Harnessing data to solve problems

IHS plumbs information to aid business

By Julie Hutchinson, Special to the Rocky

Published May 19, 2008 at 12:05 a.m.

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Explaining exactly what it does may be one of the most difficult things that IHS does.

Then again, what the Arapahoe County-based holding company IHS Inc. does is simple: It sells information.

IHS creates, collects, slices, dices, analyzes, packages and delivers all kinds of information to clients involved in a wide range of industries in more than 180 countries - everything from national security to nuclear weapons to building dams to global warming to bird flu.

CEO Jerre Stead, an Iowa native who has held key positions with Honeywell and AT&T, flew 250,000 miles last year and said it's not unusual for the person in the seat next to him not to know about IHS.

"With time, we'll gain recognition," Stead said.

He attributes the company's low profile to its relatively recent emergence as a public company and the fact that its services are business-to-business.

"I will always tell you I'm delighted that we're the provider of critical information and insight to help global customers reduce risk and make better investment decisions every day," Stead said. "So you'll say, 'Who's a customer?' I'll say, 'Pick a Fortune 200 company.' "

On its Web site, IHS uses a hurricane to explain what it does. In today's world, a hurricane bearing down on the Gulf of Mexico is no secret. As soon as the comma shape shows up on a satellite map, its path and the potential death and damage become big news.

IHS shifts into gear to plumb for information that can help clients make timely decisions, from how many oil rigs might be affected to how best to rebuild a damaged rig and return it to production quickly.

IHS describes its mission as "harnessing the power of information" to help businesses drive growth and increase value.

The company, founded in Denver in 1959, employs 3,000 people around the world, including 800 in the Denver area.

IHS went public in November 2005, debuting at $16 a share. Today, it trades at about $67.

Customer service

Delight is a word Stead uses frequently, as unbusinesslike as it sounds.

"Every person inside of IHS has an improvement goal based on outside benchmarks for customer delight," Stead said. "Assuming they get shareholder approval, every colleague in the company will have the opportunity to earn 30 shares of IHS to meet or exceed our improvement goals on customer delight."

Colleague is another word that pops up a lot when Stead talks, but, in this case, he's talking about the people who work for him.

"I never use the word employee, " Stead said. "If you think about employer-employee, that implies a class structure I don't believe in. We're all employees, but we're all colleagues."

Stead strives to drive home that message in the way he signs official communications.

"Everything I sign is 'Your head coach and CEO,' " he said.

Stead tips his cap to the strong values he grew up with as the son of an insurance agent, the grandson of a banker and a teacher and the great-grandson of homesteaders. Married at 18 to his childhood sweetheart, Mary Joy, Stead is a father of two sons and grandfather of six.

Most days he's up at 3:15 a.m. - no alarm clock necessary - to run 40 minutes, meditate 15 minutes, answer e-mail, scan six or seven newspapers online and head into the office by 6:30 from his Highlands Ranch home.

"I'm a bit of a nut on health," Stead said. "If there's one thing you want to do it's stay in great shape and keep your energy up."

And Stead's energy defines the culture of IHS.

"With a company like ours there is always something imminent," Stead said. But the key that drives IHS' success is "good, strong growth complemented by acquisitions."

'It's quite a niche'

Dave Furry, a lead standards engineer for Broomfield-based consulting engineers MWH Inc., sees IHS' databanks as an essential aspect of his company's day- to-day work.

"Companies like ours rely on what we call industry standards, which are usually put out by professional organizations, such as the electrical industry," Furry said. "Keeping a library of all of these would be cost-prohibitive, and some are pretty obscure."

Furry said having access to online IHS databases for what can be highly obscure, region-specific standards saves time and money.

"It's quite a niche," Furry said. "It's a very good service, obviously. It would cost us a lot more to develop and maintain that on our own."

What IHS clients pay for the information they buy is proprietary, but among its 55,000 customers worldwide, "any one would account for no more than 3 percent of our revenues," company spokeswoman Lauren Baker said.

IHS' model as a company is to "increase our gross margins and have very positive cash flow," Stead said. "Few companies have our model. It allows us to leverage our infrastructure and see 75 to 80 percent of our cash flow come from our subscriptions."

The company's net income for the first quarter ended Feb. 29 increased 17 percent to $21.4 million, or 34 cents a share. Revenue was up 30 percent, to $198.8 million.

William Blair & Co. analyst John Neff is bullish on IHS.

"I view it as an information- and subscription-based way to play a multitude of global-growth themes," Neff said. "Those would include energy, alternative energy, environmental, infrastructure, emerging markets, globalization, the whole thing. It's got an increasingly proprietary collection of assets with which to pursue those opportunities. I think management is first-rate and there are significant margin opportunities."

Global expertise

IHS offers knowledge on a wide array of subjects. Here is a sampling of the experts working for IHS companies and some of their specialties, taken from the company's Web site:

* Chi Zhang, CERA director, China Energy, Beijing. Expertise: Chinese electric power.

* Alex Vatanka, U.S. security editor, Jane's Information Group, Alexandria, Va. Expertise: security and political developments in Iran and the Arabian Gulf states, Afghanistan and the states of Central Asia.

* Bert Turner, vice president, IHS Intermat Solutions, Houston. Expertise: materials/spare-parts data.

* Stephen Trammel, senior product manager, Denver. Expertise: hurricanes in the Gulf of Mexico.

* Susan Ruth, CERA senior director, Global Energy, Washington, D.C. Expertise: above-ground risks, climate change and carbon.

* Simon Pugh, head of Process Engineering Technology, London. Expertise: refinery equipment.

* Aaron Brady, CERA director, Global Oil, Cambridge, Mass. Expertise: biofuels.

* Katherine Hardin, CERA senior director, Russia and Caspian Energy Markets, Cambridge, Mass. Expertise: Russia and Caspian energy markets.

* Terry Hallmark, director of political risk and policy assessment, Houston. Expertise: political implications relative to oil and gas; above-ground risk and security of supply.

IHS purchases

Two major recent IHS acquisitions:

* Jane's Information Group. IHS acquired Jane's in June 2007 in exchange for 4.399 million shares of IHS stock. Jane's produces information on subjects including defense, security, public safety, transportation, law enforcement and intelligence. Among its best-known products is All the World's Aircraft, a reference detailing more than 1,000 civil and military aircraft in development or production by more than 500 companies.

* Lloyd's Register-Fairplay. IHS purchased a 50 percent interest in Lloyd's in March for about $75.5 million. The company can pinpoint the location of the world's merchant fleet, which includes tanker, cargo, carrier and passenger ships, at any moment.

IHS Inc. at a glance

* Headquarters: Arapahoe County

* CEO: Jerre Stead

* Employees: 3,000 in 35 locations around the world, including 800 in Denver area; operations in 180 countries

* Customers: Governments, multinational corporations, small companies, technical professionals

* Industries: Aerospace, defense, construction, electronics, energy, telecom, automotive

Brief history

* 1959: Information Handling Service is established as a provider of parts catalogs on microfilm used by aerospace engineers.

* 1985: IHS begins to provide microfilm catalogs electronically, as computers take their place on the desks of businesses around the world. IHS produces a full-text database on a CD.

* 1995: IHS databases become available via the Internet.

* 1997: IHS makes several engineering databases available to clients via the Internet.