Being a small, largely independent unit within a bigger technology company raises a whole host of issues, some of them positive, some not. For SmartTurn Inc., which makes inventory and warehouse management software, living inside supply chain and cargo management company Navis Holdings Inc. was no exception. Luckily for the unit's manager, Jim Burleigh, the blessings, such as the safety of an incubator's confines and exposure to big customers, outweighed the detriments.

The promise of the warehouse management software market, coupled with the fact that SmartTurn offered a software-as-a-service product to the small and midsize businesses that wanted it most, led it to spin out Navis in December after three years inside the company.

Now SmartTurn's CEO, Burleigh has a good deal of experience with the on-demand software market, having been the sixth employee to join customer relationship management software company Salesforce.com Inc. [CRM] back in 1999. He moved to Navis in 2002 to become a senior vice president of marketing and corporate development. Burleigh managed Navis' distribution center software business and helped found the SmartTurn unit within the company in 2004.

Burleigh saw some strong opportunities for the business. According to U.S. government statistics, there are 600,000 warehouses in the country. There are also 7,900 U.S. third-party logistics providers, which generate about $113 billion in annual revenues, according to research firm Armstrong & Associates.

Inside Navis, SmartTurn's promise was all but ignored. Burleigh knew the answer was to spin out the unit, and the perfect opportunity arose when Navis received a $145 million takeover offer from asset tracking company Zebra Technologies Inc. [ZBRA].

Concurrent with that deal closing on Dec. 17, SmartTurn stood on its own. With the 30-employee company earlier this year having landed $5 million in Series A funding from New Enterprise Associates and Emergence Capital Partners, Burleigh recently spoke with Tech Confidential about his plans for SmartTurn. - Olaf de Senerpont Domis

What differentiates SmartTurn? Aren't other companies developing this kind of software?

Jim Burleigh: You can divide software applications into three tiers: the core functions of a business, like accounting; then the important but second-tier stuff like customer relationship management; then you have the third-tier, which includes performance and expense tracking.

Accounting has been the only thing in the top tier until now. Inventory is a core business application for a huge number of businesses of all sizes, but inventory and warehouse management software has been lacking in the market. There are some minor efforts through third-party logistics providers, and one is offered by a company that sells scanners. But they are minor efforts that don't have the Silicon Valley DNA that we bring.

So many people talk about the Silicon Valley edge. But is that a tangible thing when it comes to building a solid technology startup?

The Silicon Valley edge is critical in high-end technology like this. To build a proper software service app, it's easy to get it wrong. It has to be very scalable. You are ultimately trying to deliver economies of scale and functionality. If you get it wrong, it might not show up right away, but it will show up eventually in the costs and flexibility for the customer.

Are there any continuing advantages SmartTurn derives from Navis, like customer referrals?

Navis and Zebra have no formal relationship with us at all. But from an informal standpoint, we're obviously close to people at Navis. Its core business is in container terminal management and RFID.

We've had some prospects asking us about RFID, and from a SmartTurn perspective, if we need to hook up our system with RFID, we have real close friends next door who can provide that.

Are there any other advantages or disadvantages from being a spinout?

The primary advantage is our incubation in a bigger company, and that was a huge advantage. Technically we are three months old, but we are actually three years old. During our incubation, Navis was dealing with yard management and container management with very large customers, and through that we got feedback on what we were doing.

The disadvantage was that we were the little spot on the side that got ignored. We knew at some point we'd be spun out, and the acquisition by Zebra was the catalyst.

In your bio you mention that there's a "green" component to SmartTurn. What do you mean by that?

Software-as-a-service by its nature is green. Instead of people buying servers, you just access the Internet. Everything involved with maintaining software is done away with. You get rid of manuals, transportation, servers -- everything is utilized in one spot.

You need a lot less total processing capability, so you use lower resources at all levels. We have one customer who thinks it's a godsend. They had to support multiple users around the country, shipping laptops to install software. Each time, that is another drop of fuel, another bit of packaging.

What is your growth strategy?

Inside Navis, we had no outbound marketing. But now we are focusing on third-party logistics sites, like beverage distributors, which is the perfect market for us. We need to extend our functionality a little further, and we need to reach out to them.

See Jan. 23 press release from SmartTurn
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