators] build consulting practices around our software." Angove says that, in fact, many of the consultancies have teams trained in Retek products."Accenture has about 700 people trained on the Retek product, and IBM is similar," he says. "You don't see the traditional services army being deployed by Retek. We rely very heavily on third-party integrators." In Gap's case, solution provider Answerthink of Miami was selected to collaborate on the implementation and integration of the Retek merchandising solution.

Even so, Angove notes Retek deploys its own service specialists at customer sites to ensure smooth implementations. "We put people on the ground [at customer sites] because we are ultimately responsible for customer satisfaction and have a lot invested in that," he says. "Our people are software experts, and they can help the knowledge transfer to the third-party integrator doing the implementation."

Retek has been buffeted by a series of challenges during the past year, and although its fortunes are improving, profits remain elusive. Revenue increased to $43 million in the second quarter this year, up 123 percent from $19.5 million in the second quarter last year. Also in the second quarter, software license revenue hit $1.6 million, up 175 percent from the prior last year. And, for the first six months of 2001, Retek reported a net loss of $7.9 million on sales of $80.7 million, compared with a net loss of $26.5 million on sales of $33.6 million for last year's first half.

In July, its board of directors brought in Steve Ladwig, a former executive with Imation and IBM, as president and CEO. Ladwig promises to focus his efforts on business development and working with the board and management team on strategy and direction for Retek.