Kanwal Rekhi,
Chief Executive Officer, Ensim Corporation

A conversation with Kanwal done by Krishna Kumar 

On September 8, 2002, Ensim Corporation announced that Kanwal Rekhi would take over the reins as its CEO. In an interview with The Catch, Kanwal talked about fitness-fiscal and physical-productivity, the dot.com mindset, and what it will take for Ensim to win. 

Q: You came out of retirement to become Ensim's CEO. What was your retirement like? 

A: I had a very active retirement, mostly built around mentoring entrepreneurs and companies. I retired at the end of 1994. I was 49 years old. I had worked non-stop for 25 years, mostly without vacations. When I worked, it was very intense. I worked long hours. 

By that time I felt I had done my bit. I would take one year off. And that one year that I was supposed to take off really was a very productive year for me. It turned out to be a transition year from a structured job to an unstructured setup. 

I mentored lots of entrepreneurs that year and several very nice companies came out of that. Exodus Communications, Cybermedia, Versata - there were 13 or 14 companies that came from people I mentored that year. 

I became active on several boards, but I also became active in the policy-making domain. Economics is my passion. How the economy works, how you create wealth, how you become prosperous as people. And from there, why is India poor? The last four or five years I spent a fair amount of energy on that one.
Q: What made you decide to come out of retirement for this opportunity with Ensim? 

A: When the whole dot.com phenomena started, I was totally out of tune. When I started as a young entrepreneur, there was a premium on experience, on revenue, on profits. All of a sudden you have this new breed of entrepreneurs who are young and inexperienced, seeing no revenue, no profits. I had problems with that. 

People were talking about retiring at the age of 30, and I started to speak-as early as 1999-that this is all nonsense. This will not last. How can you run a business without revenue and profits? 

And of course, it didn't last. When things really started to head for the south, my message to entrepreneurs was, "this is the best time to be an entrepreneur." The best entrepreneurship happens at the bottom of the economic cycle. 

Look at Intel, Microsoft, Apple, Cisco-they all happened at the bottom and rode the market back up. After preaching that for a while, I thought maybe it's time for me to jump in. This is the best time. 

The other thing was that during the last ten years, I had become physically unfit. I had put on a huge amount of weight. The lunches, the dinners, the meals - there wasn't much physical activity, since I was traveling a lot. 

So at the end of last year, after September 11, I started to take stock of myself. I said, I'm only 56, and I'm already so unfit, by the time I'm 65 I'll be in a wheelchair. I had trouble with my knees and trouble with my back. For a smart person, I was pretty dumb.

Q: Did the board feel that the company needed a change at that time? 

A: Everybody on the board felt that was the case, including Rosen. We needed to bring in somebody with more experience. Rosen is less than 30. He was part of the entrepreneurs who were young, rash, not experienced, not financially savvy. So there was a sense that Ensim needed to become a more traditional startup. 

Q: What do you see in Ensim that shows we can win? 

A: Lots of smart people. Young, but lots of smart people. We still have money in the bank, so it's not as if we don't have resources. Customers have been buying from us, but we haven't priced it right. We haven't serviced our customers right. 

So when I look at the smart people, the technology customers are paying for, and the resources, we should be able to put it together in a more productive fashion. How do we understand our customers and their needs more precisely and align our resources to solve their problems? Customers pay good money to have their problems solved.

Q: So you see the market as strong? A: I see a very strong market. I see the whole Internet revolution ahead of us rather than behind us. What you saw earlier was a little bit jumping the gun by the entrepreneurs. The Internet needs to be exploited more fully. But this time, for money rather than freebies. And that's the mindset I have. How do we create value. How do we get paid for it. 

Q: What does Ensim need to do to answer that question? 

You need to have this mindset: I will win. Then make a plan and follow it. I come from the old school: you plan your work very quickly, figure out what you need to do, then come back and work your plan. 

You cannot be falling behind every step of the way and expect to make it up at the end. You need to have a plan keeping you in the game - maybe a step or two ahead. And if you start to lose even one or two steps, you stop that very very quickly rather than wait to the end.

One of the problems we had at Ensim was that we were coming up with a new model of selling software. We would lend our software out on a monthly basis. Now I'm going back to being a very traditional software company. 

Q: What do you consider to be a traditional software company? 

Customers have to pay you for service and support. Every step of the way you create value, and you realize that value in dollars and cents.

My view of business is very simple. I use four letter words: You plan, you make, you sell, you ship, and you get cash fast. If you don't get the cash fast, you are spending money, paying the engineers, paying the marketing people, paying everybody. You can't be living off the investors money very long. 

You keep an eye on your cash. You say, what are my sources of cash, and what are my uses of cash? You need to make sure that your sources of cash are very clear to you: customers. And uses of cash-you very quickly justify them. What's my return on the investments I am making? 

So you have this mindset: Is my cash building, or is my cash depleting? If it's depleting, when will it turn around? If it depletes all the way, you're out of business. 

A famous entrepreneur in the valley here - Allen Shugart - he was a role model for entrepreneurs of my generation - he used to say, for a startup company, your cash is more important than your mother. You can always make up with your mother, but once you're out of cash, you're out of business. 

And that kind of mindset was not there at Ensim. We spent 52 million dollars- down from 84. If we stay on the same path, pretty soon we'll be out of cash. 

Q: Ensim has been around for almost four years. Would you still consider us to be a startup? 

A: We are a restart-up. We haven't created the value that we set out to create. 

You're done as a startup when you become viable and self-sustaining - when you're making more than you're spending. We have not done that. We have spent all that money, with no short-term prospects of turning things around. So I'm bringing in that mindset now-that we have to turn the ship around. Put the past attitude behind us. Put a sense of urgency in its place. 

The first quarter is a transition quarter for me. Understanding the business, making changes, hopefully inspiring people, giving them the clairty.

Q: We've had quite a few course corrections in the last year and a half. Do you expect that trend to continue? 

A: No, not at all. One of the problems when you do a course correction is that the money you have spent on the product you were creating is flushed down. People start to say, why bother? The company becomes very unproductive. 

I want to set financial goals and instead of me telling you what needs to be done, I want you to tell me how do we achieve those goals. My whole approach is to empower. And I want to make [goals] achievable. I don't want people to say, why bother; we can never make those numbers. The part that I don't have any control over is the market itself. If the market doesn't materialize, you'll have to change at that time. 

But there is nobody ahead of us in the marketplace. We have technology that customers are buying. How do I get them to buy more at higher prices than we have done in the past?

I need to increase the value proposition. I need to do better pricing, packaging, marketing. If you use a baseball analogy, how do we hit some singles and doubles rather than try to hit one out of the ballpark every day. 

I use the example of the military. You've got to get your army armed and clothed and fed and then you start marching down to battle. And if you change your mind, all that is down the tube. And I don't want to do that unless there's very good reason. 

Q: What is your focus as CEO? 

A: I am not a technologist. I haven't done any technical work in almost 15 years. So I'm not bubbling with the technology ideas. [I won't] come down from the mountain and say, "I have a new idea. I have seen the new wisdom." I'm going to focus on process. We need to identify the customers we're going to serve-listen to their needs. I won't be doing that myself. It needs to be done by marketing people - by sales people. Then we synthesize that into a clear plan and work the plan.

I always think of business as a mathematical exercise. You have to make your business math work on paper, in the marketplace. And this is something new at Ensim. If you're spending a million dollars a month, you have to ask, to what end? What should a million dollars a month produce? 

If you spend a million dollars a month and don't produce any results, you're not in business. There's a notion of investments ahead of revenue, but we've been doing that for four years. If Ensim was to go back to investors right now, there is no way we would get any more money.

And then I have a notion of sewing and harvesting. You can't be sewing all the time. You have to harvest. If you spend millions of dollars worth of R&D, that R&D must reap a value. 

The whole mindset that the dot.com phenomena had-that was not a viable model. 

Q: Do you think Ensim has been in that dot.com mindset? 

A: Oh yes, absolutely. If you look at the free stuff in the cafeteria - free candy, free soda, free lunches on Tuesdays and Fridays - and the mindset with customers - free service, free support, free this and free that - that was the dot.com mindset. And you know, sooner or later, the money will run out. Last year, we did 2 million dollars of revenue, and we lost 10 million dollars. You can't spend more than you make for very long. 

Q: What does that mean for individual Ensim employees? 

A: We are living on borrowed money - borrowed time. We have to start thinking more clearly, and justify every expense we have in the company. How will this improve my revenue prospects? You need to make sure all your activities drive your revenue. 

About Ensim corporation

Founded in 1998, Ensim® Corporation is the leading software provider to the Web hosting industry. Ensim provides a comprehensive product line of management solutions for each stage of the hosting life cycle. Based on award-winning technology, Ensim solutions have become the industry's standard, as more than half of the top U.S. service providers rely on Ensim to efficiently deliver hosting services to their customers. With a seasoned executive management team and strong backing from leading members of the investment community, Ensim has the products, technology, customers, partners and resources to lead and deliver the next generation of hosting management solutions.

For more information, please visit their Web site at www.ensim.com.