RealTime IT News

Breakaway Founder Returns With E5

A startup's fate often depends on differentiating between a technology trend and a business trend. Gordon Brooks' last venture, Breakaway Solutions, thrived briefly on the former, specifically, Internet consulting.

In the late '90s, companies rushed to get online. Work for the Web design shops was plentiful but dried up when initial projects were completed and venture capitalists turned off the cash spigot.

Now, Brooks has a new company built on what he believes is a longterm business trend -- outsourced application management and consulting.

E5 Systems, based in Waltham, Mass., will help large companies ($1 billion or more in revenues) evaluate and maintain their software systems.

"Eighty percent of the money spent on IT is for the maintenance and support of existing applications," said Brooks, citing market research from Gartner.

For example, an entertainment company might spend $15 million to build a applications to handle the distribution of royalties. Supporting that system, however, is where costs add up over time, up to $5 million a year, Brooks said.

E5 Systems could scrutinize the entire system, make recommendations and take over management through its outsourcing centers in India and China, saving the customer money.

"We want to bring the discipline and management of a software firm to the support and maintenance industry," Brooks said. "That means rigorous requirements, return on investment analysis and regular updates."

Investors see the promise in the plan. E5 has raised $10 million in first-round financing from Bain Capital Ventures, of Boston, G-51, of Austin, Texas, and the companies founders who hail from Cambridge Technology Partners, EDS and NerveWire.

The funding will be used to pursue joint ventures, possibly with systems integrators, and expand offshore centers.

Michael Krupka, managing director of Bain Capital, said his firm was attracted by the "business model that delivers quantifiable business benefits."

The company's name comes from a commonly used opening chess move. "Application management is about planning and thinking five moves ahead," Brooks said.