Feeling secure in right environment

BUSINESS INTERVIEW: For the chief executive of safety and security firm Xtralis, which has just opened its global headquarters in Dublin, Ireland offered one thing many other prospective locations did not – support for growth

SAMIR SAMHOURI can pinpoint the exact moment he decided to locate his company’s global headquarters in Ireland. In February, he was invited by Netwatch, one of his Irish clients, to the official opening of their US headquarters in Boston, which was being launched by Taoiseach Enda Kenny.

“Now, I’m an outsider, I’m just sitting there as one of the guests,” explains Samhouri intently, in his soft-spoken, American accent. “I know Netwatch. They’re not a huge company. They’re a small company with the potential to become a huge company because they have an excellent service.

“But for the leader of a country to come out in strong support of that potential told me something about the culture of the place. You see a lot of leaders come out in support of big companies and they have to. But to come out in support of a small and medium-sized company is saying something else.”

Within hours, Samhouri was on the phone to his consultants and chief financial officer with instructions to check out Ireland as a location for Xtralis’s global headquarters. The decision was especially significant because Xtralis was weeks away from finalising the establishment of its head office in another European country, a process that had been in train for more than a year.

“We spent more than three years deciding where to locate our global headquarters. Then, when we had chosen a place, we spent another year – and a lot of money, a lot of consultants – going through the process of moving to that country. Literally hundreds of thousands of dollars.”

Samhouri points out that the reason the company didn’t consider Ireland initially was because of the negative press around the country at the time. So, why the change of heart?

“Ultimately, it was the support for business. Of course, there are always certain elements that you look at – the tax structure, workforce, telecommunications structure, proximity to customers – but it’s not as if other countries don’t have those.

“What made Ireland different, as far as I’m concerned, and what I heard that day, was the support for growth. As a private equity-backed company, that’s what we’re focused on. When we followed up, the IDA were very proactive and extremely helpful. My hunch was right.”

IDA Ireland’s work seems to have paid off. Yesterday, Xtralis – without the lure of IDA grant aid – officially opened its global headquarters in Dublin. Its finance, HR and IT division will be based there, with the company’s head of HR relocating from Australia and its chief financial officer also moving to the capital.

While the announcement may not mean much in terms of direct jobs – initially Xtralis will employ 10 people, which it hopes to grow to 50 by end of the year – its impact in terms of tax take and indirect economic effect is significant.

Samhouri believes that small, privately-held companies such as Xtralis are exactly the kind of firms Ireland should target and nurture as it repairs its bruised economy.

Xtralis typifies the kind of small, nimble high-growth tech companies that have emerged from the US over the last couple of decades. The company is a niche player in the security industry, providing a service which detects early-stage threats to security. It operates in three main areas of safety and security – fire prevention, gas-leak prevention and peripheral breaches.

While most security systems focus on response to security issues, Xtralis’s focus is on detection, Samhouri explains. “Safety and security is a $250 billion industry but the vast majority of systems focus on responding to threats after they’ve happened. For example, alarms, smoke detectors, sprinklers.

“Take fire, for example. Instead of detecting a fire, you need to be able to detect the very, very early stages of smoke, even invisible smoke.”

To do so involves the deployment of extremely complex technology. Xtralis uses image processing technology, or, as Samhouri calls it, “interpretation of light”. “We send light out, absorb it back in and then look at it,” he explains in layman’s terms.

“By looking at it, we can tell where there are certain distortions that might tell you there’s something wrong in that infrastructure.”

Impressive stuff, but is it not highly expensive? “Yes, it takes a lot of money to get technologies to this point. But while it is more expensive for companies in terms of capital outlay, the operational costs are cheaper than more traditional solutions, where equipment has to be monitored continuously.

“Insurance companies are also in favour of the system, which is much cheaper in the long run than damage to building or products, etc.”

Evidently Xtralis has plenty of companies that are prepared to stump up the cash. Its clients include some of the world’s most high-value sites, from public spaces such as the Smithsonian Museum in Washington, to high-tech manufacturing sites and transport companies.

In Ireland, companies such as Microsoft and Intel use its systems to protect their manufacturing sites, while other clients include AIB, Bank of Ireland, the ESB and the Irish Aviation Authority.

The company itself employs close to 1,000 directly, while up to 14,000 are estimated to be involved in the deployment and re-selling of its products across 100 countries, its chief executive says.

Founded in the mid-1980s, Xtralis has evolved in various incarnations. Since 2006, it has been run by Australian private equity firm Pacific Equity Partners and, more recently, San Francisco-based Blum Capital, which acquired a minority stake in the company in early 2010. The company currently has revenue in excess of $100 million (€78 million).

Samhouri was brought on board as chief executive in 2007. The move followed a fast-paced career in technology and entrepreneurship.

Raised in the Gulf states, where his father worked in the oil industry, Samhouri went to the American University in Cairo at the age of 15, where he studied mechanical engineering. From there he moved to Montreal, where he took a degree in electronic engineering at McGill University.

While still at university, he started his first business – a software company focusing on automated services for pool and billiards halls. After graduation at the age of 21, he sold the company and moved to Philadelphia where his uncle worked as a surgeon. He swiftly set up three companies in two years.

“The first two were successful, we sold them on, but the third was in the defence area. This was back in the mid-1990s and Clinton cut the defence budget and the contract we were working with shut down. The business went to virtually nothing.”

At this point, Samhouri was forced to “get a real job”, he says. After a spell in Germany, he worked as general manager of Lucent’s networking division, subsequently heading up Lucent spin-out Agere, where he oversaw the transformation of the business from a company with a $850 million valuation to a $4 billion valuation over a two-year period.

The experience taught him a lot about how to handle a business in a downturn. “The company had been through the internet bubble, so there had been huge cuts before I arrived – an infrastructure that was designed for 19,000 people had to be cut to an infrastructure for 6,000. When you do so many cuts, sometimes if you’re not careful, you end up cutting that what makes you distinctive, that makes you money at the end of the day.”

What does Samhouri think about the state of the tech sector? “Firstly, I think you need to define the tech sector. Social media is becoming its own segment . . . I don’t really want to comment on that, and it’s still TBD [to be defined]; you can’t really predict what’s going to happen.

“But technology generally is going to be characterised by cyclical growth. Ultimately, it’s a growth market. Companies individually might grow or decline and regions may go up and down, but the whole segment is a growth segment.”

Samhouri believes that diversity is crucial for any company’s success.

“Between 2007 and 2012, we doubled our revenue. In the middle of that period, there was a global financial crisis, and performance dipped in certain areas, like Spain, but other areas excelled. Your business has to be regionally diverse and has to be application diverse – in other words, you need to create awareness, [or] need for your product, in different sectors. You can’t just depend on one segment. So for us, we are operating in a range of sectors – manufacturing, transport, high-end residences – as well as 100 countries. It provides a buffer of sorts.”

Ultimately, Samhouri believes the most successful companies have to be global in outlook.

“I recently read a book called The Virtual Corporation. It shows that global perspectives are key. The company that is successful is the company that manages its operations virtually. If you master that art – and it’s tough and takes time – you can scale endlessly because you can continue adding countries, adding applications, thereby diversifying your revenue base, and hence profit.”

For a country like Ireland, fostering small and medium-sized, high-growth businesses could also be a niche growth area.

“Encouraging smaller companies to come to Ireland and grow is in many ways much more powerful than already-established companies coming and simply putting jobs here. Every small company has the potential to become a big company. If Ireland can encourage even 50 per cent of them to grow their base from Ireland, there are huge opportunities.”

FRIDAY INTERVIEW

Name: Samir Samhouri

Job: Chairman, president and chief executive of Xtralis

Age: 40

Lives: Divides his time between Jordan and Pennsylvania in the US.

Family: His wife is a medical doctor and professor, and teaches at the British University in Jordan. He has three children, aged 11, eight and five years old.

Something you expect: As someone who forged his career in the US, what he likes most about the Irish is their optimistic, can-do attitude.

Something that might surprise: His favourite sport is ping-pong.