Laszlo Szalvay

How did an entrepreneur grow a successful product and services business around Scrum

I met Laszlo Szalvay (and his brother Victor Szalvay) several years ago, when Laszlo hired me at Danube Technologies. Both Laszlo and Victor are quite remarkable entrepreneurs who started Danube Technologies straight out of college. This is a story how they build a successful product and services business around Agile and Scrum, and how they eventually sold that business to Collab.net.

Laszlo is incredibly honest in this interview, and I found it especially interesting to hear why they decided to sell the business, and also Laszlo’s thoughts on where the Scrum community is headed. Lazlo Szalvay is a VP at Solutions IQ; an Agile consultancy based in Pacific NW that offers Agile training, coaching and mentoring.

Here’s the interview:

Transcript

Kane: Laszlo let’s get started. Let me ask you, what brought you to the
Scrum community?
What originally did you see within Scrum or how did you come about
coming into the Scrum community?Laszlo: Yes, okay. Thanks Kane. Great question. I got into the Scrum
community, I guess
pretty early, on maybe like 2003, 2004 time-frame. At that time, my
brother Victor and I had a company, a little consulting company based
in Seattle, Washington called Danu Technologies.

One of our employees at that time was a guy named Michael James and we
were looking at how do we contemplate project management? Because it
wasn’t something when we were doing these, kind of, smaller scale
projects that we really contemplated, really thought through.

We had some pain and so Michael and Victor did some research and they
found Ken Schwaber’s book and we were looking for kind of how to lay
out physical spaces and things like that for more collaborative
working environment. So that’s how we first heard about Scrum.

We decided to try it whole hog on a government project and it was with
the state of Alaska. The customer loved it. In fact, one of those
customers moved into our office as project donor. The rest is history.
That’s kind of how we got started. I can elaborate if you’d like.

Kane: I’d love to. Yes, tell us.

Laszlo: Yes, so I can tell you the whole story. From there we started
getting into more and
more projects and trying it on more and more projects and we found it
really helped us. It helped us with customer satisfaction, it helped
us with predictability, it helped us a lot with employee morale.

As a small company you’re kind of looking for every little edge that
can retain customers and employees because without that you’re kind of
dead in the water. [inaudible 02:31] your company is kind of dead.

From my standpoint I was pretty pragmatic about it because I was on
the business side and really Michael and Victor and some of the others
like Kelly, they were kind of doing the heavy lifting, Eric and them.

Then as is the case with many kinds of services based companies, we
had a business that was ebbing and flowing. Sometimes we had a lot of
business and we were really busy and other times we were kind of
bored, for lack of a better word. We didn’t have any projects.

What we decided to do is we decided to go out and build a project
management tool that modeled Scrum. What we did is we tried to model
it exactly to Scrum. The idea of that initially just came as a way to
kind of proof of concept how we work. We could show, okay we can do a
project and here’s what a project looks like.

We started kind of showing this project management tool to different
people in the community, for example Dan Rawsthorne and Mike Cohen and
Dan kind of said are you guys planning to charge for this? We said no,
we’re just. He kind of looked at me and said well, you might want to
think about that.

Then that’s kind of how things got started. Then we launched the
ScrumWorks product in August of 2004 at the XP universe show which is
now Agile 2000X Series. Interestingly enough, Rally Software was also
there.

They launched at the same trade show actually, interestingly enough
their product. That’s kind of how we got started. We found that that
ScrumWorks product created a huge lead generation engine for us and
got us interested and noticed by a lot of the early adopters like, who
was the company? I think TransCanada was I think one of the first
companies to use Scrum.

Kane: Yes, TransCanada Pipelines, TCPL.

Laszlo: Did I remember it correctly? Yes, TransCanada pipelines. I
think you were working on
that project maybe?

Kane: Yes, absolutely. Yes.

Laszlo: Then there were some others as well. I think Capital One. I
think you were working on
Capital One at that time as well?

Kane: Yes. I was working with ThoughtWorks at the time. But yes for both
TransCanada and
PCPL and Capital One I was with ThoughtWorks. So you were selling the
ScrumWorks Pro tool to both PCPL as well as Capital One?

Laszlo: Yes, let me correct myself here. At that time it was just free.

Kane: Oh, interesting. Yes.

Laszlo: Just totally free. The idea was just lead generation and the
idea of it being free was
primarily because we were so small a company, we couldn’t afford the
infrastructure to build a support team, to build an SLA, a service
level agreement around the product. We got around those difficult
questions by just kind of rationalizing it as free or freeware. But
what we did get out of it were interesting conversations.

Then we landed some pretty large contracts, for example with the state
of Washington. I think we were involved in the first ever government
Scrum projects. It was the first time they used the word Scrum in a
government RFP.

That was in 2004, late 2004. I think October of ’04. Interestingly
enough we were competing against Solutions IQ which is where I am
today.

Kane: Was the state of Washington, were they asking for a Scrum project?

Laszlo: Yes.

Kane: They were explicitly asking to do scrum?

Laszlo: They were explicitly putting it into the RFP. There was a very
progressive guy there. I
think his last name was Kane. Kane. I think his name was John Kane. I
think. Don’t quote me on that but that’s the name that comes to mind.
There were some very progressive project managers there like Ann
Dylan. They just kind of brought us in and they said look. We have to
use Scrum. That was a prerequisite.

Kane: Interesting.

Laszlo: Then we said, “Hey, we know Scrum.” The way it all came about
actually was at that XP
Universe show where we launched ScrumWorks. Victor, my brother, did an
introduction to Scrum talk.

These days when you go to the Agile show you’re not going to get too
many what is scrum basics talks but in 2004 that was a big topic
because it was essentially an engineering XP conference.

Two guys from the Washington State government were in the audience.
They approached me afterwards and said “Hey, we’ve got this project.
We’ve got this RFP”. There are not too many people who know about
Agile and Scrum and interestingly enough, they were based in Olympia,
Washington and we were headquartered at that time in Seattle,
Washington. We were just laughing because we could have been in

Detroit and they could have been in Nashville. You just never know at
these trade shows. We ended up winning a piece of that business and
that kind of parlayed us into kind of a full-fledged training
business. Right?

Training and coaching business. At that time we brought you on,
actually, as an employee from ThoughtWorks. We brought on folks like
Dan Rawsthorne. We brought on folks like, you know Michael James
became a CST. My brother became a CST. Then we just kind of began
teaching it.

One of the first classes I think we did, my brother did, was in
probably late ’05. His first class I think was with Boris Glogger. So
yes, it was just like early days. Very early.

Kane: Pretty exciting too.

Laszlo: That’s how we got into it.

Kane: You were using the ScrumWorks tool that you guys built. You were
using it as a lead
generation?

Laszlo: Yes. [inaudible 08:23]

Kane: Originally it was free. Primarily lead generation and at what
point…

Laszlo: An brand awareness, right. Brand awareness because now you are
introducing your
brand to these mega companies, right? Here’s a little company in
Seattle. We’re not going to get the attention of Capital One. Why
would we? [inaudible 8:43] for example.

It provided a great kind of talking point. Then we just kind of built
a business around that. We had a freeware product. We had a training
business. We did some coaching work, some transformation work. But
that was kind of early days on the transformation side as well.

I mean if I remember correctly you were at Qpass which then got
acquired by Amdocs and the Seattle market. We had folks at City of
Seattle. You know, just trying to build a business, right?

Kane: At what point did ScrumWorks become a commercial product? Because
it’s now a
commercial product?

Laszlo: Yes, so great question. So it became commercial, we did a
double down in late 2006
and all the money we made off of that contract in Washington State,
instead of putting it into our pockets we invested that in a
development team.

We ended up funding that development team and launching a for pay
product January 15 of 2007. So, that’s when it hit the market as for
pay. We had two versions. We had kind of this what they call freemium
model. We had the free version and the paid version.

Kane: How did that work out? How did that commercial product work out?

Laszlo: I think it worked out okay. I mean, we were able to, again if
you’re looking at the
history, right, between 2007 and 2010, we were able to hold our own in
the market. We eventually ended up selling DanU as part of that
ScrumWorks.

That acquisition, we sold the company in 2010, February of 2010 to
CollabNet. When we sold the company we had, I think, in the
neighborhood of 20,000 paid users and 125,000 free users. So,
substantial user base.

Kane: Yes, I was about to say. That’s fairly sizable. That’s nothing to
sniff at, at all. Quite
sizable.

Laszlo: I think if you were early days, like if you were really in the
Scrum community in ’08,
’09, ’07, or, before you either tried ScrumWorks on a project or you
used ScrumWorks. Even if you didn’t like it, you at least took a look
at it. That was kind of my feeling.

Kane: It was certainly very common. I don’t see it quite so much anymore
because there are a
whole bunch of other free tools that people use. So, for example,
Trello is a very common one to see at the moment.

Before that, oh gosh what was it called, Pivotal. Pivotal Labs, their
free tool used to be, maybe two or three years ago, used to be really
common but certainly before that ScrumWorks was an equivalent piece of
software that people would often try and use.

Laszlo: Yes, yes.

Kane: Cool. You sold the company to CollabNet in 2010. What happened after
that?
Actually, let me ask. How did that all work out? Did that work out
alright for both you and Victor?

Laszlo: Yes, I think so. I think when we started the company we never
knew where it was
going to end. We started the company early days. We started in 2000. I
had just graduated from college in May. We started the company in
August. I essentially took the summer off and started a company which
was an interesting journey in and of itself. Just learning about
business and people without any kind of world business experience.

We learned a lot of lessons the hard way about people and about money
and all those things, financing and all that stuff. I think when we
sold the company we had wonderful team. I mean you were part of that
team for many years.

We had other people like Angela Druckmen, Jimmy Fostic who kind of
came in later and just a great sales team. It really did feel like
family. I am really proud of those accomplishments.

You know, Victor and I did well as part of that sale. I feel really
good about that. I feel like CollabNet got a good deal as well. So I
wouldn’t, I think both sides benefited greatly.

Kane: What drove you to sell the company at the end? What was the
motivating factor?

Laszlo: Stress.

Kane: Stress?

Laszlo: Yes. We had no venture capital money. We had essentially no
banking support, and in
terms of a big debt or round or something like that we had very little
friends and family money in the business.

When you’re carrying all of those things on your own shoulders, you
know it can kind of ground you down and wear you out. It was getting
to a point where it was affecting my personal relationships and I knew
enough to know that that was bad.

The other thing, right, was the September of 2008 crash, financial
crash. That definitely scared us because we kind of had meetings in
October, November, December, looking at each other and going we’re
doing everything right and the world around us is collapsing and you
can’t really talk to any honest CEO who would tell you that their
business was growing in 2009 in a space.

Most of us were flat back or growing a little bit. So those things all
played into it. We just didn’t know. The other interesting thing at
that time right, if you go back to the history and the politics of the
Scrum Alliance at that time, there was a lot of uncertainty within the
Scrum Alliance.

Kane: Absolutely.

Laszlo: There was a lot of uncertainty around Ken’s role, around what
Jeff was doing, around
what Mike Cohen was kind of hovering around wanting to take a
leadership role or a bigger leadership role.

You had guys like Tom Meller in there and we just couldn’t make heads
or tails out of the community and we were very concerned that it would
become fractured. You know, similar to kind of the Linux just
distributions.

In fact, that’s kind of how it played out because you have scrum.org
and you have Scrum Alliance and you have a number of different
certifying bodies and if you listen to them they’re not really aligned
that much.

We thought they were going to be more divided. I guess there are some
common threads but we thought it was going to be kind of divided. So
those things all played into it. All played into it.

Kane: You were at CollabNet. When you saw the company, you joined the
company as well.
You joined CollabNet?

Laszlo: Yes. I was at CollabNet about three and half years and you know
they provided an
extremely positive experience for me as it relates to some of the
things that I was able to do. I mean, my boss Mike was great in the
sense that he enabled me to go out and become, I’ll say, a real
businessman.

What I mean by that is, I’ve done over the past and I know you’ll
recognize this. Over the past three years I did a half million miles
of air travel and global travel. I was vice president of Asia Pac for
a year which meant extended trips to Korea, China, Japan, as well as
Malaysia and Singapore.

All those things kind of helped me understand how different people
communicate and gave me a broader concept of just people in general.
It gave me broader perspective and helped me mature.

At the same time it was all still within Scrum and Agile domain. It
kept me kind of focused and interested in the community in general.
But you know, you go into Korea, I was in Korea in 2012 having similar
conversations that you and I were having in 2005 around how do you
scale from one team to three teams or what do you do with HR? So the
kind of, in that sense, organizational issues are a little bit behind.

They are kind of the cutting edge stuff today in Agile and Scrum is
cutting edge maybe in North America and maybe in Europe but in other
parts of the world it’s still lagging maybe.

Kane: That’s very true. That’s also true here in the Australian market.
Australia is a couple of
years behind probably North America.

Laszlo: But it was fun. I went to India. I went to Brazil. According to
TripIt which is the
program I am using to track it, I’ve been into 100 different big
cities.

Kane: That’s a lot of cities.

Laszlo: Yes, it’s kind of fun if you look at it that way. A lot of time
away from home and
all that. I sat down with my bosses at CollabNet earlier this year and
I said” I kind of want to travel a little bit less” and we couldn’t
come to terms on that. So I said, “Okay well, maybe it’s time for me
to make a switch.”

Kane: That’s why you’re at Solutions IQ.

Laszlo: Yes, that’s right. I’ve known Charlie the owner of Solutions IQ
since kind of 2004
time-frame because we were competing against each other at the state
contract and I came in and talked to them and they really, my feeling
is here at Solutions IQ we have agility and agility in our bones and
in our DNA.

It’s been a transformation. It wasn’t the case say in 2004 or 2005.
It’s just wonderful. You feel like you have a seat at the table. For
example, tomorrow we’re bringing all of our consultants to our home
office and we have about 125 consults today out doing different
projects around the US.

They’ll come in, they all fly in tomorrow, and we’ll do what we call
retro-space which is a retrospective and an open space around
organizational issues.

Kane: At the same time? Cool.

Laszlo: That’s cool. For me that’s interesting.

Kane: Yes. Solutions IQ, is it still predominantly a Pacific Northwest
company? Or has
Solutions IQ expanded nationally within the US?

Laszlo: Yes, so great question. So great brand awareness here in the
Pacific Northwest,
especially here in the Seattle area. One of the reasons I was brought
in is to expand that presence and build it to what’s called a leading
domestic brand, which means having more and more projects out of state
in places like New York or Michigan or Texas or California.

Kane: Ohio?

Laszlo: Or Ohio, right. that’s part of my mission here and my role here
is, I guess, Vice
President and I’m doing things related to sales and marketing and
training operations. It’s a pretty weighty goal but I think it’s a
pure services company, so I think we’re going have some success with
expansion.

Kane: Cool. When you say pure services, does Solutions IQ not produce any
products at all?

Laszlo: That’s correct.

Kane: That’s interesting. I always thought that they might have something
but not the case.

Laszlo: Nope. Not the case. Again, that’s part of the make-up of the
organization. No products.
In that sense, I think we’re positioning against some of the folks
like ThoughtWorks we have kind of a difference of the DNA there.

ThoughtWorks to me is different in the sense that kind of come watch
us work. You know, versus with us it’s kind of like come work with us.
It’s kind of a little bit different. Again, also right they have the
Mingle product and Go and some other products.

If you don’t want to use those products then they may not want to do
business with you.
We have some neutrality there.

Kane: Yes, absolutely. Cool. Cool. So that covers my first couple of
questions which are,
how did you come to the Scrum community and also what are you
currently doing now? Where do you see the future of Scrum going? Where
do you see the future of Agile going?

Laszlo: Okay, I have the same question for you. You should answer
first.

Kane: Do you want me to go first? Or do you want to go first?

Laszlo: Sure.

Kane: I’m not sure. I’ve got no idea. I really don’t.

Laszlo: Really? This one time. Right. I mean you’ve been in industry
since before it was an
industry.

Kane: Yes, it’s really hard to say and the reason why I say that is because
my feeling is that
there will be something very similar to Scrum around but whether it
will be called Scrum in ten year’s time, I don’t know.

I think the elements, the basic structure of Scrum, is so fundamental.
I think it’s just really, really a very fundamental and a very natural
framework that going forward there will always be some element of that
framework in whatever we do.

Whether it will be called Scrum or whether it will be called Agile,
whether it will be called something else, I really have a hard time
trying to see that far into the future. At the moment, the feeling
that I’m getting is that in large part the words scrum is heavily
overused and the word agile is heavily overused.

People will use the word agile for whatever they are doing. They are
doing waterfall in three monthly cycles, they will call it agile.
They’ll call it agile waterfall or something like that. And people put
the brand Agile on just about everything.

I was speaking to James Copeland. I was speaking to him three or four
weeks ago and he said that the Japanese have the notion that you can
overuse a word. You can over tax the spirit of a word and when you do
that, then the word loses its meaning. I think that’s a very valid
point with the word agile.

I can see or I can speculate that maybe in five or ten year’s time,
the whole word or the whole agile movement could be something people
frown upon and people will want to distance themselves from. So where
will Scrum be in ten year’s time? It’s very difficult to say.
I think there will many people who will be doing Scrum like approaches
to delivering software but whether it will be called Scrum or not is a
different matter.

Laszlo: Yes, it’s interesting you mention Cope because I actually had a
similar conversation
with him in Tokyo about Japanese people. But anyway, that was kind of
an interesting dinner actually. Yes, my take on it is actually a
little bit different. I think we still have a huge runway here.

I think there is a huge market. I think we’re just now getting into
interesting questions. For example, the questions around compliance.
To me, doing Scrum in a heavily regulated industry which there are
many or trying to contemplate. Like one of the research projects that
Pat Reid and [inaudible 25:42] involved in.

I don’t want to say helping her with but it’s an area of interest for
me as well is around how to navigate the generally accepted accounting
practice rulings in the US with Scrum teams because those rulings were
written with waterfall teams in mind. When we start hitting those
kinds of boundaries, that tells me we’re having success.

When we have known organizational patterns or enterprise patterns for
those types of things that’s when I kind of know it has run its
course. I don’t think it has run its course yet and I remember how you
used to feel about this years ago, but there is distributed and large
scale agile.

If I remember correctly you didn’t even think you wanted to build
software with 10,000 people or something like that. Philosophically
that was kind of your take if I remember. Is that still kind of where
you’re thinking?

Kane: Yes absolutely. Yes.

Laszlo: My point on that is that to me it depends on what you’re trying
to accomplish. But at the
end of the day, right, it still comes back to kind of those notes. The
teams doing the work or the people doing the work or the work products
in and of itself. That work will continue forever and then the other
thing, right, is you have this kind of I’m going to try to draw a
graph here with my hands.

You have kind of a timeline, right, on the “X” axis and you then you
have your number of software developers in work world as an axis and
then you have your lines of code. Your lines of code are growing
exponentially and your number of developers is not.

Even companies that are not, you wouldn’t necessarily consider to be
software companies. For example, American Express, Chase, or Capital
One. We were talking about Capital One. Or American Express or take
for example Fed-Ex.

Fed-Ex I think has like 7,000 software developers. American Express
has 12,000. The amount of software that needs to be done to support
these non-software organizations is incredible which tells me that
we’re going to hit a tipping point, right?

people are going to get frustrated. I don’t think we’re even close. I
think you’re looking at you know a 30 or 50 year run here.

Kane: That’s fantastic.

Laszlo: It’s not close. I mean you can’t tell me that, you know people
talk at these big
companies. I don’t want to name a company but say a random big company
that is talking about business agility. They are talking about
maneuverability, being able to maneuver your business. That’s very
different than the rigor and discipline it takes to run a Scrum team.

Kane: I totally agree.

Laszlo: It means something very different. To me, that’s kind of where
we are going. So that’s
my take on it. Another 50 years. That means we’ll have grey hair by
then.

Kane: Yes. Absolutely. Actually, from a business point of view, I really
like what you say
there because from a business point of view, it does give me a lot
more hope because I do tend to be incredibly cynical and perhaps
overly so. But that’s just me as a person. So I do tend to be terribly
cynical about the whole thing. So to get a second point of view is
really, really good to hear. Really interesting. Cool.

Laszlo: Yes, I appreciate. I appreciate the opportunity to do the
interview with you. I hope that
someone will watch it and we can get some hate mail going or
something.

Kane: Fan-mail as the case may be.

Laszlo: That would be great. So thank you for the opportunity Kane.
Much appreciated.

Kane: Thank you very much for your time Laz.

Laszlo: Yes. Cheers.

Kane: Bye, now.

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