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Inside Ed's Head

From somewhere inside the two halves of Ed Iacobucci's brain has emerged something pretty unusual -- a major software company in Florida. Since he founded Citrix Systems in 1989, the company has grown to 750 employees worldwide and $248 million in sales. Revenues have more than doubled every year since 1995. Earnings hit $79.4 million last year -- a comfortable 25% margin -- and Citrix has $600 million in the bank for acquisitions and stock buybacks. Speaking of the stock, Citrix shares are up some 2000% since the company's December 1995 IPO. Needless to say, Wall Street loves 'em.

Analysts have good reason to cheer: Industry researchers predict spending in Citrix's market niche, server-based computing, will reach $16 billion in 2002 (up from $1.1 billion two years ago), and Citrix is the industry's software leader with virtually no meaningful competition.

Iacobucci, the company's spiritual leader, left a comfortable job as one of IBM's top software developers to start Citrix because he wanted to change the world -- into a place where every consumer has easy access to cheap, user-friendly technology. Born into an Argentinean family of scientists and artists, the low-key 45-year-old possesses a rare combination of engineering logic and entrepreneurial acumen. "I've got a good balance between right and left brain," he says. "That's the way I was wired."

He first met a computer (one of those big old ugly mainframes that filled a room) at Georgia Tech University in the '70s, and it was love at first sight. Iacobucci ended up writing software for IBM, where he eventually headed the development team that co-produced, with Microsoft, the operating system OS/2. Iacobucci recalls traveling to high-tech hubs across the country, talking up OS/2 with none other than Bill Gates. "We connected on the geek level," Iacobucci says.

No surprise, then, that in 1989 Microsoft offered Iacobucci a job as chief technical officer of the company's networking group. (Microsoft shares offered as a signing bonus would be worth $189 million today. Oops.) But Iacobucci had other ideas. He had always wanted to run his own company, a desire that had been nurtured by his father's close friend, Roberto Goizueta, the late, much-admired CEO of Coca-Cola. When young Edward was in high school in Atlanta, Goizueta had encouraged him to join the school's Junior Achievement program, which he did. Even as Iacobucci devoured math and science textbooks, he also served as president of student-run "companies" such as Flame Industries, which sold cigarette lighters (it was profitable). Says Iacobucci: "I'm a technologist at heart, but I like to think in bigger terms. I want to do things that affect change in a global way. Business is a wonderful medium for building things, applied creativity, if you will."

While at IBM, Iacobucci had one of those world-altering ideas. What if our computers could run any kind of software available, he mused, regardless of the type of computer or how powerful it was (or wasn't)? What if we didn't even need personal computers at all -- if we could e-mail our grandmothers or dial up the local restaurant guide from our television set, our telephone, or from a simple monitor?

Today, those ideas form the basis of the industry called thin client/server computing, of which Iacobucci is the recognized godfather. Thin clients are low-cost computing devices that don't require hypersonic processors or gobs of memory. The server is the central computer that hosts and controls the software. Imagine a hub-and-spoke system where the hub is the server; the spokes connect the server to employees' desktop terminals. Software applications and mega-databases live on the server, with Citrix's products allowing computer users from any corporate location to access heavy-duty applications without clogging up the system.

For information technology administrators, Citrix is a dream come true, because -- well, let Bill Dowd explain. Dowd is IT director for JM Lexus, a 15-acre Lexus dealership in Margate. As the dealership grew, adding more employees (and thus more PCs), managing the computer system became increasingly more laborious and costly. With Citrix's products, instead of running all over the place installing new software and troubleshooting problems, Dowd can install new programs just once -- on the server -- and diagnose a user's problems via his own PC. "I can manage the whole system from my desk," Dowd marvels. Dramatic cuts in troubleshooting time and administrative costs explain why 48% of the Fortune 500 now use Citrix technology.

Silicon in the south
The reason Citrix lives in Fort Lauderdale, and not Silicon Valley or Austin, is simple. Iacobucci worked at IBM's Boca Raton campus, lived in Coral Springs, and his family didn't want to move. The IBM engineers he persuaded to accept lower salaries at Citrix in exchange for the promise of a big payoff worked in Boca, as well. "With IBM and other companies in the area, there was a reasonable technical base," recalls Citrix's first CEO Roger Roberts, who came to the company from Texas Instruments. Venture capitalists who were sinking millions into the start-up, however, weren't convinced. "There was quite a bit of pressure to go to either Texas or California," Roberts says.

As it turned out, location was the least of the hurdles young Citrix had to clear. Iacobucci's plan for Citrix was to develop thin client/server products based on the OS/2 operating system -- a sensible strategy since, after all, he was the lead architect of that project, and the engineers he'd taken from IBM also had worked on OS/2. In its first two years, Citrix plowed through its venture capital working on its first product, Citrix Multiuser OS/2. Then, just three days before Multiuser OS/2 was scheduled to start shipping, the Wall Street Journal reported that Microsoft had decided to drop its support of OS/2 in favor of its own operating software, Windows. Iacobucci saw his business plan, his IBM advantage and his future dissolving.

It was a tough time for the company and for Iacobucci personally. "In front of everyone, Ed never let on that he was worried," says Citrix's first office manager, Ina Blum. "Privately, he would say to me that he felt the pressure. He knew what everyone had given up to come to Citrix, and he felt responsible. They had come because they believed in Ed. That weighed heavily on him."

At a September 1991 meeting, the board discussed shutting the company down. Iacobucci and Roberts argued that Citrix engineers could go back to the drawing board, literally, and rewrite its software for the Windows world, while the sales people would continue to sell Multiuser OS/2 as long as they could. All they needed was another few million to carry them through the transition. The investors, big-name venture capital firms like Kleiner Perkins Caufield & Byers, not surprisingly, had doubts. "There was nothing rational about continuing the thing," Roberts says. "We were shipping a product on a dead technology, with $6 million gone, burning money about $300,000 a month, and we were broke." In the end, the venture capitalists agreed to put up some more dough -- if Iacobucci and Roberts found other investors to share the risk. They signed deals with Intel and Microsoft within three months. (Microsoft remains a 5.6% shareholder.)

Ironically, it was Microsoft that caused Citrix's next big crisis, in 1997. During negotiations to extend Citrix's licenses on key Microsoft technology, the software giant informed Citrix it planned to develop its own version of Citrix's software and compete directly with the company. This was what investors had feared, and the market reacted accordingly: The stock dropped 62% in one day.

Iacobucci caught a plane to Redmond, Wash., Microsoft's headquarters, and moved himself, a slew of technical experts and negotiators into a suite of apartments for weeks of talks. His relationship with key Microsoft employees and his industry expertise helped Citrix pull off a new licensing agreement that provides Citrix with $175 million in royalty payments over several years and a promise from Microsoft to endorse Citrix's technology through at least November 1999. Of course, that day is almost here, and questions about Citrix's relationship with Microsoft continue to dog the company. However, Lehman Brothers analyst Michael Stanek reported in April indications from Microsoft that it will continue to support Citrix software protocols. Iacobucci believes the same.

Creative culture
Surviving crises is considered standard operating procedure in the technology business, and Iacobucci figures it's just a matter of time before the next one hits. "There will be a lot of churn in the next five years. Different technology will come and go. We're not scared of that." The trick to surviving, he says, is to "build a team and a culture that supports creative thinking and rapid decision-making. Software is an intellectual activity. Assets aren't bricks and mortar. Everything is intellectual property and people, smart people, who need to be able to think on their own and work in a team. You have to have the right kind of culture, one that's empowering."

Maintaining that kind of culture, particularly as Citrix grows and grows, occupies an enormous chunk of management energy. It starts with quality of life at the office. There are free sodas and fresh fruit for all employees; also an on-site gym. The dress code is, well, to dress. Blum and Roberts tell stories of buttondown New York investors aghast at wild-haired Citrix engineers in bathing suits and bare feet. Salespeople wear costumes to the monthly sales meeting, and there's a lot of inside jokes, such as the bust of Picasso in the lobby (a Citrix product was code-named Picasso).
The hijinks go all the way up the corporate ladder: Current CEO Mark Templeton, who calls himself the Chief Excitement Officer, has portraits of Julius Caesar, Napoleon and Genghis Khan hanging in his office -- because they all failed. "I want them to remind me what not to do wrong," he laughs.

Of course, there's more to it than fun and games. Both Templeton and Iacobucci insist it's critical to create a politics-free atmosphere so that people can say what they really think. Templeton says that starts with the hiring process, communicating to potential employees that playing politics is unacceptable. In business meetings, Iacobucci is not above saying something provocative to spur people to speak their minds. Explains Iacobucci: "We don't have time for politics. When you're growing very rapidly in a business that's changing, you have to establish a culture where people can speak up."

Next generation
Of course, it probably doesn't hurt that some 200 Citrix employees are now millionaires by virtue of stock options. Iacobucci himself earned $301,000 last year. He holds stock worth $34 million and options on shares worth another $11 million, and in post-IPO years, he sold $21.4 million worth of company stock.

Not bad for a software company that, while Florida's biggest, is still relatively small by industry standards. Microsoft, for example, does Citrix's entire '98 revenues in four and a half days. Even with Citrix's growth, it still ranks just 98th on Florida Trend's 1999 list of Top 250 public companies. The Lehman Brothers analyst predicts 1999 revenues of $383 million.

Templeton says he thinks Citrix can eventually be a $1-billion company, and to help Citrix get there he's working on a reorganization of the sales, engineering and marketing departments to focus more employees on revenue generation. The company continues to churn out licensing agreements with new hardware and software firms; perpetual partnering is how Citrix ensures its technology becomes the industry standard. Citrix also is jumping out in front of an emerging area of the thin client/server computing business, the application service provider (ASP) market. ASPs are based on the same server computing model already being used, except the servers are located at remote data centers rather than on-site. Companies connect to their databases via the Internet, and the ASPs handle the technical stuff. The approach basically amounts to outsourcing the IT department.

The beauty of ASPs is that they offer small companies that may not be able to afford their own sophisticated server systems a way to "buy time" on an off-site server, which in turn expands the overall server market significantly. Technology research firm Forrester Research predicts the ASP market alone will reach $6 billion by 2001, and, again, Citrix is the software leader so far.

And what about Iacobucci's vision of a world where we can check our e-mail via telephone? In January, Citrix licensed its software protocols to Motorola for use in digital wireless handsets. The goal is for employees to be able to access e-mail and software on the server back home from anywhere over a wireless network. For now, however, the handset has to be connected to a laptop to work. Boca Research in Boca Raton also is using Citrix technology in inexpensive Internet "appliances" that allow users to plug into the Net using their TVs. Slowly but surely, Iacobucci sees his vision unfolding. "It's not going to happen immediately, but it's there in front of us," he says. "One day, we'll reach 99% of the world, like the telephone, and we'll be able to deliver information services to the masses."