Norsoft

Photo: Kris Kathmann

Mankato-based, 26-year-old custom and off-the-shelf software firm has satisfied customers all over the United States.

This could be Greater Mankato’s most breathtaking and peaceful panorama of the Minnesota River Valley. Soothing classical music from Bach and Beethoven to Berlioz on KGAC-FM glides around workstations and faintly filters through hallways. Twelve employees—and the only sounds they create are whispers and feather-light keystrokes.

Shhh.

Norsoft is quiet as a church mouse. And so is founder and president David Mikkalson.

He began his calm company in 1984 at age 25, when computers were Apple IIs and Windows were sold in vinyl or wood. Today, Norsoft has custom software, custom reporting, network and server maintenance, database administration, and website development customers throughout the United States. A smaller sister company, Enlyght Software, takes Norsoft custom software and tailors it for off-the-shelf, general use.

Norsoft’s local client base includes a healthy mixture of business, education, and government: It Takes Two (Le Sueur), Ridley (Mankato), ProGrowth (Nicollet), Iowa Veterinary Supply (Mankato), South Central Service Co-op, Blue Earth County, and Nicollet County. Nationally, the company has customers that buy anywhere from $120 to $240,000 in services and product annually, says Mikkalson.

But Shhh.

He wants Norsoft growing quietly. The company has been highly selective the last ten years in choosing new custom software customers. They start off slowly doing small projects with new customers before moving to larger.

The company emphasis on quiet growth began ten years ago when dot.com’s were busting up left and right. Initially, Norsoft participated in that high-decibel Internet boom—only to discover that the cacophony would breach quiet-loving Mikkalson’s comfort level.

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Born in Blue Earth, David Mikkalson moved at age 6 with his family to just north of Rochester, to Wanamingo, Minnesota, where his father accepted a position as a high school instrumental music teacher. His mother was an elementary school teacher.

“My parents were great, hard-working, Christian,” said 51-year-old Mikkalson from his US 169 headquarters building near BENCO Electric Co-op headquarters, west of Mankato. “And when I was young, we would spend quite a bit of time in Bricelyn because my grandma and grandpa lived there. “

In the 1960s, rural high school teaching jobs didn’t pay well. His father wasn’t one to “hire someone else if he could do the job himself,” said Mikkalson. “I wouldn’t say we were poor, but we certainly weren’t wealthy. My father fixing his car and house himself came out of necessity. My work ethic came from him. Like him, I like getting my hands in there.”

His mother stayed at home and wouldn’t return to teaching until all the children had completed junior high school. She kept her family running on schedule: they had three children, with Mikkalson being the oldest. Given his father’s occupation, he learned to play all kinds of instruments, including the piano, baritone, trumpet, and bassoon, and the family spent many weekends in the Twin Cities attending various music concerts. Before his junior year in high school, his father took a position as an instrumental teacher in Mankato.

“There I became interested—through a shop teacher—in electronics and in being an amateur radio operator,” he said. “I had a desire in the beginning to become an electrical engineer and started on that path at Minnesota State. But into that first year, I decided I enjoyed computer programming more. Those were the days of punch cards and BASIC. Computer programming just came easy to me. I transferred from Minnesota State to the vocational school for a year before getting a job offer in Owatonna to work for Viracon, the architectural glass fabricator.”

He began as a programmer/analyst at Viracon, worked two years, and in 1981 gave in to repeated overtures from Midland Ross/Midtex, which he had worked for in Mankato as a computer operator during vocational school. That position went well for him until 1984, when Midland Ross/Midtex, he said, “just broke apart.”

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Said Mikkalson about his career: “I was and still am attracted to computers because it’s creative, even as creating music can be creative. You start with an idea, and take that idea and form it into a product. Instead of working with your hands, you work with your mind.”
He liked being creative, and he was in on the ground floor of an emerging industry. In 1981, when he began at Viracon, keyboards, monitors, and the mouse didn’t exist at most companies. Computer operators used punch cards. In 1984, when Midland Ross/Midtex began falling apart, DOS wasn’t widely used and the Apple II was the top computer.

Yet Mikkalson could sense opportunity arising. “When Midtex broke up, I decided at that point I knew enough people around Mankato,” he was saying, “and that through my five years working there, I had picked up a strong knowledge of accounting, which included receivables, payables, and inventory. While using microcomputers, I started out on my own helping folks in that area and began contracting out to a few businesses in town and did that a few years, on my own, with my office on the back porch of our house.”

Hubbard Milling was his first customer, which he had become acquainted with through Midland Ross/Midtex. Another early customer was Clear With Computers, for which Mikkalson developed specialized accounting software. Though he would eventually succeed, and grow to hire employees, the first ten years did not come easy.

“It was a bit scary going out on my own because I could have worked for someone else,” he said. “At the time, my wife and I had four children. We would have two more. There were no investors and no bank wanted to back us. “ He also had the misfortune of being in a fledgling industry few bankers understood and in which no potential mentors had yet been developed. He was learning everything on the fly—and doing it while in his 20s.

He said, “Cash flow was probably the biggest challenge early on. We had a lot of customers and if you made a mistake you could be in trouble. A few of those early customers were less than honorable. They would ask for something and not want to pay for it after receiving it. There was a lot of training in the school of hard knocks the first few years. Contracts would leave us. Growing up, I learned from my dad if you shook a person’s hand and had a verbal agreement—that was good enough. I found out quickly that didn’t always work.”

He mentioned one company, in particular, who he invoiced $5,000 for work completed and the company refused to pay, saying the “new” boss hadn’t approved it. In the mid-‘80s, and to a small start-up company on a tight cash flow, not being able to collect on $5,000 was a major setback.

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“My wife and I have said many times that if we would have had any idea it would have been so difficult the first few years, we may not have gone forward,” said Mikkalson. To get by, they just rolled up their sleeves and dug in deeper and worked harder, beginning work early in the morning and continuing until nine or ten at night. In time, their being able to hire new programmers helped immensely. New customers It Take Two and Iowa Veterinary Supply came on board—and exist as customers to this day.

Growth came slowly and steadily until the late 1990s. “That’s when we had wild times,” he said of the dot.com boom and bust. “A number of start-up companies had a number of ideas and funding for them, so we would come in to supply the software. One of those companies was a pre-paid telephone company and we supplied the software that went into the handset, and were working with the manufacturer to do it. That product never came to market and became a one-shot deal. We had hired for it and when the deal was done, there wasn’t any business to replace it.”

At one time during the wild ride, his employee count ballooned to 24 before popping. Through it all, Mikkalson would learn to be careful in the future about working with start-ups. It was easy money then, for sure, but was a great deal of work that often had no long-term payoff other than the heartache of having to lay-off employees when the projects ended.

The ups and downs of the dot.com boom and bust also happened to coincide with family medical problems to add to Mikkalson’s internal stress. Two of his children—twins—had colitis and after using Prednisone would develop serious joint problems. One of the twins eventually had hip replacements. Mikkalson began having stress-related health issues himself. The stress at work and home had grown far beyond his comfort level.

In some ways, Mikkalson felt a great deal of relief after having to go through the dot.com bust that affected his company. For one, his workforce fell to what he believed was a more manageable level, from 24 to about 12, where it remains today. For another, Mikkalson didn’t have the temperament or education to be a manager or salesman. All he knew was that he knew technology and accounting, and that his company had grown during the dot.com wave far beyond his ability to manage.

“I’ve been an employee and I’ve been an employer,” he said. “And there is much more stress as an employer. With 24 instead of 12 employees, I had twice the responsibility level. Some people are better at it than I—I’m no Lee Iacocca. Now I don’t want to grow that fast.

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“The company moved to a spacious, two-story office building near BENCO Electric Co-op west of Mankato in 2000, renting from owner Al Sween. It overlooked the Minnesota River Valley. In 2005, they purchased the building in a transaction involving Fisher Group. The peaceful and idyllic setting seemed perfect for a man who liked peace and quiet.

“And it is very quiet here,” said Mikkalson. “We don’t have much drama. We all have our jobs and specialties, such as network testing, building or monitoring servers, and writing software. It’s a great group of people.”

Mikkalson’s wife Charlotte recently became operations manager, paying the bills and doing payroll. She and Mikkalson have complementary skills and abilities. At one time or another, all their six children have been employed at Norsoft, including two currently. Having one-third of the company workforce coming from his own family gives Mikkalson some degree of comfort.

The company prefers hiring trainable and bright programmers, and often will look right past a candidate’s core knowledge and experience. They especially value character and honesty, and an applicant’s ability to get along well with others.

As for expanding the workforce, he repeated, “We are comfortable right now at our current level. We have come to the conclusion that larger isn’t necessarily better with Norsoft. On the development side with Norsoft, having 12 to 15 employees is a good number to manage.”

Norsoft has grown almost exclusively through word-of-mouth advertising. For example, one large customer, United States Academic Decathlon (USAD), came from a recommendation from South Central Service Co-op in southern Minnesota. For USAD, Norsoft supplies an online training center that provides Decathlete subscribers throughout the nation study tools for Decathlon competitions.

Enlyght primarily earns income by owning its software and offering customers a non-exclusive license to use it, often priced at $25 per user per month—rather than selling its software as a one-time shot. In the ‘80s, Norsoft was involved mostly in writing accounting applications to make an accountant’s job easier. As the Internet began in the ‘90s, their focus began including writing internal websites for companies. Accounting software is still the company’s bread and butter.

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That said, Mikkalson does eagerly desire rapid growth in Norsoft’s sister company, Enlyght Software, which accounts for 20 percent of his total business. This company takes Norsoft developed software and refashions it for off-the-shelf sale. It has thousands of customers throughout North America. Mikkalson sees Enlyght Software as having the greatest growth potential and has been funneling it marketing money and internal attention. Also, Mikkalson’s brother, Paul Mikkalson, a former News Corp. vice president working for Rupert Murdoch, has been helping lately with marketing through his California-based Interplay Media & Marketing, which counts SPEED channel and FOX Cable Networks as clients.

Said Mikkalson, “We are finding that (my brother and I) working together is working out. It is really in my comfort level to trust my brother. Once we develop software through Norsoft, we can go back and generalize it through Enlyght Software. When a company buys it, we can tweak it for them.”
In addition to Enlyght Software, the company has a data center downstairs in its Mankato headquarters. It also has a data center in southwest Florida and another in Woodbury, Minnesota. Another for California is on the drawing board.

Mikkalson has deep concerns about what he sees as an increasing amount of programming leaving America for offshore. “To compete, one thing we do—and it has been successful—is to keep our pricing as reasonable as possible to stay competitive to offshore,” he said. “Our rate is quite a bit less than what you would find in Minneapolis, for example. It can be less because of our low overhead.”

Personally, he doesn’t understand why offshore software companies attract many American businesses. For one, he said, differences in culture often lead to communication difficulties that can lead to disappointments in the finished product.

He said, “We have a customer now who had a whole project done in the Philippines and it wasn’t what they asked for. It was a communication problem. We have another customer who had the same problem with software developed in another country. So we had to clean up a couple messes.”

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As Mikkalson gazed out from his corner office and out onto the scenic panorama below—a breathtaking and quiet panorama—he once more reinforced a common theme running throughout his life: he desires growth, of course, but only within his comfort level. “The bottom line is we are looking to have slow but constant growth in Norsoft, although we wouldn’t have problems with having more explosive growth with Enlyght Software,” he said. “We don’t have investors. We don’t have deep pockets—so we have to stay conservative. As a company, we have borrowed only to buy this building.”

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Waxing Philosophical

“One of our philosophies is we want long-term relationships with our customers,” said Norsoft founder/owner David Mikkalson. “We work with a number of companies in a partnership. We don’t want to be the low-price providers who then lose the business two months later to an even lower-priced provider.

“We also try to be truthful. We don’t knowingly say our product will do something it won’t do just to get business. That’s common in this industry. People will promise the world with no intention of delivering. If it’s good news, we will give you good news. If it’s going to be expensive, we will tell you. We are very careful with whom we work with and whom we pick for customers. We don’t need drama. We start all our relationships with a small project to see how it will work out.”

Banking Experience

Said David Mikkalson: “When first starting out, it was difficult for us getting a bank loan because we didn’t have many assets or much experience. After going to a number of banks while looking for assistance after some early mistakes we made, I began disliking banks. Now that we have additional assets, we find it interesting we have banks as customers. I have been on the board of a bank (Profinium Financial) and know regulators and auditors. So I come from having a dislike of banks to working with them to now noticing that if you have assets and money, they can be your best friends.”

Krahmer Connection

CONNECT: What about your relationship with your uncle by marriage, Fred Krahmer of Fairmont, who founded Profinium Financial and is an attorney, land developer, and ag producer? (Connect Business Magazine cover story in November 2004.)

MIKKALSON: We don’t have any business relationships going on right now. He is my uncle through his wife, who is my dad’s sister. He’s a fun guy. He is a down-to-earth fellow, a good example, and very articulate and intelligent.