RWD Technologies, Inc.

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RWD Technologies, Inc.

5521 Research Park Drive
Baltimore, Maryland 21228
U.S.A.
Telephone: (410) 869-1000
Toll Free: (888) 793-8324
Fax: (410) 869-3002
Web site: http://www.rwd.com

Private Company
Incorporated: 1988
Employees: 700 (est.)
Sales: $104 million (2004 est.)
NAIC: 541490 Other Specialized Design Services

RWD Technologies, Inc., is a Baltimore, Maryland-based professional services company that helps companies maximize technology through training, information technology consulting, and organizational performance improvement solutions. Privately held, RWD divides its business into three categories: Performance Solutions, which helps automakers to launch new vehicles, railroads to improve reliability, and the petroleum and chemical industries to increase worker productivity; Enterprise Learning Solutions, providing training and other services to companies that use Oracle, PeopleSoft, and SAP software; and Applied Technology Solutions, helping pharmaceutical and other regulated industries integrate software systems, as well as develop custom applications. Although a relatively small company, with annual sales less then $150 million, RWD boasts a client list that includes a large number of Fortune 500 companies. It serves 20 industries, including automotive, chemical, consumer products, finance, manufacturing, medical, petrochemical, pharmaceutical, rail, and telecommunications. RWD maintains 19 offices in the United States, Australia, Belgium, Canada, France, Germany, Japan, and the United Kingdom.

Founder Jumpstarts Education During World War II

The letters RWD stand for the company's founder Robert William Deutsch. He was born in Far Rockaway, New York, in 1924, the son of a grocer, and grew up interested in math and science. In 1941 he entered Queens College to study engineering, choosing the school simply because it was affordable. Within a matter of weeks, the United States military base at Pearl Harbor, Hawaii was attacked by Japanese forces, Germany subsequently declared war on the United States, and the country found itself at war. Deutsch remained in school for two years before enlisting in the Army, which then sought to take advantage of his training. Deutsch was sent to study electrical engineering at the Massachusetts Institute of Technology, and afterwards dispatched to Europe, where he helped in the communications between U.S. and French forces.

Following the war, Deutsch returned to MIT in 1946, earned a Bachelor of Science degree in physics. He then went on to graduate school at the University of California at Berkeley, and in 1953 earned a Doctorate in high-energy physics. Deutsch next took a position at the General Electric Knolls Atomic Laboratory in Schenectady, New York, involved in the development of nuclear reactors that could be used by submarines. In 1957 he went to work for Florida-based General Engineering Company, and after that company was sold four years later Deutsch became a physics consultant on aerospace projects for Martin Marietta, a move that brought him to Baltimore. He then became a professor of Nuclear Engineering at Catholic University in Washington, D.C., in 1962, while continuing to serve as consultant for companies involved in nuclear power plants.

To bring in more consulting work, Deutsch tried his hand as an entrepreneur in 1965 with the launch of General Physics Corporation, which trained nuclear plant operators. The nuclear power industry was on the rise and General Physics prospered under his leadership as chief executive officer. Most of the work was on government contract, mostly for the Navy and nuclear power plants. Deutsch took the company public in 1982, retaining a quarter interest, but in 1986 National Patent Development Corporation acquired a controlling interest in General Physics, which by this point was generating about $115 million in annual revenues. In late 1987 National Patent wanted Deutsch to step down as CEO and offered him what Forbes in a 1998 profile called a "face-saving retirement package." He rejected it and, according to Forbes, "he told the world he'd been fired and sold his family's 24% stake in National Patent for $18 million. Less than three weeks later, in January 1988, Deutsch used some of the cash to get back in the training business."

The 63-year-old Deutsch recruited his chief operating officer at General Physics, John H. Beakes, formed RWD Technologies and set up shop in Columbia, Maryland, the goal to provide hightech services to commercial companies. It was a welcome change of direction for Deutsch, who had already concluded that both defense contracting and the nuclear power industry offered a meager opportunity for growth. He saw an opening to train workers on how to make the best use of the advanced technology that was being introduced in all industries. "Deutsch got the idea for his second act," according to Forbes, "after watching the frustration corporate management often experiences when it invests in new technology. Too often the employees don't really know how to use the new equipment properly, so the buyers don't reap maximum productivity gains." Deutsch explained the genesis of the problem to the Washington Post in a 1995 interview: "The big companies tend to work from the top down. Someone sells top management on the idea of a new technology, but doesn't give them a system that's user-friendly. Top management forgets about the people who have to use the system." The primary goal of RWD was to customized those systems, then train the workers who would actually have to use them, but the greater mission was to help American manufacturers regain a competitive edge in the world.

RWD's early work was done with Chrysler Corporation, involved in the development of training programs that helped workers in the launch of new vehicles. Unlike most consulting firms that preferred to work with management, RWD liked to go directly to the shop floor to deal with problems from the bottom up. Deutsch told Forbes, "Big consulting companies, when they do go into factories, talk down to the workers. It's just not in their culture to work with people who use their hands and with the nondegreed." In order to gather the kind of personnel comfortable with this approach, Deutsch eschewed MBAs, preferring instead to hire engineers and computer science graduates, while also avoiding graduates of premiere schools like MIT and Stanford or applicants with a perfect 4.0 grade point average. "It means the person did nothing but study and did not have any social or athletic life," Deutech explained to Forbes. "That person would have a hard time working in a place like this with our team environment."

Success with Chrysler led to work with Ford Motor Company to help implement lean manufacturing methodologies in an engine plant. This would lead to RWD working with Ford to implement the Ford Production System in its factories around the world. RWD also learned lessons from its automotive work that could be applied to other industries. For example, the work it did with Ford on a new production line for automobile transmissions was useful in solving a problem for Frito-Lay Inc., which was trying to install a new potato chip production line that kept burning the chips. By changing the flow of oil, a lesson learned at Ford, the RWD troubleshooters solved the problem.

After three years RWD was profitable and established enough to not need a marketing department, a decision that also reflected the company's philosophy. "Salesmen tend to promise solutions engineers can't deliver," Deutsch commented in the 1998 Forbes article, which added, "RWD often approached an account by first asking if it can talk with workers: Before pitching to a food manufacturer, recently, an RWD project manager spent the day riding around with one of its deliverymen."

Early 1990s SAP Work

In the early 1990s RWD expanded into computer systems. It helped Dow Chemical make changes to its training program to help implement the SAP enterprise resource planning (ESR) software it purchased. This project led to other SAP implementations, and RWD expanded its expertise to include other ERP packages, including Oracle and PeopleSoft. As a result, the client list swelled to include a wider variety of industries. RWD also beefed up its information technology capabilities in order to offer custom IT systems for corporate customers. For example, it helped office furniture manufacturer Steelcase to create a user friendly laptop ordering system for its salesmen and helped Holiday Inn develop an easy-to-use worldwide reservation system.

Revenues grew at a rapid clip in the 1990s, totaling $18.4 million in 1993 and topping the $65 million mark in 1996, when net income approached $5.2 million. In June 1997 the company was taken public, after twice postponing the initial stock offering because of poor market conditions. Not only did RWD raise $38 million, it was able to create a stock option plan for employees after they had been with the company for 12 months. Moreover, being public added credibility to RWD as it attempted to attract more Fortune 500 customers. On the downside, the company now had to spend hundreds of thousands of dollars each year on Securities and Exchange Commission filing fees, extra attorney and accountants' fees, investor mailings, and insurance to cover directors and officers. As long as the business continued to grow, the cost of being a public company was acceptable, but that situation would change within a few years. In the meantime, RWD continued to enjoy an upward trend in business. Sales totaled $85.7 million and net income topped $9 million in 1997. RWD was serving seven of the top ten of the Fortune 100 and 25 overall. The company was also becoming more of a global player, as 10 percent of revenues came from international sales, compared to just 2 percent in 1996, prompting RWD to open an office in Europe. Most of that growth was connected to RWD helping Ford implement its lean manufacturing production system at plants in the United Kingdom and Europe.

Company Perspectives:

RWD is a professional services organization that focuses on providing people with the knowledge and tools they need to support their learning, performance and quality of work.

RWD enjoyed another strong year in 1998, when sales improved by 34 percent to $114.7 million and net income totaled $13.1 million. The company was listed among Forbes 200 Best Small Companies and ComputerWorld named it one of the Best IT Places to Work. By now the ERP practice was the fastest growing part of the business, but RWD also enjoyed significant successes in the IT area. For example, in 1998 the company developed an intranet-based diagnostic system for 5,300 Chrysler dealer repair shops, providing mechanics with up-to-date vehicle information. A similar system was then set up for John Deere equipment dealerships for their technicians to use in the field.

Business began to tail off in 1999, due in large measure to clients diverting money away to address the Y2K problem. Although RWD's revenues increased to $124.4 million in 1999, it was less than expected, and net income decreased 60 percent to $5 million. In addition, the price of RWD stock tumbled. After starting 1999 as a company with a market capitalization of $300 million, it ended the year worth half as much.

In June 1999 RWD acquired Merrimac Interactive Media Corp., an Internet-based technical training and testing solutions provider, and then in 2000 RWD established a new subsidiary called Lattitude360 to provide just-in-time training programs. RWD appeared to be on the rebound in 2000, as business increased during each of the first three quarters of the year before sagging in the fourth quarter. In the end sales improved to $133.7 million while net income slipped to $4.2 million. However, the slowdown at the end of the year was a harbinger of more difficult conditions to follow in 2001.

Poor Economy In Early 2000s Hinders Growth

Despite a retooling of its business models in 2000, RWD simply could not overcome a downturn in the economy that led clients to cut back on investments. Sales dropped to $118 million and the company reported a loss of $9 million in 2001. The reduction in corporate spending on IT services continued in 2002, when revenues decreased further to $117.5 million and RWD lost another $22.4 million. To make matters worse, the accounting scandals at such companies as Enron and Worldcom, resulted in new and costly regulations. To remain a public company would now cost RWD about $1 million a year. Given the company's size and struggle to regain profitability, Deutsch decided in 2003 to take the company private once again and eliminate these costs as RWD waited until economic conditions improved. Deutsch used a company he owned with his family, Research Park Acquisition Inc., to acquire the outstanding shares of RWD stock. The transaction was completed in September 2003.

Sales continued to slide in 2004, falling to $107 million. The company sought new business opportunities to turn things around, as Deutsch once again looked to military and other government work. In October 2004 the company created a new business group dedicated to the training of federal employees, anticipating that a large number of baby boomers were on the verge of retirement, creating a need for their replacements to be trained. The initial focus was on ERP software training. RWD also developed software that in November 2005 received certification for the Navy Marine Corps Intranet, capable of distributing documents and training materials and providing online help. In addition, in 2005 RWD hired a pair of executives to expand the Applied Technology Solutions division in hopes of drumming up more business from the pharmaceutical and other regulated industries.