February 2, 2010

To Succeed, Study Failure

By Renee Houston Zemanski

Chris McCleary, chairman and CEO of USI, an application service provider, studies failure. No, it’s not something he majored in at the University of Kentucky. On the contrary, McCleary seems to have the Midas touch. He came into Digex, an early Internet service provider, in 1996 and turned the company around in one short year. And now his new company – USInternetworking (USI) – is growing faster than the analysts can say, “Buy!”

USI buys and installs software from such high-profile application giants as PeopleSoft and Siebel Systems, keeps the programs at its own data centers and gets a flat monthly fee for running the client’s in-house software. But, here’s the real difference – clients pay USI only when the system functions well. USI guarantees the systems will stay up and running and will fix any glitches at no extra cost. Because companies loved the idea, USI reaped $50 million in contracts in less than a year.

“The real difference at USI is that we study our failures,” says McCleary. “When we failed to get investors after a huge marketing push with the best underwriters, we asked ourselves, ‘Do we ramp the company down and get more conservative or do we keep going?’ We kept going. We had the confidence to study that failure, find out what went wrong, fix it for the future and move in the right direction. If you don’t study the failures, you’re isolating yourself with only things that were successful.”

Always the hired gun in companies before USI, McCleary set out to take advantage of the times when he co-founded USI. “When we started USI, we looked at three different case studies and found out that all three companies were dissatisfied with the way their application systems were operating,” says McCleary. “We asked, ‘How can we improve what these companies do?’ We looked at it as a solvable problem and our goal was to find a single way of making those systems work better. We also looked at competitive case studies and found that no one had ever put it together and succeeded. But USI has. We broke the mold on how communications and information technologies are provided.”

So, USI was born with an idea – but no employees, no data centers, no money and plenty of skeptics. “We never really viewed this as a start-up company,” explains McCleary. “This was just a big company getting going. Everyone we hired had to think big and have confidence.”

McCleary’s strategy paid off. USI went from zero to 850 employees in two years. “All companies want is someone to take responsibility,” says McCleary, “and USI takes responsibility. We push the envelope in everything we do. There’s always a better way to do things. At USI, we do the ‘can’t/won’t test.’ We ask, ‘Is it really that I can’t do it or I won’t do it?’ If someone says to me, ‘It can’t be done,’ I stop and say, ‘Why? Are we violating the laws of physics?'”

McCleary, who grew up in suburban Chicago, credits his mother as the influence behind the way he thinks and works. “My mother was into constant improvement before it was a buzzword,” says McCleary. “We lived in a little town and we always tried to do things just a little bit better. I still hold that belief. We live in a fabulous time when anything’s possible.

“In the old days when people would say, ‘You can do anything,’ it was a real motivational cliché. But, today, it’s actually true. No matter what you want to accomplish, you can accomplish it. The technology and the capital markets are there to back you up.”

McCleary is proof that you can accomplish anything. Two years ago when USI was founded, there were virtually no ASPs. “The words ‘application service provider’ weren’t even in our business plan,” says McCleary. “Now there are at least 100 ASPs.” And analysts predict that by the year 2001, ASPs will grow to be a $6 billion industry.