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What Happens When Big Business Turns Out to Be Anything But Big

THE PROBLEM: What happens when an expected tidal wave of business reveals itself to be a brief splash?

Mark Kolb, chief executive of Taratec Development Corp., of Bridgewater, N.J., is the first to admit he was
unprepared for the spring of 2000. "Spending for our services just dried up," he says. "We were caught off
guard."

By PAULETTE THOMAS Wall St. Journal

Though he didn’t realize it at the time, Taratec, an information-technology consultant to large pharmaceutical
companies, had been an unwitting beneficiary of the Y2K computer crunch. Through the late 1990s, big
corporations, including his clients, shoveled piles of cash at software and hardware consultants, anticipating
computer snarl-ups when the digital calendar turned to the year ’00.

Even though Taratec did little Y2K work, by 1999, Mr. Kolb employed 100 and was looking at record revenue of
$17 million. He told his partners to prepare for a public offering in 2000. He was proud that a business launched
from his living-room coffee table in 1984 had reached this grand juncture.

But in the first quarter of 2000, new business evaporated. The stock market tanked. Y2K was a nonevent. "We
didn’t realize how much of our 1999 revenue was driven by Y2K budgets," he says. For the first time ever,
annual revenue fell.

THE SOLUTION: The surprising setback forced him to reassess. Mr. Kolb assembled an outside board of
directors for advice. He brought in venture capital for the first time, selling a minority stake for $5 million. He
concluded that his management team lacked the experience to build the business and hired a new team.

With new managers came a new focus. They decided to abandon some existing consulting work to focus on
Food and Drug Administration regulations that affect electronic record-keeping for drug companies. Mr. Kolb
redeployed a team of 25 software testers to became experts in the regulation known in the industry as "Part
11," which requires electronic records used in drug-lab research to have the same security and integrity as
old-fashioned lab notebooks on paper. For the first time, the firm began selling a software product in addition to
its consulting services, committing new resources to a sales team.

As the Taratec team talked to clients about the issue, Mr. Kolb said, "No one was in compliance." He believes
that Part 11 is a $10 billion problem. It’s a big electronic mess that requires software experts, a sort of Y2K
problem for the drug industry.

So far, so good. In 2001 Taratec revenue grew 65% to $24 million.

THE LESSON: Even as he bets his company on Part 11, Mr. Kolb says that he learned from his ride on the
Y2K wave. Part 11 work will have a shelf life of just a few years. He and his new management team now
commit at least a day a month to look ahead to the next opportunity.

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