Hedging the Future: Integration Firm Eze Castle Sets Sights on Custom Software Line

Eze Castle Integration Inc. cultivated a technology consulting practice that earned $20 million in revenue last year because of its expertise in the hedge fund business, executives said.

Building on that success and expertise, the Boston-based company this year expects aggressive growth, including a foray into software development.

Eze Castle Integration was formed in 2000 when the systems integrator business split with Eze Castle Software, Inc., another Boston-based company. The original company was started seven years ago. The two companies as they exist today maintain a working relationship, and separately managed Eze Castle Software accelerated its growth with a $20 million outside investment in 2000.

Eze Castle Integration sees a software niche in which to expand its own business, one that will not compete with Eze Castle Software, executives said. The company invested nearly $1 million in the customized application business last year and now has 11 engineers working full time on the project. Eze's executive team will continue that push into application development, even as the company plans to grow beyond the hedge fund business, marketing to venture capital firms, private equity firms and mutual fund companies as well. Eze Castle Integration will hire another 25 people this year.

"One of our biggest areas of growth has been in the custom application development area for our customers. Our clients are seeing a lot of new needs for technology," said Furqan Nazeeri, Executive Vice President of the Software Consulting Team. Customers have more widely adopted instant messaging technologies and are handling more trades electronically, he said. At the same time, the U.S. Securities and Exchange Commission is intensifying its oversight of the industry.

"We're developing custom applications and we've devoted a lot of resources creating applications uniquely designed for our customers. We're going to see a lot of growth in our custom application group," said Nazeeri.

Hedge funds and other niche financial services companies have sophisticated technology needs, said Eze Castle Integration executives. Often, the applications require customization, meaning a familiarity with the way the industry works gives a systems integrator an advantage over more general IT consultancies, they said. JNK Securities Corp. of New York, a sell-side broker that works on a daily basis with hedge funds, has been a customer of Eze Castle Integration for about two years.

"There are a lot of people that sell technology services," said Orest Kyzyk, managing director of JNK. "Where it becomes a challenge is how you blend the business work flow process. A lot of technology firms...did not have the core business expertise to translate the technology to business work flow."

Currently, less than 10 percent of the company's revenue comes from IMTRADER, the software product, said CEO John Cahaly Jr. But the company has an expertise in custom application development and sees growing demand, he said.

"What we need to do is look at the best ways to grow that business," said Cahaly.

The company thus far has been operationally funded. Eze Castle Integration saw the busiest month and a half in its history at the close of 2003, a year when the company grew by 40 employees, with 64 in Boston. With further expansion on the table, outside funding is a possibility depending on the timing of the company's growth, said the CEO.

"When we feel like we have the best opportunity to accelerate that growth, that's something I would expect us to look closely at in the next year," said Cahaly.

One reason for the expansion into the software development business is the more predictable and steady revenue stream that would come with the business. Currently Eze Castle Integration is targeting revenue growth for 2004 of 15 percent. But the company would like to reach a more aggressive 25 growth if it can, the CEO said.

"All of the base infrastructure is in place for our business. For us, a 10 percent or 20 percent growth rate can have a huge impact on our business," said Nazeeri.