RMS Software & Aphrodite Gold: Peter Buttigieg on taking SaaS to the cloud and to the world
Early in his career, Peter Buttigieg, now the managing director of RMS Hospitality and the acting CEO of Aphrodite Gold (ASX: AQQ), helped bring trading into the information age by introducing computer systems to the Melbourne and Sydney stock exchange as an IT contractor.
“You remember the old chalkboards where they used to record stock prices? That was first computerized when the team I worked with replaced chalkboards with computer screens. That was really the first project I worked on.” From there, Buttigieg and his company RMS Hospitality began writing software for insurance brokers, then for caravan parks, “and that’s what really got us into the hospitality market for property management software.” Nowadays, Buttigieg is head of a successful software company and CEO of an emerging mining project for which he was an early investor.
His successes were not won overnight, however. In the early days of the computer revolution, the hospitality industry was only beginning to leverage software to streamline their processes. Buttigieg’s team first began computerizing the booking charts for caravan parks and hotels, then the receipting information for accounting purposes, and later all aspects of property management software as well. “Back then, computers weren’t even on the radar, so we spent the first ten years just trying to convince people that computers could do the job.” Because the hardware was still rather slow in the early 80’s, he found himself having to prove to prospective clients that using computer terminals would save them time in the long run.
Though Buttigieg experienced early success working with caravan parks, it proved to be too small of a market for sustainable business, and his company quickly moved on to include hotels and motels in their client base, as well as student accommodation for universities, shopping center space management for malls, and accommodations for defense bases. “From a software point of view, all these vertical markets, all pretty much did the same thing. […] They all had something to do with reserving something,” he says. Branching out into the different vertical markets was extremely important in the early days of RMS Hospitality because the Australian market for each of the individual niches was too small at the time.
Expanding a business in the 1980’s was not as simple as sending e-mails to prospective clients, and required a lot of legwork out in the field. Nearly everything had to be done in person. “Back in the early days, computers were the size of a washing machine, so setting up one onsite demonstration could take you a day and a half,” Buttigieg says. “It was a lot of hard work.” This was especially difficult due to RMS Hospitality’s target market, which included clients from all over the country, so the work required constant travel. “[Our sales team was] on the road all day, every day, knocking on doors, lugging these big boxes out of the boot, setting it all up, and showing people. That’s how we did it.”
RMS used to provide the software to their clients on physical floppy disk media. The applications had to be copied and sent through the mail, but since floppy disks were often unreliable, this created further logistical complications.
Because of these myriad physical limitations, international expansion at the time would have been difficult and RMS had to heavily rely on these vertical markets in Australia. “Really, until the Internet came around, it would have been impossible.” It was not until roughly 2005 that RMS began to expand into overseas markets. “Fast-forward into where we are today, we are now running out of the UK, the US, India, and the UAE, but primarily only in parks and hotels and motels. With these other verticals, we’re pretty much only working in Australia so far.”
RMS interfaces only with businesses and does not sell any kind of software to the public. Their competition, as a result, is not very extensive. “Our whole focus is dealing with the actual properties that provide the accommodation, so in our space competition-wise, there’s probably maybe ten to fifteen property management systems now worldwide that we’re competing with.”
A huge shift in technology that has taken place of late involves clients switching from using on-premise dedicated Windows servers to running cloud-based software. RMS is one of the few “traditional” companies that was able to port their Windows-based software into HTML5 cloud applications, rewriting their code for a completely different environment. Whereas before, RMS sold and supported the software, but the clients were responsible for the hardware that ran their servers, RMS now runs a full SaaS model, collecting a monthly fee to maintain both the software and the servers. This allows the clients to remotely access their information through a “dumb terminal” and outsource the IT aspect of their business.
Some customers, however, still use the old Windows-based system and have yet to upgrade to a cloud-based solution, so RMS finds itself supporting both systems simultaneously. Part of the challenge of upgrading has been adapting to a constantly-changing technological landscape. RMS started their migration to the cloud six years ago, implementing Microsoft Silverlight, only to realize years into development that the industry standard had trended towards HTML5. This required a complete rewrite of their front-end interface. “We have a full working version in Silverlight that we’ve had to also put in the bin to go to HTML5.”
Fortunately, because RMS still had a full working version of their software on Windows, the challenges of upgrading did not affect their profits. “Customers were still paying for a service. Whether we were delivering it via Windows or Silverlight or HTML5, thankfully we still had income coming in that was able to fund the development that we needed to do.”
This is not the only way that the changing tides of technology have affected the business. “Along with the whole cloud-based change, the whole revolution with online bookings has been the biggest game-changer,” Buttigieg explains. In recent times, online booking has come to completely dominate the market, and 85 to 90% of people now book their rooms online. “Because we’re having to manage all of these online bookings, we have a whole separate stream of servers running, just collecting these online bookings 24/7.” So in addition to property management, RMS must also handle the back end where clients make their bookings, relay availability to online travel agents, and update all of this information in real time to avoid double-bookings.
“We’re one of the few property management systems that do both,” he says of RMS’s ability to handle both the traditional booking aspects and the “channel management” aspects of a property. This allows RMS to handle bookings truly in real time, and prevents their clients from having to deal with the added complication of having a third-party channel manager. “They are 100% reliant on us,” Buttigieg says. Properties use RMS’s services in order to know who is coming and going, what rooms are available, who they need to bill, and what rooms should be cleaned.
Without these services, the 5,000 properties that use RMS would come to a standstill. Thankfully, outages at RMS are vanishingly infrequent, and are very brief even when they do happen.
Being ahead of the curve and highly stable has given RMS many opportunities over its competitors. It has allowed them to capture large clients like Quest Apartments and Discovery Parks because of the market trend towards cloud-based systems.
“That opportunity wouldn’t have arisen if we weren’t fully cloud.” The early migration of RMS to new systems has allowed them to not only keep up, but to speed ahead of even well-established tech companies like Oracle when it comes to hospitality software.
Aphrodite Gold (ASX:AQQ)
Considering this vast background in tech, Buttigieg’s other major venture, Aphrodite Gold (ASX:AQQ), seems highly unusual from an outsider’s perspective. “This [Aphrodite Gold] is really an accident,” he admits. “I was a passive investor.” Just before Aphrodite Gold’s IPO, he put up roughly $100,000 of investment. “That’s all I really wanted to do with it,” he says. A few years later, however, Aphrodite Gold had spent the money that they had raised, and the company found itself having to begin fund-raising once again, so they asked Buttigieg if he would like to invest more. In addition, they approached him to be on the board of directors. Buttigieg agreed, interested in learning more about how a public company was run because of the possibility of RMS Hospitality itself going public at some point.
From Aphrodite Gold’s end, they hoped that Buttigieg could offer the board a much-needed alternative perspective. “They sort of wanted me to come on as a mediator, I suppose, to try and work out this deadlock between the CEO and the chairman. So that’s sort of how I got involved, because it was starting to get into a bit of a mess.” Eventually, the chairman was removed, and Buttigieg was abruptly voted into his position during the first board meeting.
Aphrodite Gold Limited (ASX:AQQ) originally bought the Aphrodite mine from Apex, aiming to develop the site and get it into production. While, according to Buttigieg, the mine indeed had—and still has—a lot of potential, the project was initially mired in technical problems. “There were some metallurgical issues that needed to be resolved,” he says. Because the gold was buried so deeply, the company’s strategy was to first focus on removing the top layer of overburden that covered the deposits. While this expensive process would have been profitable when gold prices were high, once the prices took a hard dive, the mine was suddenly no longer profitable.
In order to solve this problem, the company initiated massive changes in management. “We had to remove the management and put a whole new structure in place, and effectively shut the whole project down to start from scratch.” The strategy that the company then took was to cut their overhead dramatically, and sit and wait until they could decide what the best plan moving forward would be. “The operating expenses that we had for the size of the company and what we were doing were just ridiculous, and not sustainable,” he says, so the board felt compelled to cut costs above all else. Since gold is not particularly perishable, Buttigieg felt that it was a sound approach. “It’s not going to go bad,” he says, “so we could afford to shut everything down.” It wasn’t great for the share price initially—which dipped to $0.007 at one point—but it kept the company alive and out of massive debt.
After providing the cash injection, Buttigieg and his colleagues decided to look towards the expertise of a geologist to help them better understand how to extract the gold. Because the gold is refractory gold, several processes are required to extract it, including processes that create toxic byproducts that must be managed. In general, extracting refractory gold is therefore more expensive than oxide gold. The market was therefore skeptical of the mine, and stock prices remained low. However, he says, extraction “can be done at an economical price” using modern technology, and several examples of this type of extraction exist around the world.
Fortunately, the geologist helped the team to discover that there was easy-to-extract oxide gold in the top layer of soil that they had been removing. This meant that not only was the overburden removal going to pay for itself, but it was also going to be profitable enough to provide the capital for extracting the deeper refractory gold. “It’s effectively turned the whole project around,” he explains.
Now that the situation is much more profitable than previously expected, Aphrodite Gold is in the midst of interviewing for a CEO who has a mining background, to replace Buttigieg as the acting CEO and help the project move forward into production. Though Buttigieg has always been interested in gold because he sees it as a “good hedge,” he lacks in the knowledge in the technical aspects of the project. “There’s been no interest getting into the mining sector at all. Like I said, it was really an accident that I got involved, and I had to stay involved otherwise both myself and a lot of friends and family and staff would have lost their investment completely, because [the company] would have gone broke.”
The pre-feasability study concerning the site has just been finished and is due shortly. The mine is particularly promising because of the infrastructure that surrounds it. Just North of Kalgoorlie, it is close to transport and has adequate access to water and electricity. Unlike other mines near the area, which have small pockets of gold peppered throughout their sites, the Aphrodite Gold site has all of its gold concentrated in one area. In fact, he says, “we’ve got 1.4 million ounces in the ground of refractory gold. We know for sure that that gold is down there.”
“We’ve proven that the project is now viable,” Buttigieg says, so the next step before the transition from exploring to production will be finding a suitable CEO. This will factor into the company’s execution plan, which is now critically important. According to Buttigieg, since the company doesn’t have the “luxury” of shutting down operations once production begins, this step must be planned carefully. Moving forward, the company will soon begin extraction of the gold at the top layer, which will fund the extraction of the refractory gold beneath.
Considering Buttigieg’s success and the profitability of his two major ventures, one would think that he would be tempted to relax into some sort of retirement. This is not the case, however. “I definitely like to see things through to where they’re finished,” he says. “Rain, hail, or shine, I do like to see things through.”
Written by Raul Betancourt.