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Russ: This is the BusinessMakers Show heard here and online at theBusinessMakers.com. It's guest time on the show and this is a special guest event because we're on site at PKF Texas at their cool networking event called Doing Business Over Coffee and my guests this morning are the cofounders of Merrick Systems, Samina and Kemal Farid. Samina, Kemal, welcome to The BusinessMakers Show.
Kemal: Good morning and thanks for having us on.
Russ: You bet.
Samina: Thank you so much.
Russ: You bet. Well let's start here. Tell us about Merrick Systems.
Kemal: Merrick Systems is an information technology company. We're primarily a software company but we also produce electronics, RFID tags for ruggedized environments. Our clients are oil companies, also oil field service companies, drilling companies and manufacturers of oil field equipment. Most of our business is in operations for oil and gas production and the rest of it is in operations for oil and gas drilling. So our focus is increasing production rates from existing fields, increasing total recoverables from fields and lowering lifting costs, lowering capital expenditures and lowering operating expenditures for oil and gas production and drilling.
Russ: My goodness. You can increase production rates from oil fields with software?
Kemal: Yes you can. So you have an underground reservoir. You have the well and you have the surface facilities all working together to extract fluids from the ground and if you monitor all of those systems better. You model them and you operate them more efficiently, just as we've done in optimizing refineries and optimizing manufacturing facilities and optimizing other business processes and operational processes in other industries. You can do that with oil field operations. Software's at the heart of that.
Russ: Cool. But I introduced you both without even telling your title. So why don't you both tell us what you do with Merrick Systems.
Samina: Okay I'm Samina. I'm the CFO and Executive Vice President and I handle a lot of the back office functions, the financial aspects and the contractual aspects of the company.
Russ: Okay.
Kemal: And I'm Kemal Farid. I'm the CEO and I handle technology development, work heavily in sales and marketing and in operations and Samina and I launched the company together. Our relationship is Samina is my aunt.
Russ: Okay. It was obvious we had a family business here going but this is an aunt/nephew company. Tell us how that happened; how the company got started.
Samina: Well actually I was working in the oil and gas industry for a number of years with Esso Eastern and in the midstream with Enron and Kemal was in college and had done a lot of entrepreneurial stuff and at a very young age. We used to talk business at family dinners and the like and he proposed starting up a business.
Russ: Okay.
Samina: And I thought he was nuts. [Laughter]
Russ: Okay.
Samina: But it grabbed and as I saw the changes in the market and I recognized there was a need for the technology, because I needed it in my role, it became a serious thing that we started thinking about and went ahead and quit our jobs and went forward.
Russ: Okay, so Samina you were in the business already. And Kemal you were a software developer, but it was bringing those two together which is what created Merrick Systems.
Kemal: That's right. You really had to have both the business side and the technology side. I had been writing software for some time. My educational background is in electrical engineering and we applied client server PC-based computing to solve some problems that were mostly solved with mainframes -
Russ: Uh huh.
Kemal: - and so we figured we could solve those problems more cheaply and that we could get a business off the ground without much capital because all we needed were a couple of PCs and just our time to write the software.
Russ: Okay. Now were there already other software companies solving these same problems that you guys were targeting?
Kemal: We went after some niche problems that there weren't any packaged applications. We started the company by solving some problems round data management for natural gas production and transportation issues and some regulatory compliance issues around production and transportation in the state of Texas. Most of those problems were being solved by large oil and gas companies by writing in-house software on mainframes.
Russ: Okay. Okay. That's really cool. so tell us about that first win; that first customer. I mean did that just happen automatically and was it easy?
Samina: We started writing the software out of my house and I live on Merrick Street, so that's where the name comes from.
Russ: Cool.
Samina: it's literally one of those build it in the house things. And then we went out and actually started marketing to a number of companies. We first decided to go out and do some alpha testing and we were very fortunate. I called about six companies and two of them were very interested because there's a need for the product.
Russ: Right.
Samina: And then we went ahead and had to work - I thought, "Oh this is gonna be easy." Well it wasn't. It took about six to eight months and we got about three companies at the same time and the hardest thing I would say at that time, I guess for most entrepreneurs, was when we got our first sale, the company started trying to bring me down on the price -
Russ: Okay.
Samina: - and bring me down on the prices and I actually said, "No." [Laughter]
Russ: Okay.
Samina: But then they called me back and we did the deal. So it was very, very exciting.
Russ: But did I hear you correctly that you might've gotten three orders from -
Samina: We actually got three companies about the same time. Yes.
Russ: Wow. That's cool. Real cool. Well I'm talking with Samina Farid and Kemal Farid, cofounders of Merrick Systems and we'll be back with more with them after this. You're listening to The BusinessMakers Show, heard here and online at theBusinessMakers.com.
[Aflac Commercial]
Russ: This is the BusinessMakers Show heard here and online at theBusinessMakers.com and continuing on at the Doing Business Over Coffee event at PKF Texas, interviewing my guests, the cofounders of Merrick Systems, Samina Farid and Kemal Farid. Now, Samina you were just telling us, wow, that first order after you made your first product happened like in threes. Three people were ready to - that's quite unusual. So was this just a piece of cake the whole way? Did this company take off from there and there's been no challenges, trials or tribulations?
Samina: Well we got our first three and then we waited a while and then got others, but it took awhile.
Russ: Okay. Okay.
Samina: No it was a lot of work. I don't think that we realized when we started the business how much work it was going to be.
Russ: Okay.
Samina: It was constant work. I would say 24- very little sleep, kind of stretching the money as long as we could. And that was pretty smart, I thought, because it did take a while.
Russ: Right.
Samina: You know, just basically talking to as many clients as I could get my hands on and let me in their office to talk about our products. It was a lot of work.
Russ: Was there a long period of time where it was just the two of you?
Kemal: Well we spent about three years of weekends and evenings writing the software that's from '89 to '92 when we quit our jobs and launched the company. So it was just the two of us working on it for a number of years going through the alpha testing and beta testing of the products. Shortly after we launched the business we started hiring people and we had a team of four people pretty early and that was the core team through the first year or two, really. Then we started building a little bit more every year, adding people as new clients came aboard, building up more specialized teams around sales, client services, software development and administration.
Russ: Okay. It seems like a business that's focused on the energy industry, might be subjected to some up and down periods. Is that true or is it just been pretty steady the whole way?
Samina: Oh no, it's been rough. I thought until 2008 came along the year 1999 was just crazy -
Russ: Okay.
Samina: - because if you're in the software business you've got the Y2K issue.
Russ: Right
Samina: And we also at that time, there were pricing problems as well. So we were very fortunate. We were able to just kind of focus on the business, maintain our staff, which we were very fortunate to do and survive. And I was very grateful for that and then along came 2008. [Laughter]
Russ: Right, okay.
Samina: And 2008, yeah, so we've been through ups and downs but 2008 was something like the likes of which many industries have not seen before.
Russ: Okay, well Samina you mentioned the word survive. Have there ever been periods of time where you thought maybe we ought to throw in the towel?
Samina: Absolutely.
Kemal: Well I think failure was never an option.
Russ: Great.
Samina: Yeah.
Kemal: But it certainly there were many years when it was very tough. We were lucky in many ways in that by focusing on operations our clients had a continuous need for what we did. So even in the lean times, we still had business coming in and we didn't have large drops in revenue. In fact, even through some of the times when oil prices were low we were still growing moderately. But it was a tough business during those times because you were scraping and fighting for every dollar you could get in the industry.
Samina: And fighting, too, I might add. [Laughter]
Russ: All right. Well I think our real-world audience loves to hear stories like this your experiences are actually quite common for startups but now I'm kind of interested in what you mentioned earlier Kemal about RFID, radio frequency identification tagging. That seems like maybe a little bit of a diversification out of your core business.
Kemal: In some ways it is. If you look at what we've been doing in field operations and management in oil field production operations. We've had a lot of mobile technology for the last decade. In fact we've been the leader in mobile applications applied to the oil field. To make RFID work in managing oil field equipment such as drilling equipment, production equipment, a lot of subsea, down hole equipment that undergoes very harsh conditions, high temperatures, high pressures. You have to be able to track that equipment in the field and that requires, again, mobile computing. So going into RFID allowed us to leverage our experience in mobile computing and data management into a new adjacent area that seems different but it's very closely related. Again, it's very operational.
Samina: Yeah. And let me add that I mean we're very client-oriented and so the ideas were coming from our clients and they were asking to have more technology for asset management. We're getting a lot of questioning about that and what we're going to do also in the drilling area as well and that actually prompted us to look at this technology very seriously.
Russ: Well I get the impression that asset tracking might not have been a high priority item in this industry in the past.
Kemal: That's correct. In general, efficiency hadn't been a major driver of the oil industry on the production and drilling side. You saw in the downstream side refining, for example, where margins were very important and therefore efficiency in the operations was a driver to profitability. There, it's been adopted for 20 years. In the upstream side of the oil industry, efficiency and optimization of operations, tracking assets very carefully to be able to reduce those operational costs hasn't been a focus until maybe just the last five or ten years and it's only recently with RFID technology that can be applied to tools that undergo very high temperature and high pressure environments that you have had a technology that you could use for asset management of drilling equipment and other subsea equipment.
Samina: I like to say we were country before country was cool.
Russ: Okay.
Samina: So we were production before production was cool. So -
Russ: Okay. And for our non-energy listeners, the upstream is the exploration part of the business, going and finding new fossil fuels and downstream is refinement, correct?
Kemal: That's right.
Russ: Okay. Now I find RFID to be a real fascinating technology but to put it in these extreme conditions that you talked about. I mean, you used regular RFID technology to do that?
Kemal: Off the shelf RFID technology doesn't work in sustained high temperature and high pressure environments. So we had to engineer a set of RFID tags that could survive the conditions of, for instance, drilling operations. We do use standard off the shelf chipsets so that we are able to comply with the existing standards for RFID technology and use existing off the shelf readers, for instance. But the standard technology stops there. So the way that he antenna is wound and the way that the electronics are mounted and encapsulated in a glass bead and then surrounded by a carrier that allows it to be affixed to oil field equipment is all designed by us and these tags are custom manufactured for us and they're all patented. So it is a unique set of technologies that we've spent millions of dollars developing over the last five years.
Russ: Okay. And it seems only logical that it might have markets beyond oil and gas exploration?
Kemal: That's right. We're starting to see applications in aerospace, in military, in maritime and in mining and there are probably other industries that this'll fit in as well, oil and gas being really the largest industry in the world is a great place to start this technology in but I think there's a lot of places we could take it where it'll fit as well.
Samina: We had an interesting inquiry from somebody who's in the laundry business even looking for -
Russ: Laundry business?
Samina: - yes!
Russ: Okay.
Samina: Yes. They were in linens and they were looking for high temperature tags because they wanted to take the linens and put them in washing machines.
Russ: Cool.
Kemal: They wanted to track how many times they were washed and the usage history.
Russ: Wow.
Kemal: Same type of thing that you'd want to do with drill pipe.
Russ: Wow. Interesting, interesting. Cool, cool story. Well I'm talking with the cofounders of Merrick Systems, Samina Farid and Kemal Farid and we'll be back with more with them after this. You're listening to The BusinessMakers Show, heard here and online at theBusinessMakers.com.
[Aflac Commercial]
Russ: This is the BusinessMakers Show heard here and online at theBusinessMakers.com and continuing on with the cofounders of Merrick Systems, Samina Farid and Kemal Farid. Well it sounds like you've got some real cool opportunity with this RFID technology but tell us what's in store for the future in your vision of Merrick Systems?
Kemal: Well there is a lot of work to be done just to implement globally the technologies that we've built so far. The oil industry's getting increasingly more complex. Operations are more complex and hydrocarbons harder to find. So there's a need to digitize everything that's happening in the oil field and we continue to look for more opportunities to develop technologies to help the oil field become more efficient.
Russ: Now before I let you go, let's assume that we have some aspiring entrepreneurs in our audience this morning who are listening to this story and would want to know what sort of advice would you guys give to somebody that's just brand new, diving into the world of starting their own company.
Samina: Well persistence for sure because you're gonna have ups and downs. Just keep up with it and then also watch that cash. Keep it going as long as you can 'cause there're gonna be ups and downs.
Kemal: I'd like to echo what Samina said. Persistence is number one and having a good set of advisors around you to give you guidance is a huge help.
Russ: Okay. I really appreciate you guys coming in here and telling us the story of Merrick Systems.
Kemal: Thank you so much for having us this morning.
Samina: It's pleasure being here.
Russ: You bet. We've been talking with Samina Farid and Kemal Farid, cofounders of Merrick Systems and you've been listening to The BusinessMakers Show, heard here and online at theBusinessMakers.com.