Filling the IT Gap

ORBIT Systems carves a profitable niche by providing information technology to small and mid-size companies.

By Scott Carlson
St. Paul Pioneer Press
January 16, 2005

At ORBIT Systems, business is skyrocketing.

The Eagan-based provider of information technology outsourcing services has seen a tenfold increase in revenue, growing in annual sales from $500,000 in 1999 to $5 million in 2004. The firm is forecasting 2005 sales of about $7 million.

And bigger growth could be in store for ORBIT, whose niche is providing IT services to small and medium-size companies. With about 60 clients, ORBIT has tapped into less than 1 percent of the Twin Cities area's market, said Stephen McFarland, company co-founder and chief executive officer.

"Getting business owners to understand this (IT services) is available to them" is one of the biggest challenges facing ORBIT (which stands for Office Ready Business Information Technology), McFarland said.

McFarland and business partner Philip Palmquist, ORBIT chief operating officer, launched their company in 1999 from the garages of their homes. They had $500,000 in personal funds and money from an angel investor.

The men hatched the idea while they worked in Minnetonka for Comdisco Network Services, which is based in Chicago. As Palmquist and McFarland helped to develop and roll out IT systems for Fortune 500 companies, which spent millions of dollars for the services, they noticed the clients' systems were virtually identical.

McFarland approached Palmquist with an idea: Build a basic information technology platform and then tailor it to the individual needs of each small to medium-size company, thereby making the service affordable. Many small businesses don't have the money to hire full-time IT specialists or cultivate them from their own work forces, he said.

"If we could configure desktop servers and group servers, you could leverage that for customers on software and hardware infrastructure," McFarland said.

To date, ORBIT's business model seems to be working. The company offers a range of services from as little as $550 a month for InternetOffice up to $3,500 a month for a more comprehensive package of services that includes remote monitoring of the client's IT system and protecting their systems from computer viruses.

For example, ORBIT Systems last year had already protected its clients from a computer virus months before the bug struck many U.S. businesses, McFarland said. ORBIT took advantage of Microsoft's "patch" to block the computer infection, he said.

Despite its IT orientation, ORBIT Systems' big focus is on customer service, McFarland said. "We spend very little time managing infrastructure but a lot of time on customer service," he said, adding that ORBIT employees must be not only techno-savvy but also people-friendly.

"We have been in business six years and never lost a client," McFarland said.

Woodbury-based Autumn Grain & Transport Inc. says ORBIT has made it possible to have an IT system at about half the cost of hiring its own full-time specialist. Autumn Grain & Transport had virtually no IT system for its business operations until 2000, said Julie Landreville, Autumn Grain operations manager.

Since then, the 100-truck specialized carrier has used ORBIT to provide e-mail and Microsoft software products and services as well as to help choose and implement a dispatch software service, Landreville said.

"It (the information technology) has given us the capacity to compete with much larger companies," Landreville said. That competitive equalizer will soon include a company Web site, she added.

ORBIT supports clients in about 20 U.S. states from its Eagan headquarters. Whether the company eventually opens an office outside of the Twin Cities depends on getting a big enough cluster of clients in other cities, McFarland said.

Since launching his company, McFarland said he has learned at least three important lessons. First, if you think you have a good business, stick with it. "When you get into business, you have to stay focused," he said. "If you have an idea, then you need patience to have people accept and buy into it."

Second, be disciplined. Have processes and procedures, such as billing and human resources, in place to make the business flow better, McFarland said. Third, get the right workers on board "and you can go wherever you want."