Richard White’s Long Way To The Top At Wisetech
by Neil Johnson
By Colin Kruger | Syndey Morning Herald
7 January 2019 — 12:00am
The software industry has made Richard White a billionaire, and far richer than his former music industry clients, like AC/DC and the Angels. But it has been a long road to tech industry stardom via the company he founded, WiseTech.
The software group, which is purely focused on the logistics industry, listed on the ASX in 2016 when he was already 60. White became a billionaire the following year at 61.
The company, which has a market capitalisation of about $5 billion, has been touted as the next Atlassian – the other Aussie software Cinderella run by Mike Cannon-Brookes and Scott Farquhar who are almost young enough to be millennials.
White founded WiseTech in 1994, when the Atlassian founders were barely in high school. It was well after he had started, and ended, his rock’n’roll career.
“I’m an economic refugee from the music industry,” White jokes of his first love.
“I went and did music really only for a few years because whilst I was a good musician, and had a lot of friends in the music industry – I’m very good friends with the Angels and I used to do work for Angus and Malcolm Young – I really realised it wasn’t a place I wanted to be.”
So all importers, exporters, logistics companies, all have this massive pain point.
He went from playing music, to repairing instruments, to building what he claims was the world’s first digital lighting console. It marked his entry into the tech world and he hasn’t looked back.
White was running a consulting business in the 1990s when he did some work for logistics companies and got a glimpse of industry’s challenges – and the opportunities.
“Customs clearance, and the border compliance, and all of that compliance components around international trade, is the biggest pain point for everybody in international trade. So all importers, exporters, logistics companies, all have this massive pain point,” he said.
Logistics companies have had to rely on having feet on the ground in every country to handle this cross border work, and there is no standard system to handle this. White describes an industry that is incredibly fragmented and still rooted in a pre-internet age.
“It’s an unholy mess,” he says.
This is the reason why industry productivity is as low as one to one-and-a-half billable jobs per day per worker. WiseTech says one of its clients has now lifted that to seven jobs a day using its flagship CargoWise One platform.
Wisetech slowly built itself onto the global scene with this cloud-based solution that offers clients in the logistics industry what White describes as “everything in one box.”
A single solution that works in every country that matters – from a trade point of view – with a common user interface that reaches down to a local level. Data gets entered once and shared everywhere on the system.
While there are some savings on the IT side, White says the biggest gains come from the efficiencies companies get out of their workforce.
One of Wisetech’s early decisions was to turn its platform into something akin to an App store for its logistics customers.
Nothing is customised. Different capabilities in the system are productised, meaning it is available to every customer who using CargoWise.
And every time a customer uses that capability WiseTech clips the ticket. Building a system like this isn’t easy. WiseTech customer
DHL spent €500 million trying to create its own internal platform and failed.
It is not cheap either. WiseTech will be spending $100 million this year on research and development. WiseTech growth numbers though speak for themselves.
The company told shareholders at its annual meeting in November that it was on track to deliver revenue growth of up to 50 per cent this year to $333 million, and grow earnings before interest, tax, depreciation and amortisation (EBITDA) up to 37 per cent on last year which could see earnings total $107 million.
The quality of the company’s earnings has never been an issue. What has led some investors to baulk at the stock is just how much they have been forced to pay for it. At its peak valuation of $7 billion in August, investors were effectively paying $25 a share at a multiple of 21 times its revenue for the current financial year.
It has since come off those highs as global tech stocks have suffered and was trading at $16.47 at Friday’s close.
Not that White isn’t confident of the company ability to deliver.
“Our penetration of both customers and addressable markets is still in the early stages. We have a significant and highly profitable runway for many decades,” he said at the AGM.
When it comes to capitalising on the competitive advantage its customers get from its solution White says it’s a “slow burn.”
During the good times it’s easy for a company to stick with the status quo. When times are bad though, and margins come under pressure, that’s when efficiency comes into focus.
“We did extremely well during the GFC. From 2008 to 2011 we grew at about three per cent a month because people were looking for survival,” says White.
WiseTech also sees enormous opportunity. The global logistics industry has revenues of around $14 trillion annually.
According to White, the IT spend is around two to three per cent of that number.
“You could round it up and say our marketplace for potential product is around $300 billion to $450 billion of revenue potentially, and we are a tiny tiny fraction of that. We could grow a thousand times and not hit the sides,” he says.
He also foresees the logistics industry’s version of the iPhone effect. Remember the days when people were happy with an $80 Nokia as opposed to a $2000 iPhone?
“Technology convergence is also going to take a big share of the logistics spend and turn it into a technology spend,” says White. This means technology could account for 10 per cent of the industry’s revenue in a decades time.
The fact that WiseTech is the only company in a position to capitalise on this opportunity says a lot about White, and not just his formative years in the music industry.
White cites his family for having a significant impact on him.
“I learnt my entrepreneurial drive really from my grandfather, and I learnt my engineering mindset from my father, my mother was a salesperson so I absorbed a bit of that,” he says.
The formation of WiseTech was merely the end result of these influences and White’s contrarian instincts.
“I have this intense desire to understand how things work, I have a pretty strong dissatisfaction level with the status quo,” says White.
“That sort of intensity of desire to know things and then to realise that they are not very good when you learn them, that sort of drives me to make things better.”
He is also an unfashionably strong supporter of Australia’s place in the tech world and has no plans to continue his campaign to become the dominant software solution for the global logistics industry from anywhere other than Australia.
It is one reason why he chose to list here rather than on the US tech bourse, the Nasdaq.
“Its very very hard for a company like ours to push ourselves into the Nasdaq and be even remotely significant player, whereas if we went to the ASX we’re at home … we can be a big player in that marketplace.”
He describes the decision to list on the ASX, against the advice of everyone he talked to, as “the best advice I ignored in my career”.
Even the recent political turmoil has failed to register as a major negative with the WiseTech founder.
“Let’s compare ourselves to other economies. If you look at Britain and the US at the moment do you think we’ve got a more or less stable political system? Frankly I’d rather be here.”