Case Studies in Aboriginal Business

The Purdy Crawford Chair in Aboriginal Business Studies was established at Cape Breton University in 2010 in response to Aboriginal community leaders’ expression of the need for entrepreneurship, business investment, and corporate skills training for the purpose of creating a model of self-reliance.

Named in honour of Canadian lawyer and corporate boardroom leader, the late Mr. Purdy Crawford, the Chair aims to promote interest among Canada’s Aboriginal people in the study of business at the post-secondary level.

The Purdy Crawford Chair in Aboriginal Business Studies focuses its work in four areas:

• Research on what “drives” success in Aboriginal Business• National student recruitment in the area of post-secondary

Aboriginal business education• Enhancement of the post-secondary Aboriginal business curriculum• Mentorship at high school and post-secondary levels

“ Meaningful self-government and economic self-sufficiency provide the cornerstone of sustainable communities. My wish is to enhance First Nations post-secondary education and research to allow for the promotion and development of national Aboriginal business practices and enterprises.”

Purdy Crawford, C. C. (1931-2014)

Purdy Crawford Chair in Aboriginal Business Studies

Shannon School of BusinessCape Breton University

1250 Grand Lake Rd, Box 5300Sydney, NS B1P 6L2

©2014

www.cbu.ca/crawford

ID Fusion Software by Rachel Marsch 1

ID FUSION SOFTWARE BACKGROUND ID Fusion Software is an Aboriginal technology company located in the French area of St. Boniface in Winnipeg, Manitoba. ID Fusion offers world-wide IT consulting services. The CEO, Christian Dandeneau, started the business in the early 1990’s while completing his undergraduate degrees in physics and computer engineering. At that time, the business installed and configured computer networks for businesses. When demand increased in 1996, Dandeneau recruited two former University of Manitoba classmates, Daniel Piché who was then pursuing a PhD in applied mathematics at the University of Waterloo, and his brother Robert Piché, who had completed an undergraduate degree in computer sciences at the University of Manitoba. The company name was influenced by its Aboriginal Francophone co-founders. The French word for idea is idée (IPA: /ide/), so the company’s name in French is “idea fusion” referring to a fusion of ideas. ID Fusion Software was incorporated in 1999 and began the transition from being solely a service company to one that also developed its own products. The company’s initial objective was the creation of a web-based shopping market for local retail stores. The ability for small retail stores to offer an online catalogue would help them compete with larger companies. For several years, the product mylocalstore.com was the company’s primary focus and at its peak served over 50 clients. Following the dot-com bust of early 2001, financial support became an issue. There was also confusion amongst clients, who held unrealistic expectations that mylocalstore.com would address all marketing needs rather than simply assist in one area. ID Fusion reached a turning point when efforts were refocused on recognizing opportunities in alternative markets through large system integration (SI) teams by providing companies with lower cost and local resources for their projects. The Aboriginal Procurement Initiative was a competitive advantage that ID Fusion had over other local independent resources to win large government contracts. The decision was made to abandon mylocalstore.com and move in the direction of consulting for System Integrators. By 2004, ID Fusion was achieving success by growing their consulting services. By providing qualified lower cost, local resources, ID Fusion obtained contracts with larger software service providers such as HP (formerly EDS), IBM, and Deloitte. The recruitment of highly skilled, client-oriented, and motivated employees was not an issue for ID Fusion, as they offered generous benefits that helped to empower and retain their employees: “Christian’s management philosophy is based on the belief that a high level of employee engagement leads to lower staff turnover, higher sales growth, better productivity, better customer satisfaction and other manifestations of

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superior performance.” Employees are provided with anything deemed necessary to create an informal and comfortable work environment, such as ergonomic office equipment, laptop bags, unlimited free snacks and beverages, lunch programs, and regular staff social gatherings. ID Fusion encourages continuous skills development by providing funding for applicable business books, training, and educational courses that interest employees. Employees are also given 10% of company time and resources to work on their own software interests. This led to the creation of the mobile app division in the company, Freshcode. This division focused on developing products and services for the highly popular Apple software platform. Freshcode was recently rebranded under the ID Fusion brand and continues to grow due to its success. Involvement in their community and increasing the number of Aboriginal people in the IT industry through improved awareness, exposure, and access to education has always been an important objective for ID Fusion. The CEO, Christian was part of a steering committee at the University of Winnipeg that developed an Aboriginal Information and Communications Technologies Diploma Program. The program was designed to fill the Aboriginal employment gap in Manitoba’s technology workforce and has helped graduates from the program to find careers as web programmers, network support technicians, and help desk support professionals. Christian has also served on Information and Communication Technologies Association of Manitoba (ICTAM) Aboriginal Steering Committee since 2005 and is the current (2014-2015) board president. CONTEXT ID Fusion saw the potential for significant growth in their company as a result of opportunities within the local market; however, this would require an additional investment of $200,000 to expand the management infrastructure of the company. The company anticipated this would result in an increase in market share from 12% to 18% and revenue from $2 million in 2011 to $6.75 million in five years. According to CEO Christian Dandeneau, “the biggest issue we struggled with within our company was having enough cash to manage our operations and support our investments in product development.” In the past, the company’s revenue stream was not sufficient enough to support a middle management team and there was a lack of capital to invest in building new products. “Over the years we've always been underfunded. This led us to develop many strategies to better forecast cash needs and look at interesting tricks to improve cash flow.” The strategies for monitoring and managing cash flow employed by ID Fusion included:

1. Applying for the Federal Scientific Research & Experimental Development research grant to recover our product development costs.

2. Working with customers to change the billing cycle from monthly to bi-weekly.

ID Fusion Software by Rachel Marsch 3

3. Collecting deposits at the start of new projects. 4. Developing a detailed cash flow management spreadsheet to forecast when and

how expenses would be paid. ID Fusion had determined that a +/- 15% market share was achievable based on current market size estimates. This was a reasonable calculation, as there were few competitors positioned to utilize the Manitoba’s Aboriginal Procurement Initiative (API). The Manitoba API was established “to increase the participation of Aboriginal peoples and suppliers in providing goods and services to the Manitoba government in order to stimulate Aboriginal business development and create new employment opportunities.” This initiative enabled ID Fusion to obtain more contracts in projects as the Manitoba government is one of the largest SI clients in the province. SITUATION

In 2011, the CEO of ID Fusion knew that the company had the potential for growth in relation to the Manitoba Aboriginal procurement strategy. A market niche had been identified and responded to by providing talented and self-motivated SI consultants. However, the CEO had also reached his resource limits, being responsible for practically all facets of the business, from sales to finance and operations. Their strategies for managing cash flow were no longer sufficient and within the first two quarters of the 2011 fiscal year, the company turned down over $1.6 million in multi-year contracts due to the lack of capacity to fulfill the demand. The company had to decide whether to fulfill existing contracts with their current capacity or focus on recruiting additional managerial support to respond to the demand created by the procurement strategy and grow the business. Increasing the management infrastructure would allow the company to pursue business expansion and contract fulfillment at a constant and simultaneous rate. However, to accomplish this, ID Fusion would require immediate financing of $200,000 to recruit additional management personnel to allow them to meet the demands of the market.

QUESTIONS FOR DISCUSSION

1. What is the value of procurement strategies for Aboriginal-owned businesses? 2. If you were the CEO, what direction would you choose for the company? 3. If you chose to grow the managerial team, how would you secure the financing

necessary to grow the company and meet the demands of the market?

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EXHIBIT 1 Photo of Robert Piché, Christian Dandeneau, Daniel Piché.

ID Fusion Software by Rachel Marsch 5

SOURCES ID Fusion Software. 2013. “Products and services.” http://idfusion.com/, accessed 28 March 2014.

---. 2011. Business plan: a road map to growth. Winnipeg: ID Fusion Software.