Mogul finds fertile area for software

Twenty years later, he has carved out an unusual niche as perhaps Hungary’s most successful software entrepreneur. Simon’s latest creation to bubble out of Budapest is LogMeIn, a 400-worker outfit that makes software that allows one computing device to take control of another.

Using this technology, a person can tap into a home or office PC while on the road with a laptop. Customer support technicians also use LogMeIn’s products to take control of people’s machines and fix their PC problems.

Similar technology has existed for years. What LogMeIn did was make it quick, easy and cheap to use by shielding people from complex computer configuration work. The company, which went public last year, stands as one of the most profitable of its kind and competes against GoToMyPC from Citrix and pcAnywhere from Symantec.

Simon, who is 45 and the chief of LogMeIn, attributes the success to the company’s penny-pinching Hungarian roots. “In Silicon Valley, someone comes up with an idea and people pour money into it,” Simon said. “In Hungary, you’re expected to do a lot more than people expect with a lot less.”

The revenue of LogMeIn has surged, hitting $74.4 million last year, from $27 million in 2007. The company expects to post revenue as high as $94.5 million this year, with gross margins above 90 per cent.

“At this stage, their growth rate and profitability is better than a lot of their predecessors,” said Richard K Baldry, an analyst at the investment banking firm Signal Hill. “They have a unique story.”

LogMeIn gives away the basic PC version of its software, and people have swarmed to this low-resistance pitch. The company serves up 1,00,000 new downloads a day of its software.

More recently, LogMeIn began selling a $30 version of its software for Apple’s iPhone and iPad, allowing people to pull photos, presentations and other files from their computers to these portable devices.

Simon’s Hungarian tale started in 1992 after he finished business school at Washington University. While pursuing an internship, an opportunity popped up in Budapest. “I bought the Lonely Planet guide to Eastern Europe on a shoestring,” Simon recalled. “It described Budapest as the Paris of Eastern Europe, and I thought, ‘That sounds good.’ ”

In Budapest, Simon discovered a wealth of smart engineers fresh out of school and hungry for opportunities — for relatively modest wages. He ended up running a software firm that contracted with companies outsourcing their engineering work. Then in 1995 he founded Uproar, a software company that built Web versions of games like Family Feud and Bingo.

Uproar performed some remarkable feats. It could handle 18,000 people playing a game at the same time, during an era when many Web services broke down under modest pressure. After a couple of years, the company went public on the Wiener Börse, Vienna’s stock exchange, and was later acquired by Vivendi.

Simon kept in touch with the engineering team that had managed to make the most of limited computing power and turned to them again when Marton Anka, a Hungarian software engineer, approached him with the remote access software he had been selling out of his apartment.

Considerable attention

They founded LogMeIn in 2003, garnering considerable attention from technology support specialists who found they could help customers by dialling into their computers rather than making office visits.

Technology heavyweights have long looked to Eastern Europe for skilled, lower-cost software talent to help out big projects. A Hungarian software engineer, for example, can expect to earn about a third as much as his Silicon Valley counterpart, according to data from PayScale.

LogMeIn stands as a rare example of a company that hit it big on a global stage after starting out in Eastern Europe. This business customer base continues to pay the bills at LogMeIn. Most of the company’s revenue comes from small to midsize companies that provide remote support services and pay for more sophisticated versions of LogMeIn’s products. Larger companies like Lenovo, Toshiba, Sony, Best Buy and AT&T now use LogMeIn for similar functions.

LogMeIn has about 20 free customers for every paying customer, a ratio that would devastate most online service providers. After all, LogMeIn must pay for data centers capable of managing the connections between huge volumes of computing devices.

LogMeIn’s model would appear under threat from so-called cloud computing services because people can now gain access to their files stored on a server from any Web-connected device. Simon, however, says that the influx of smartphones, Web-ready cars and a host of other more intelligent products will build demand for the company’s remote support wares. More companies will need to fix more things and connect to consumers from afar.

Next up, LogMeIn, with its headquarters near Boston and its engineering base in Budapest, plans to tackle giants like Cisco Systems, Microsoft and IBM with an easy-to-use — and, yes, free — product for holding meetings and exchanging information over the Web. Customers have been testing the software, which should arrive to the public in a couple of weeks.

The analysts said that LogMeIn would most likely find it tough to pull a second trick out of its hat, especially given the size and strength of its competitors. “The question is whether or not they can stay ahead of the field and not have a slip-up,” said Gregg Moskowitz, an analyst at Cowen and Company. “That’s the one thing we are watching out for.”