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Thursday, August 23, 2001

By Eve Modzelewski, Post-Gazette Staff Writer

Collapsing dot.com stories and Web bashing may be all the rage these days, but a number of Internet product companies are doing quite well.

	Confluence's Kirk Botula, left, chief operating officer, and Mark Evans, president and co-founder, have focused on selling their software to top mutual fund companies. That strategy has allowed the private firm to sail past other dot.coms caught in the economic storm. (Bob Donaldson/Post-Gazette)

Among them is Confluence, an Oakland-based firm that makes software that helps mutual fund companies and investors track fund performance. When it rolled out its online product last year, Confluence did something seemingly radical for an Internet concern -- it made customers pay for it.

"We learned in school to charge for what we make," quipped Mark Evans, president and co-founder of the 10-year-old company.

So far, the Internet version of Confluence's FundStation software has been a hit. Big-ticket clients including SunAmerica Mutual Funds, which manages about $30 billion in assets, and Merrill Lynch have signed up for FundStation.net, which calculates and broadcasts mutual fund performance to brokers, dealers, customer service workers, clients and others.

"We reflect the part of the economy that has incorporated the Internet into a viable business model," said Kirk Botula, a six-year Confluence veteran and its chief operating officer.

Even before Confluence launched its Internet product, it was no stranger to big-name customers.

When the company set its sights on the mutual fund niche about six years ago, its managers decided to market Confluence products to the front-runners in the business, including Charles Schwab, American Express and Janus -- all of which are now Confluence clients.

"We've always concentrated on selling to top-50 mutual fund companies [and distributors] because we always wanted to make sure our product focused on the needs of the biggest, most complex organizations," Evans said.

Now, more than 40 percent of all U.S. mutual funds use Confluence's FundStation software -- which is also available offline -- to automate the tedious calculations needed to keep track of mutual fund returns. The company also launched an after-tax returns calculation tool to help companies cope with new Securities and Exchange Commission requirements, something Evans said can save clients countless hours of work.

The after-tax returns service evoked a lot of positive responses from Confluence customers, Evans said. "That was the first time our client base as a whole said, 'Wow, we're really glad you worry about this stuff all day long.' "

Evans coined the company's name, which was shortened in June from Confluence Technologies. He said he was looking for something that would allude to Pittsburgh area -- namely, the confluence of its three rivers -- without connoting that the firm was limited to just one region.

Though Confluence hasn't been in the public eye much -- it's privately held, it doesn't have its name plastered around town and its offices are relatively nondescript -- it has been recognized by some publications as one of the fastest-growing private companies in the country.

Inc. magazine slotted it last year at 441 on its list of the country's 500 fastest-growing privately held U.S. companies. And this year, it was named to the Inner City 100, a list of fast-growing companies located in urban areas.

The company employs 50 and is continuing to grow. Evans said Pittsburgh provided a diverse pool of talent to pull from, and that the firm was content to keep its headquarters in town.

"We have a terrific hub here," he said. The local financial services industry, the universities and the manufacturing base are all assets for the company, he said. "Software companies can perform and thrive here."

Even so, none of Confluence's customers are based in Pittsburgh. But Evans said that didn't matter because technology is so mobile.

Both Evans and Botula have their roots in the financial services industry -- specifically, Mellon Bank -- so they had the dollars-and-cents background needed to delve into mutual fund calculations and other financial services software.

"In the old days, if you left Mellon, you went to PNC, and when you left PNC, you went to Mellon," Evans said. Now, younger companies such as Confluence are able to lure talented people away from the older organizations, he said.

Not that Confluence is a fledgling. Evans founded the company in 1991 with Michael Schiller, who has since departed.

But the original company was a completely different business -- it specialized in consulting, something Evans said quickly grew tiresome.

"Consulting is really hard, and it does not allow you to leverage your expertise," he said. That's why he shifted his focus and started catering to the financial services industry.

Botula said developing software for that sector has allowed Confluence to have a solid impact, whereas when it was in the consulting business, it simply followed the industry's lead.

"With these products, we're actually changing the industry that we work in."