Volume 31 • Issue 10 • October 2006
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Burlington software company
takes Advantage of location
Advantage Factory lands contracts with
Defense Department, local and national clients

by Tara Nelson

At first glance, a small plat of land next to a field on the banks of the Skagit River might not seem the ideal home for a multi-million international software business, but that’s exactly what Ken Schneider and Dan Downing – two former Microsoft employees – were thinking when they founded the Advantage Factory in 2001.
Schneider, of Seattle, and Downing, of Anacortes, left their former jobs as e-commerce director and senior program manager at Microsoft, figuring they could start a business closer to home and simultaneously be able to work with clients more closely, said Doug Dennie, vice-president of professional services. And with several employees already living in Skagit County, it made sense to locate there.
“I think the desire for both Ken and Dan was a desire to get outside a very large organization and be more in the trenches in helping customers implement solutions rather than be behind the corporate wall,” Dennie said. “I worked at Boeing for a number of years, and you’re millions of miles away from the customers. Whereas, here you interact with the customers on almost a daily basis.”
Dennie said the business strategy was to apply technology capabilities and solutions in a way in which only a small business can do but with the expertise of having worked for a large international company. In addition, the company’s size allows for a more hands-on approach with a timely method of delivering solutions.
“We know how to go out and get business in both small and large markets. We’re tactical and strategic in both areas and we know how to play in the big sandboxes with the big organizations,” Dennie said. “We really have two strong skill sets: one is we have people who understand business requirements and the other is that we’ve got architects and software developers that can take those requirements and build solutions. We’ve been able to implement those solutions at a much faster rate than the big companies do. And we think we’re very, very competitive at delivering solutions to our customers in a timely fashion.”
Another reason was the area’s designation of a Historically Underutilized Business Zone, as recognized by the Small Business Administration as part of the federal Small Business Reauthorization Act of 1997, a program designed to stimulate economic development in rural communities through economic incentives.
Dennie said through the HUB program, the Advantage Factory is automatically given a preference on a certain percentage of federal contracts, although he added those contracts amount to less than 10 percent of its business.

From beans to bullets
Separate or not, the company still works regularly on joint contracts with Microsoft completing such projects as the Washington state voter registration project, completed in January 2006. Dennie said approximately 10 percent of the company’s business comes from Microsoft, both in private and public projects, which helped lend credibility to the business in the beginning.
“Because of that, we have been able to build a base of credibility and then we get our own referrals to go with that,” he said. “So, Microsoft has really opened a lot of doors for us and been able to get involved with a lot of large customers and federal organizations very quickly.”
Their top private sector customers include PACCAR, The Port of Seattle, and Syngenta, an $8 billion European agricultural business. Dennie said Advantage Factory also began recently working with two new clients in Alaska: the Alyeska Pipeline company to perform data coordination and requirements analysis to spot trouble areas where data is being lost, and Carlile Transportation Systems to select a new transportation management system.
Local clients include the Society of Professional Optical Engineers and Janicki Industries, a manufacturing firm in Sedro-Woolley. Dennie said they are also working to establish a relationship with Haggen grocery stores.
In 2003, the company hired Greg Swarts, who had extensive experience in government sales, and created a Washington, D.C. branch to deal specifically with federal contracts. Swarts said their major clients on the federal side includes the Department of Defense, the Defense Information Systems Agency, the U.S. Army and Air Force, as well as the U.S. National Guard and the federal Department of Transportation.
Since then, Swarts said approximately 40 percent of their government business now comes from defense and homeland security contracts.
They are also currently working on contract projects in several middle eastern countries, although Swarts said he couldn’t mention names.
“We primarily are involved in building componants for command and control (C2) systems,” he said. “We’re working at country-level command and control systems and related intelligence systems together and what we’re doing is we’re able to either take existing systems used by the U.S. government and then apply it to the needs of a country and then also develop some new capabilities for them to work from.” Swarts defined a command and control system as the operation system of the military, often referred to as “beans to bullets.”
“So it’s everything from supply to the delivery of people and equipment to the ability to respond to an incident or event,” he said. “It’s actually helping with battle-state command-type systems or helping operate in a battle-field environment. So that can include everything from intelligence to surveillance, assigning the right people, organizations, resources and equipment to the right places and coordinate them with other organizations within those countries. For example, the U.S. military might drop off supplies and foreign government military might pick it up and distribute it to staging areas.”
They also recently completed a voter registration project for the state of Washington, in the aftermath of the 2004 gubernatorial election, integrating the data bases of Washington state’s 39 counties to make tabulating votes easier.
Dennie said it is this combination of projects – with everything from classified work, to military, international and local clients – that makes them appealing to a broad customer base.
“There’s only a handful of businesses that get to have this much fun finding technological solutions,” he said.

Location, location, location
Dennie said part of the company’s advantage is the low overhead, or cost of doing business in a semi-rural area. This, he said, allows Advantage Factory to remain price competitive.
“If you look at where we’re headquartered, obviously it costs a lot less to rent this space in Burlington than it would to rent in downtown Seattle,” he said. “So it really is cost advantageous for us to be located here in Burlington.”
Because of the limited competition and quality of life in the Skagit Valley, Advantage Factory has a high rate of employee retention.
“It’s a great technology firm for local developers who want to have the Skagit/Whatcom county lifestyle and still work on innovative technology solutions,” he said.
Another advantage is not being bound to a particular company’s products. Swarts, for example, cited Microsoft employees being organizationally-bound to delivering the products of the company they work for.
“We don’t want to compare ourselves to Microsoft, but we can partner with them and implement new technology products that Microsoft people don’t usually get to do anymore,” he said. “We deliver solutions, so we get to work with some of the new emerging technologies and apply them as a competitive advantage for our customer. So from a technology perspective, it’s an exciting area to be in.”
In addition, Dennie said the Advantage Factory has had consistently been able to either home-grow or recruit people into the Burlington area that have the skill sets often sought after by their customers.
“Most of the employees live in Bellingham, Arlington and Sedro-Woolley,” Dennie said. “Part of that is because there are a lot of technical people in this area who like the lifestyle of the tranquil Skagit Valley. There is good technical talent in this area.”

Growing up, not out
With average annual revenues of around $3 million and a growth rate of about 30 percent a year, Dennie said this technology firm located in a semi-rural environment is a huge success. He added that as the business continues to grow, the company plans to open more satellite offices around the country. Most of the growth, however, will be focused on their Burlington office, citing the low overhead costs, quality of life and employee retention.
“We want to keep a lot of that growth in Burlington,” he said. “So it’s not just as the company grows, we’re going to move offices to Washington D.C. and dwarf the Burlington office. Ken and Dan have really made a commitment to try to establish a long-term set of operations in Burlington and recruit and maintain people in that area and provide solutions.”
When asked how they plan to keep the company nimble and accessible to clients as it continues to grow, Swarts cited a flat organizational structure with authority and responsibility divided almost equally between employees – similar to Microsoft.
“At some point, we want to keep getting larger, but we understand how to organize work so we can still have a small-company mentality as we grow and provide solutions to the big companies that are in the organizational throes of not being able to be as nimble,” he said. “Right now, we have very few layers of management, where everyone is pretty much in power to act on behalf of the customer. It’s a flat organizational structure as opposed to a hierarchy.”
Dennie added the delegation of authority, responsibility and assignments creates teams of people that are capable of handling projects very quickly.
“Ken and Dan help leaders manage their business and grow with it and they’re also trying to identify and nurture employees to grow the company, all while keeping the organization as flat as possible.”
Dennie added: “It’s a challenge for any business to be successful, and the fact these guys have been able to pull off having a technology business that’s located really out in the middle of nowhere, it’s pretty remarkable. Our success story is that we’ve been able to be headquartered here and have a great client roster that includes international clients, federal sector clients, and a good mix of large enterprise clients and local clients,” he said. “For a small, local business, we’ve been pretty successful in developing business in a number of different areas – and having a good time doing it.”

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Advantage Factory vice president Doug Dennie sees benefits that come from a smaller company’s hands-on approach.




Advantage Factory executives, from left, Jonathan Granger, Chuck King, Ken Schneider and Matt Bezanson discuss a project.