One of the little known strengths of Southern California has been a wealth of enterprise software companies and expertise. Among the new crop of enterprise software firms is Reliant Solutions (www.reliantaudit.com), a Laguna Niguel-based provider of software focused on automating the auditing of company financials and operations. We spoke with Dipak Shah, Founder and CEO of Reliant Solutions, and he told us the story of how he went from being an investment banker at Morgan Keegan to starting the company.
What's the story behind the company, and what are you trying to do?
Dipak Shah: I was an investment banker at Morgan Keegan, where I was a managing partner. I retired in 2001 from investment banking around the top of the tech bubble. Luckily, we all did well on Wall Street, and I spent time looking at CEO roles for storage area networking firms. I wanted to come back, and I decided I wanted to do something unique and big, from a vision point of view. I had several different ideas, and one of them stemmed from my experience in banking. Occasionally, we'd find deals where the auditors and accounts would leave the deal, even though a company was ready to launch and IPO or secondary, because the company's lack of visibility. We never understood or knew what was happening until the 11th hour on the financials. It started me thinking about how visible operations are to executives at the top, and do they really know what is going on. Obviously, with the advent of Enron and other companies getting into trouble in 2002, that was also a driver. So I said okay, there's more to this, let's take a look, and I ended up telling myself that I should go talk to the Dow 30 and prove if there is really a gap and problem of visibility at the top of operations. If so, then I have a business plan.
Luckily, from my contacts in investment banking, and talking to companies like Disney and Boeing, I was convinced. When you're talking about assurance and visibility at the top of policies and issues, do they have the same clarity at the CFO, CEO, and board level as they do about inventory and cash position, with operational issues and risk? I found out there isn't anything there. There's no dynamic dashboard that gives that assurance.
So when did this software become available?
Dipak Shah: We're installed and in production, and we will be generally available starting next week. The company itself is 26 people, and we have a development center in India as well as here. The first two years we spent studying the problem statement, gather marketing data, and interviewing 28 chiefs of audit at different companies. For the last two years, we have been in stealth mode with development, and learning about the problems and issues with visibility, and getting into the details of what has become our methodology. We are automating financial audits and audit operations, including financial audix, Sarbanes Oxley, operations audits, and IT audits. Those are the four different facets, and obviously we have a good pipeline of folks interested in our product.
Traditionally, auditing firms have throw bodies at this problem, is this something can be automated?
Dipak Shah: We've dissected this whole automation into three phases. There are controls, including manual controls, entity-levle controls, and high level management ones. We bring automation to those controls, and there are some which are semi-automated--where some portion of the logic is automated, and other parts are manual. The third phase is the automated controls itself. There are different classes of controls. We're the first in the industry, where we have the entire issue under one umbrella, and all the controls under one umbrella, and where we can provide continuous auditing and risk management for the auditors.
How we're different is our continuous risk management. Right now, there is no such thing as looking at risk in a continuous manner. A CFO knows his inventory at any time, his balance in bank accounts at any different time. But, if you ask a CEO and CFO if they know what the risk is for a corporation, they will not be able to tell you that for a particular day. We're also different because our competitors in the business are doing selective work on controls, and where we are taking a holistic view from the top down. You can see why this is a big project, and why it took so much time for us to get where we are and develop our proprietary technology. What that means, is during the quarter, the risks are managed, understood, observed, and remediated continuously, rather than waiting to the end of the quarter for the mad rush of financial reports.
Who buys this--a company, or their auditing firm?
Dipak Shah: Good question. This was one question I was struggling with when I was thiking about this company in my home office. The company buys is. The reason why, is I did research with local and nationwide partners at the accounting firms, and found that accounting firms were not ready for this automation yet. I found that, if we can bring a little bit of attention to the automation idea, we could still do this as an operation. The catalyst are Chief Auditors and Chief Financial Officers. I took the advice to heart and that's what I'm going for, and it's been working well. We found that, even at Mindspeed when we we working on this, the external auditors have been helping us go through this.
Let's talk about your funding--how is the firm backed?
Dipak Shah: I funded the company for the first two and a half years, until last year where it's been half friends and family. We've done extremely well, and we'll be looking at our next round shortly. We're talking to some local venture guys already, and I also have connections on Sand Hill road. This has real business value, and we're not a company that is dependent on Internet advertising models.