Economy

Gemcom’s identity crisis

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The mining industry software house scrapped its own awful slogan, only to have new labels imposed on it. By TIM LEVIEN.

Gemcom realised the nonsense of its boast, of being ‘a mining company without a mine’; now the challenge for managing director Nic Pollock (right) is how to promote the company and maintain its strong research effort?

By Tim Levien

‘Know your customer’ is an old piece of business advice. ‘Know yourself’ is even older, and although it comes straight from philosophy texts written 2500 years ago, it is advice that a computer software developer is putting into practice as it rides high on the resources boom.

Gemcom Software International is applying the principle of ‘know thyself’ proposed by Socrates, and other Greek philosophers, largely because its original marketing spiel was so horribly wrong.

Until last year, Gemcom tried to persuade mining company clients to buy its exploration and mining software by calling itself an insider, using the naff slogan that it was ‘a mining company without a mine’.

Anyone with a brain could see that it wasn’t a mining company (with, or without a mine), but it took an international merger of the Canadian and Australian parts of Gemcom to refocus the company on its reason for existence, the sale of software and services.

By correctly identifying what it is trying to achieve rather than pretending to be like its customers, Gemcom has been able to focus its efforts on software development at a time when mining companies are crying out for:

  • Increased efficiency, partly because of high demand for minerals, but also because of the skills shortage and the need to work smarter and quicker.
  • Simple solutions to software issues, which can only come from consolidating myriad products, most of which do not communicate with each other.

“Software in the mining industry has evolved alongside the distinct processes of exploration, mine design, and the mining process itself,” says Nic Pollock, Gemcom Australia’s managing director.

“We have a range of products to satisfy most demands, but the value we’re increasingly bringing to our customers is systems integration.

“Until recently, the mining industry software business was characterised by a large number of small companies offering highly specialised solutions. That was fine, for a while, but now we have much bigger miners demanding a single solution from a single supplier.”

Gemcom, which grew from the merger of a Canadian software business of that name with Australian based Surpac Minex, has not found it difficult to listen to customers; most are too big to ignore. Buyers of Gemcom services include BHP Billiton, Rio Tinto, De Beers and Alcoa.

In terms of global reach, Gemcom, which has more employees in Australia (100 on the payroll) than Canada (80), is unique for a business that falls into the small-to-medium category. Its products are used on 2500 mining and exploration sites in 90 countries around the world.

But, that impressive spread needs to be seen against what is still modest annual revenue of $C35.8 million, and an equally modest profit of $C4.5 million for its most recent financial year, to March 31.

Pollock points out that both of those numbers are a substantial improvement on the 2006 result, but direct comparison is impossible because the latest figures represent the merger of Gemcom and Surpac Minex.

Having answered the question of what it is, Gemcom is now looking for ways to leverage its position as the world’s leading supplier of software to the mining industry.

The boom obviously helps deliver growth, as does consolidation of the industry and the chance to work closely with customers who want to integrate their various computer services into one simple system that enables management to seamlessly look at the complete business.

“Standardisation and systems integration is undoubtedly a major growth area for us,” Pollock says. “Developing new software in consultation with our major clients is another.”

Tackling those two challenges as a relatively small business servicing some of the biggest companies in the world is a huge undertaking for Gemcom, best shown by the fact that 21% of annual revenue goes to research and development.

But, the real challenge for Gemcom is two-fold: First, how integrate the internal demands on cash – with such a big R&D budget the time will come when shareholders say “me too” and demand a dividend; second, how to not get caught up in a second piece of indirect, but nonsense marketing.

At least two recent trade media reports have referred to Gemcom as ‘the mining world’s Microsoft’, or compared the company with Caterpillar, the US earthmoving equipment maker.

Both comparisons are wide of the mark, and although Gemcom has not made them itself management is doing little to dismiss them. Given the company’s previous adaptation of a meaningless slogan it might be in danger of repeating its mistake.

The truth about Gemcom is that it’s a terrific little business, making world-class products, with world-class customers, and riding the resources boom with aplomb.

It must now find a way to reward shareholders while hanging on to its mining business and possibly finding a way to migrate its undoubted expertise in writing software to other industries – when it might well bump into the real Microsoft.

The lesson of Gemcom’s success is that in a mining boom even the software salesmen make a lot of money. The trick is not getting too carried away with the good times, and to not forget the important, but small role you play in servicing the real miners.

 

 

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