Profile - Colin Smithers and Ian Murphy

Designing for independence

by The Chilli analysts

In this issue, The Chilli profiles the founders of design services consultancy Plextek. Based 10 miles south of Cambridge, UK, the company was founded in 1989, by Colin Smithers, CEO, Ian Murphy, technical director and Tim Jackson, non-executive director.

The company undertakes electronic product and system design targeted at the communications, defence/aerospace, industrial/scientific/medical and automotive markets. Plextek claims to have one of the largest GaAs (gallium arsenide) design teams outside of a foundry, giving it a capability for specialist high-speed designs.

Smithers had nursed ambitions of running his own consulting company from early on, and after graduating from Surrey University (sponsored by Philips for BSc and PhD), he joined PA Consulting of Cambridge, where he was directly involved in RF design activity. [Editor's note: PA Consulting was spawned from Cambridge Consultants, and went on to spawn TTP, Scientific Generics and Symbionics].

Smithers recalls the sobering experience of coming into work (at PA) one morning and discovering that two entire layers of management had left to start another venture. This event spurred him and Jackson on to branch out with their own venture.

Starting out

Challenges

Sacrifices, highs and lows

Spinning out

Future directions

Advice to others

Colin Smithers and Ian Murphy, Plextek

Starting out

Teaming up with Murphy (formerly with Racal, Vodafone, Smiths Industries, Plessey and Ferranti), they mortgaged their houses to raise the initial capital to start the business. Their first client - who they worked with at PA - moved to Plextek to complete the original design of a CT2 cordless telephone (a precursor to DECT). The strong RF background of the team helped get work for the first five years, based on reputation and word of mouth. Initially, the company started working from a bedroom, later moving to a small cottage a few months later, before opening new premises in 1997.

Challenges

Exponential headcount growth brought with it various challenges. 'At twenty employees, we were doing everything ourselves and could not afford specialists such as for human resources or financial management. By thirty five employees we had communications challenges', comments Smithers. Murphy says, 'However for staff who are not used to it, too much information can itself create uncertainty; many do not wish to know the risks a business takes daily.' Aside from communications within the company, there were business issues too. At one point, seventy five percent of the company's business was dependent on one customer. According to Smithers, "We were aware of our dependency on one customer, so we used this moment to find other projects and reduce the risks."

Design services has a shorter forecast visibility than production-oriented segments of the electronics industry, with three to four months peak load visibility and a simple forecasting model.

The bubble era of the late 1990s brought further pressures on Plextek. "It appeared to be a bonanza, but the fundamentals didn't change. It became even more difficult to recruit good staff, and there were plenty of potential distractions," commented Murphy. He points to design services company Symbionics, which was acquired by EDA vendor Cadence and renamed Tality. Tality was later wound down and closed, losing most of its expertise to the four winds. With the bursting of the bubble, many companies shed staff hired during the boom. Plextek saw a decline in contract work and had to make a decision. The company decided to weather the storm and avoided laying-off any permanent staff, seeking to stay loyal to its employees. This also made the executive team think hard about how to deploy under-utilised engineering resources, leading to a decision to undertake full product design for licensing or resale.

Sacrifices, highs and lows

There have of course been sacrifices made, in terms of family time - this is a common challenge for many engineers turned executives. Murphy comments, "In order to empower team leaders you have to keep yourself distanced from the detail of the project itself." Smithers also cites the issue of distance from the staff naturally appearing. He adds, "As the management, we no longer get invited to all social functions, and unfortunately that comes with the territory."

According to Smithers, the biggest high point was winning a GSM development contract with Rockwell of the USA. Another high was the TRACKER Network product containing a Plextek-designed ASIC (application-specific integrated circuit) and used by all 52 police forces. That was eight years ago. In December 2003 they were awarded a design and supply contract with LoJack, the US owner of the TRACKER technology.

A significant low was the emotional trauma associated with a key member of staff being poached. "We are a tight-knit outfit and losing staff is never easy," said Smithers. He recounts another low, and a part of business life, as being number one on a customer's list of vendors, working hard, contributing to the specification, then losing it to a competitor, who then incorporates some of your ideas.

Spinning out

During the mid 1990s, Plextek had been working on a solution for wireless broadband - mesh networking, where there is a whole network of local receiver/transmitter units. These local units receive signals from one neighbour and pass them on to the next - forming a network of low-power transmitters that can cover large population centres. Plextek spent £1.3m on the creation of a trial network in the village of Great Chesterford, to deliver video conferencing, file transfer and IP telephony. The project was spun out as a separate company called Radiant Networks, with Jackson as technical director, and was backed by Advent Venture Partners, Sandler Capital Management, Intel Capital, Gartmore and DrKW. Plextek found itself being washed out of Radiant by the VCs, who later installed their own management team [Editor's note: Radiant Networks is now under administration]. According to Smithers, "It was our first attempt at dealing with VCs, and we lacked an experienced deal maker who understood how VCs worked.'

Future directions

The company has approximately 100 staff (80% of whom are in engineering), is independently owned, and housed in 37,000 square feet of office and laboratory space.

Smithers and Murphy are keen to build the company on organic growth alone, considering themselves to be their own VC, funding new projects internally. The company is keen to diversify away from consulting, and according to Smithers, "We have a breakeven turnover of £6m/yr, and rely on large projects." They have started to utilise their own resources more efficiently, developing 'Lost-It', a short-range proximity detection system, and 'BLightER', a portable e-scan radar, which can be provided as products or customised as designs. The company wants to move towards providing manufacturing packs that can then be licensed.

Aware of its core skills in communications design, the company is open to the idea of creating spinouts, and has learnt a lot through the experience of spinning out Radiant Networks.

Everyday challenges include being used as what Smithers terms the 'Bank of Great Chesterford', where startups have approached Plextek looking for cheap or free engineering to bootstrap development. Perhaps this explains why Smithers is not overly keen on government schemes, citing them as 'complex, requiring consortiums to be created, including universities.' He says the funding levels are unrealistic and do not take into account the cost of skilled labour in this country. "Many of the awards are unrealistically small for the tasks they expect to be performed and for the bureaucracy the initial paperwork demands," he adds.

Another challenge for Plextek is being used as a means for clients to avoid patent infringement, i.e. assigning a project to a design house such as Plextek, then asking for indemnities on any patents that may be infringed. The Plextek approach is to ask the customer what their strategy is for dealing with this internally, which Smithers says usually deals with the situation.

Advice to others

The biggest tip from Smithers and Murphy is to get the team composition right. "We have had a remarkable three-way marriage, where we were able to leverage our core skills in a complementary manner. Tim had the financial acumen, Ian was able to look after the physical infrastructure, and perhaps because my father was a personnel manager, I looked after the staff," Smithers elaborates. Each of the founders had their own area of the business to run without interference. If problems occurred, they were discussed openly to find the best possible resolution.

Comments on this story? Send an e-mail to Editor@TheChilli.com

© Chilli Publishing Ltd 2004

09MAR2004