• 2000 -- Hamid Andalib founds VIPGift in The Loft restaurant on Cherokee Boulevard
• 2008 -- Revenue hits $115 million after multiple years of double- and triple-digit growth
• October 2008 -- Private equity firms Summit and Bridgescale buy the company for an undisclosed amount
• September 2009 -- Company changes name to Incentium
• February 2010 -- Incentium loses its contract with AT&T, its biggest client
• February 2011 -- Incentium shuts doors, lays off 88 workers
• January 2012 -- Two IT professionals quietly begin planning successor to Incentium after one helped liquidate the assets of the bankrupt entity.
• June 2013 -- nCentix opens for business as a leaner incentives company.
Source: nCentix, news archives
HOW INCENTIVES COMPANIES WORK
• 1. nCentix brings on a client that wants to run a rewards program, and sets up customized rewards website for the company.
• 2. The client is able to reward points to employees or customers for desired behavior, which the employees or customers can then redeem on the customized rewards website.
• 3. Employees or customers log on to the rewards website using a voucher, then trade reward points for consumer goods like iPads or golf clubs which are shipped to their home.
• 4. The client pays nCentix for the value of the items and the cost to run the program.
CLEVELAND, Tenn. — Though it has been more than two years since the bankrupt Incentium closed its doors in North Chattanooga, the idea behind the Scenic City startup never died.
Incentium, which partnered with companies to deliver gift cards and merchandise as rewards for employees' good behavior, or as a way to retain customers, had a good idea that ultimately fell victim to mismanagement and recession, according to executives at an upstart firm that is looking to take its place.
A pair of IT veterans say they've spent the last 18 months reimagining Incentium's business model using a skeleton crew, open-source software and a commission-only sales force. They say that this time, it's going to work for the long haul.
Ramping up operations from the empty former home of Cmax Inc. in Cleveland -- a software company that once serviced the payday loan industry -- Gary Brooks and Wayne Wilhelm say they've figured out the secret to making the dream of Incentium predecessor company founder Hamid Andalib come back to life: don't pay millions for stuff you can get for free.
Today, everything from their server architecture to their website to their personal laptops is running on versions of publicly-available, free-to-own software modified to fit their needs. They don't give a dime to Microsoft, the company that makes the server software which they estimate cost Incentium millions of dollars per year before its bankruptcy.
"We figure we've got a lot less overhead and a lot less ongoing investment in maintaining the IT infrastructure," said Wilhelm, nCentix's company's chief information officer.
The new business is trying to avoid the expensive mistakes that ultimately killed Incentium. The loss of AT&T, Incentium's biggest client, was the final nail in the coffin for the company founded as VIPGift in 2000 by Andalib.
A sales force of 70, left with nothing to sell, resorted to video games and coloring books to fight boredom, former executives told the Times Free Press in 2011. When Incentium's new California owners decided to shut down the company that just years earlier had brought in $115 million in revenue, there wasn't enough money left to fund more than 50,000 outstanding gift cards, though there apparently was enough to fund $500,000 in bonuses for top executives. Ultimately, the entire staff was laid off and servers were sold to pay the company's debts.
Open source approach
Wilhelm, the technology architect of nCentix, was one of the first big developers to adopt an open source platform back in 1981 and he is bringing that expertise to the new venture. In the early 1980s, Wilhelm's brainchild was Cmax, a business he later sold that created a database that would work on all the major mainframes of the day.
"We were the second-largest vendor of that database in the U.S., and the 11th largest in the world," Wilhelm said.
Brooks and Wilhelm partnered up after the fall of Incentium and settled on the name nCentix for their new company. They quickly launched their website at RedeemWishes.com and brought an angel investor on board to fund the venture.
They also decided what they're not going to do: They're not going to keep a room full of 500,000 debit cards to ship out. They're not going to send employees out to Best Buy to find iPads to fulfill orders. They're not going to process debit cards in-house.
"That's going to be shipped from a processing center in Atlanta," said Brooks, the company's chief executive officer. "One of the things Incentium was doing, they were literally driving around the city to pick up enough where they could ship those things out."
An employee who wins an iPad for completing a smoking-cessation class will receive that iPad directly from an Apple distributor, not from nCentix. A customer who receives a gift card for filling out a survey will receive that from The Bancorp Bank, not nCentix.
That's how nCentix will compete with its bigger competitors, Brooks said.
"The larger companies have warehouses full of merchandise," Brooks said. "It's hard for them as a big company to turn around and react to changes in the market. We feel like nCentix is going to be a lot more nimble."
The company also won't mix its gift card money into the general operating budget, a mistake that led to more than $6 million in creditor claims against Incentium in 2011.
"We don't touch that money until there's actually a redemption made," Brooks said.
They still plan to offer a personalized website to companies that will allow employees or customers to log on and collect their rewards. They still plan to use a points system to allow clients to redeem gift cards and merchandise. And they still plan to measure results for companies, proving that incentives can result in more of the type of behavior that businesses want to see.
"Our margins are going to be lower, but by eliminating the overhead we're going to be better off in the long run," Brooks said.
It's far too early to declare the company a success, but nCentix's salespeople in Boston and Atlanta have already signed one client, and the company is working to pick up another $250,000 in private equity to hire more salespeople, a programmer and a customer service representative, said Wilhelm.
"They way I look at this, it should really be a feel-good business where everybody's happy about what we're doing," he said. "If we do it right, no one's feeling cheated, and our clients get better performance out of their employees and clients. Everybody wins."
Contact staff writer Ellis Smith at email@example.com or 423-757-6315.
Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...