Business Fung and games

If there’s any truth to the adage you learn more from failure than from success, Charon Systems could be a company to watch.

David Fung sold his IT services company to United States-based FutureLink Corp. for $40 million in June 2000, but remained with the company. About a year after handing over the reins, FutureLink’s American operations went bankrupt and FutureLink Canada was deemed a sellable asset. Fung, other employees and outside investors bought the company back this fall for “a fraction” of what he sold it for. He changed the name back to Charon and is open for business again.

In an interview with, Fung explains why he stayed and why Charon will rise again. Why did you stay after you sold the company?

David Fung: They said, ‘We want you to stay,’ and I negotiated an employment contract that gave me the autonomy to run the Canadian operation. So I said, ‘OK, fine. I’ll stay.’ How is Charon going to be different from FutureLink?

D.F.: We’re de-emphasizing the ASP (application service provider) part which is a no-brainer, isn’t it in today’s market?
Futurelink was an ASP and in Canada we tried not to be 100 per cent ASP because, business being business, you have to be customer focused. So going forward, what we’re doing is, we’re not saying we must do ASP. We’re basically saying we know infrastructure, we know security, we know how to build a network infrastructure that will deliver the highest return on investment. We did it before; we know the best way to do it. Are ASPs dead?

D.F.: The ASP will probably come back, I believe, with the right models. You look at Microsoft’s .Net strategy and everybody talking about portals, it’s all server based computing. Will you be in a position to serve FutureLink’s Canadian and American customers?

D.F.: A lot of the Canadian customers are still going to be here, and the ASP customers, as long as we’re profitable with the customer, we’ll carry them over. Sometimes you have to walk away from bad customers.
We still have a few U.S. customers, two or three, that are using our data centre and they would like to continue to use our data centre because of our services. Has the bankruptcy and sale hurt vendor relationships?

D.F.: Some of them that are key partners will be carried over like Citrix, Microsoft, Compaq and Cisco and all those guys. We’re still a network systems organization so we’ll continue to do what we do best. Why did you go back to the former company name?

D.F.: People know about Charon Systems; that’s why we went back to the old name. The good will is still there.
Because it’s such a short time (between the sale and repurchase) a lot of people would still recognize us, so it’s really not a big issue in terms of changing our name. What have you learned since selling the company?

D.F.: I think the biggest lesson that I learned is as a public company we sometimes make decisions that are not long term, that are not beneficial to the corporation long term.
In terms of company integration, FutureLink bought seven companies. It is a big job to integrate seven companies in a short time and try and get them together. You’ve got to admire companies like Cisco, and other major companies, that ran out and bought companies and seem to work very well. I think we just did not have those processes in place. When do you expect to have the company up and running?

D.F.: We are already running full-steam ahead. We just need to do some restructuring about some of the processes–maybe 30 days–and get everybody energized and motivated, and make sure the transition from one organization to another is as seamless as possible to the customers.

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Jim Love, Chief Content Officer, IT World Canada

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