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Oakland Internet consulting concern grows slowly but surely
Sunday, January 21, 2001 By Bob Starzynski, Post-Gazette Staff Writer
At a time when most Internet development firms are scaling back, Oakland-based Ripple Effects continues to grow.
The list of downsizings among Internet consulting companies is long: In November, iXL said that it would lay off 850 people, and marchFirst said it was letting go 1,000 employees; in December Viant cut 125 positions, and Scient slashed 450 slots.
Consider Ripple Effects the tortoise to those hares. The company has grown much more gradually and thus has experienced neither exponential growth nor the subsequent retrenching. Almost three years after its founding, it is a 36-employee business that adds a new person to its roster on an average of once a month.
"The large companies spent two years growing without worrying about their costs," said Louis Malafarina, founder and chief executive of Ripple Effects. "But now that clients aren't willing to pay the same prices for services that they were 12 months ago ..." he trailed off without having to finish his point about industry layoffs.
Malafarina launched Ripple Effects in 1998 to provide creative design and strategy to companies looking to build an Internet presence. When he started the business, which has received no venture capital support and has been funded entirely through its own profitability, he initially provided all the work through his firm but subcontracted with other agencies or freelancers to provide the technical expertise. That technical expertise was needed to link, say, a Web site with a company's database of inventory.
At first, the strategy worked well. The technology side of the business was something that Malafarina didn't pretend to understand. And finding the technical talent to whom he could outsource was easy. "The joke is that you can throw a rock anywhere in Oakland and hit three technologists," he said.
But as technology kept getting more complicated and projects began relying more heavily on technology, Malafarina realized that he needed to bring that work in house.
"We knew that we needed to deliver a more sophisticated product," he said.
Just over a year ago, Ripple Effects made its push into the technology side of Web development.
That was when Malafarina persuaded Carl Kelly, a seasoned technology manager who worked at both Alcoa and Mellon Bank, to come aboard.
Rather than setting up the technology work as a division of Ripple Effects Interactive, Malafarina set it up as a separate company, Ripple Effects Technologies. This structure was set up primarily as a recruiting tool to lure Kelly away from Alcoa, where he managed a team of employees that numbered many more than Ripple Effects' entire business -- 10 people at the time. The strategy worked, and Kelly agreed to jump ship from Alcoa to run and share ownership in the newly formed technology spinoff.
So, not only is Ripple Effects able to tackle more complex projects for clients, but the company's pipeline of work is double what it was a year ago, according to Kelly.
In the past two years, the company has taken on 40 projects -- ranging from $50,000 to $2 million -- with a variety of clients, including Carnegie Mellon University, iGate Capital, Pittsburgh Digital Greenhouse and Advocacy Online, a United Kingdom-based company that provides technology tools for the management of grassroots organizations.
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