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Feb 18 2013

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Aconex restructuring

aconexAustralian SaaS construction collaboration vendor Aconex is restructuring to reduce overheads at its Melbourne head office.

Readers’ comments on previous blog posts, including one about Australian SaaS collaboration vendor Aconex and its 2012 annual results (Aconex growing revenues again), and – more recently – my reflections on the 4Projects acquisition got me looking at recent Aconex activities.* Meanwhile, on Friday, I received text messages and direct messages via Twitter about redundancies at Aconex’s Melbourne office; one of the rumours talked about “40 heads” rolling – but I couldn’t corroborate this.

Downsizing

Certainly, some Aconex employees’ posts are to be discontinued. An Aconex spokesman confirmed the company was restructuring parts of the business “to better align the organization with market trends and growth opportunities”. He continued:

“… the business is healthy. With a robust backlog of orders and a strong pipeline of new sales opportunities across all geographic regions, we are seeing continued solid revenue growth. The restructuring will strengthen our ability to support this growth while managing our levels of investment in different parts of the organization.”

I was told the number suggested for Melbourne was “off by a very wide margin”, but that posts were lost in other locations; “following the action, our current total headcount is around 350” (this does not preclude the total number lost across the company being around 40, of course – three months ago, in November 2012, CEO Leigh Jasper was claiming “35 offices globally with 400 people“). The rationale for the downsizing is economic:

“… the Australian economy has recently come under pressure. Being prudent, we anticipate a softening in the regional market, particularly in the mining segment. The action that we took adjusted our organization accordingly. … The positions represented a number of organizational functions and levels of responsibility.”

So, it’s the economy, stupid

The Australasian market has been strong for some years and the Australian dollar has strengthened accordingly, but this has made Melbourne (and other Australian cities) an expensive place to host a head office. Moreover, Aconex is also under pressure in its domestic market from rival vendors, including the indigenous QA’s Teambinder, plus ProjectCentre (recently acquired by RIB – post), as well as local partners of international competitors – such as ProjectCollaboration (post) who are reselling the 4Projects platform.

There was some investor criticism in 2011 of the board’s strategy of focusing heavily on the north American market at the expense of other markets and/or global customers where Aconex had potentially dominant positions. Up to June 2012, Australasia contributed 50% of all Aconex revenues.

This might not have mattered so much if the global business had returned to the growth levels it achieved before the global financial crisis. However, what one blog comment described as “an aggressive ‘go global anywhere’ sales strategy” appears to have generated lots of quick project wins but relatively few that were converted into long-term enterprise deals. Partly as a result, Aconex has not really kicked on from the Au$40m revenue level (restated) that it reached in 2009, while profits have been non-existent since 2007.

Aconex, 2005-2012

* Why has no vendor yet emerged as the dominant global player? Watch out for a future post on this topic.

Permanent link to this article: http://extranetevolution.com/2013/02/aconex-restructuring/

16 comments

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  1. Tony

    Surprised! We have just started to enter the Aussie market and have instantly seen 10% of our revenues this year coming from the region. If any of the Aconex crew want a chat about the emerging technology in the region – get in touch.

  2. Paul Wilkinson

    Hi Tony, I don’t think the restructuring is a reflection of the strength of the AEC market in the region – it is mainly to do with overheads across the business and the locations in which these are incurred.

    If things are about to slow down in the Australasian AEC, mining and natural resources markets, then this is perhaps a prudent move by Aconex (though unfortunate for the individuals affected). You recruiting out there?

    1. @tonyitsadoddle

      Hi Paul

      It is indeed unfortunate, nobody wants to see that. Yes we are recruiting, but so far quietly.

      It’s a bouyant market.

      Tony.

  3. Steve

    Australia is a really exciting market for 4Projects. We would be interested in talking to any of the Aconex team affected by this – get in touch!

    1. Rosanna

      I wouldn’t think that things are slowing down in AEC just yet in Australia anyway. I suspect it’s like UK markets were around 5 years ago, but with an extra spin. We are currently seeing an emerging 3D modelling need as well as PLM ( Product lifecycle Management) – happy working!

  4. Greg

    The US market is still slow and not much happening here. The Aussie economy is very strong.

  5. Greg

    The Aussie economy is very strong into 2013. But not much is happening in the US due to the recession.

  6. Vince

    Paul, the “restructuring” is more akin to an overdue (though now panicked) realization that some staff positions were unsustainable in the face of plunging revenues. Aconex Australasia failed badly in Q4 2102 – less than 50% of budget – and is on target for a similarly dismal performance in Q1 2013. Key sales staff have left and revenue is looking decidedly uncertain. Relocating functionality to Bangalore to reduce costs has been unsuccessful as the technical capability of staff there has been sub-standard.
    Senior management have almost all moved to San Bruno – time to abandon the US IPO dream perhaps? – and there is a siege mentality developing in Australia, which as you have correctly pointed out, was the cash cow for a long time. A mature, informed market and significant under-delivery by Aconex has left them vulnerable to competition. Their board will be exerting immense pressure to meet the optimistic revenue targets that were set in mid-2012. Not a happy place to work and further reductions appear inevitable.

    1. Paul Wilkinson

      Thanks for that, Vince.
      My follow-up post “16 reasons why nobody yet dominates the construction SaaS collaboration sector” (while not solely focused on Aconex) covers some of this ground.

    2. Nathan

      Vince you hit the nail on the head. Great comment and accurate. Sales have been bad and new competition in ANZ are delivering what the customers want. Aconex for the past year has not released any new features to the market so who can blame the competition for coming and offering something new and innovative to the market. The last big release for Aconex was April 2012 – when competitors are offering new and features that the market wants.

      With most of the senior roles in the US the focus is wrong. A very top heavy company with lots of ‘ideas’ people but not many people who seem to really understand what the market wants.

      I think the board and Francisco partners will be asking some tough questions about their strategy…

  7. anon1mouse

    Reading between the lines of this story, it sounds like Aconex has really dropped the ball in Australia. Aconex has been the extranet industry’s “hare” since their big successes in the mid-2000s and then the massive capital investment they obtained from the US VC in 2008. Maybe some of the “tortoises” now have their chance to catch up?

  8. PJ

    I worked at Aconex in Australia and left about 6 months ago. Many good things about it, high energy, high ambition, sense of fun, youthful culture, part of successful international organization with projects and people all over the world. It is fun! I left before Aconex moved in but have seen it inside and the new Melbourne office is really cool and has great views. Great recruiting tool!!

    Sorry to hear about people losing jobs now that’s not cool.
    There are a few problems I could see….

    * The Bangalore service centre experiment needs a lot more work to lift the quality standards for customers

    * Senior management in California is too far away from the action in Australia and there are quite a few problems from this in “politics” and bad decisions. Cats play when mice are away

    * [senior manager – name deleted at company’s request] is a really good guy and likeable but managing people and projects is not his thing, he doesn’t listen enough.., and this is fairly obvious to anyone in the business who has anything to with him, so you get the sense that he’s only in the job now because he was around […] years ago when Aconex was founded and hasn’t got another job to do and not because of merit which kind of undermines things a bit.

    1. Leo

      I agree with Vince. I previously worked with Aconex in Abu Dhabi, UAE. I think it’s not solely on the economic instability but also how people manage the business. I believe that the recruitment process be reviewed. An example was a former military man managing an emerging business in a “far-away” branch, far from the head office. When I went to the Melbourne office, I was delighted to see how the office was managed professionally. It was my first time to see an office with a place to relax right in the office; management playing with their subordinates.
      I left the company for 2 reasons; an irresistible offer came and the presence of “wrong” people in the management.
      I heard that Aconex has slowed down its operation in the UAE but I hope that Aconex will do better and bounce back. And when that time comes, I am hope Aconex will be have better people to manage it.

  9. Hogmolly

    Interesting post. Does the picture tell the story?

    4Projects is profitable and has been growing from its own cash flow. Other collaboration software vendors have also been growing the same way.

    Aconex received a big investment from Francisco Partners in 2008. Aconex should have had some baseline revenue growth same as most successful participants in the industry have been seeing even without the investment. But Aconex should have got a big kick along in growth by spending some of this new money which would put it at an advantage to its competitors. But the orange and blue revenue lines have been flat or near enough since 2008.

  10. DF

    How long can […] justify his $450,000+ salary? He has had a pot of gold to spend to grow the business and failed. Costs are out of control due to a extra large Senior Management team for the size of business.

    When will the investors in Francisco Partners step in and demand he is removed?

  11. Paul Wilkinson

    Regrettably, I have had to remove or censor some recent comments on this blog post. I have largely refrained from this over the years, but when people anonymously make critical comments aimed at named individuals, I have to step in. It is not fair to targets if they cannot respond to the criticism without knowing who is making the comments, or without knowing their credentials to make such comments. I also do not want to be seen to support comments that could be regarded as defamatory.

    Please, if you want to comment on Aconex, avoid anonymous personal attacks, and if you do not wish to give a real name, please provide a genuine email address so that, while respecting confidentiality, I can corroborate that the assertions are made by someone with the necessary insight. I appreciate that this may delay comments appearing but it is necessary for me to support a balanced discussion.

    Paul

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