by Patricia Ames
The Imaging Channel recently had a very interesting discussion with Michael George, CEO of Continuum at the BTA event in Chicago. Join me in the speakeasy.
Tell us a little bit about Continuum.
Continuum was created in 2011 and is the result of an acquisition of a business line from a publicly traded company. The purchase was made by the private equity firm Summit Partners, which is a $16 billion growth equity firm based in Boston, Menlo Park and London. Summit Partners has made about 300 investments, and many of them have gone public. Their strategy is to identify rapidly expanding categories in the tech sector that have a disruptive attribute to them, and in Continuum’s case, the labor dynamics brought Summit Partners to the channel.
Continuum’s roots are as a managed services provider — the VAR turned MSP. The office equipment channel wasn’t a category that the previous company had traditionally been involved with, and during the due diligence phase of the Continuum acquisition, we discovered some incredible and fundamental attributes about that industry that were diametrically different from the traditional MSP. The channel had all of the advantages that the MSP was disadvantaged by including sales capacity and a large customer base with deep relationships, but the MSP had certain advantages including IT know-how and technical depth that the office equipment provider didn’t have. So we determined that the BTA channel was going to be a major category that we were going to put lots of resources into and emphasis on.
Describe some of these issues in the respective channels.
Labor is a big challenge in this market. There’s a huge IT skills gap, to begin with. And it’s one that’s broadening because the environments are becoming more and more complex — you have virtualization, backup and disaster recovery, cloud computing, you have a whole set of IT dynamics that are making it more and more difficult for people to service these environments.
There simply are not enough good technicians with the necessary broad set of skills available to service the market. It’s woefully underserved, and it is an expanding market. SMBs are experiencing a greater dependency on IT in general and if you are in a regulated industry like the legal, financial or medical fields, the need and value are even greater.
If you look at the traditional MSP, while they have great skills and the know-how to support on-premise IT environments because that has been their traditional history, what they are not very good at is sales and marketing. It’s a left brain/right brain dimension and in fact, most will freely admit they don’t like making sales calls. They are not comfortable doing that. So they typically have relatively small customer bases that they spend a lot of time with and sometimes they do things that are not necessarily of high value because they are tinkering around in the technology, but that doesn’t really help their line of business per se.
The office equipment market looks very different — it is a channel that has a tremendous sales mentality. It’s filled with top-notch sales professionals who love to sell. There is a “club making” mentality. They are great relationship builders and there is a large existing customer base. The problem that this channel has is that a lot of what they have traditionally done has been very transactional. They might have 4,000 customers, but they only “touch” them twice a year and there isn’t a lot of economics to gain from additional contact. Their challenge now is to learn to sell the products and services a modern company requires in a converged market. Most dealers have internal IT challenges in their own company, so they struggle with how they might solve these same types of problems for their customers.
This sounds like a turf war to me.
It gets even more complicated. Everybody is talking about the big guys coming in — Verizon, Comcast, Cox. The good news is that when you have somebody like Comcast going after the local managed services market, that’s a pretty good proxy for the fact that this is a really big market opportunity. These companies don’t aggressively pursue niche industries. And the problem for these companies is that they don’t have a local element to them. IT is local. That is a piece of very good news for the BTA channel.
The SMBs still want someone who cares about them. They want somebody who has a local presence; who can sit across the table from them. And particularly when it comes to items like critical data — customer data, employee payroll data, all the key business information the IT environment is supporting — they are not going to want to deal with the same kind of experience they’ve had trying to get their cable bill reconciled with Comcast.
The BTA channel needs to embrace this opportunity and mobilize to defend it properly and make sure they keep these other guys out.
Where do you see managed print services within this managed services environment?
It is a component of the managed services offering. The ability to delineate the source of a problem is getting blurred because print devices are hanging off the network; they are their own computing device. The interaction and the relationship between the MFP and other devices that are on the network is not clear. Who does the client call when there is a problem — the office equipment dealer or their IT services rep? SMBs don’t want to go to multiple vendors for these issues. They want one vendor that is going to support everything that is on their network. Anything plugged into the wall and plugged into the network — that’s their digital domain. They want someone to support their entire digital domain.
Managed print will continue to be an important part of the overall equation, but the money is in data and data management. That’s the value equation. Our BTA partners that are achieving success in managed services are realizing a completely different relationship and experience with their customer community. When you are dealing with a client’s most sensitive data, you are in the heart of their business. Print is important, but data is truly core to the operation of their business.
How do you help your dealer partners transition to selling managed services?
One of the most intimidating factors for a BTA sales channel professional is that they know a copier cold, but they probably don’t know much about Windows 8. Going into a client and speaking intelligently about software is going to be a challenge. Our simple answer for them is that they are not going to have to. Their customer, the business owner, doesn’t know anything about Windows 8 either. The language of a successful provider in this industry is not a technology discussion. It is a business discussion.
People want to understand things around security, people want to understand things around compliance, all those kinds of issues. That’s a business discussion. Our engagement with our partners in the BTA channel is all about helping them understand the business language, and this is a lot easier because they are all dealing with these same issues in their own businesses.
Cloud is also changing the landscape and making managed services an easier point of entry for dealers. It is an amazingly disruptive attribute in this market and we think it is a great way into managed services for a whole lot of reasons. We are arming our channel partners with a cloud-based offering. We have the tools and the capability to go in and enable the most technologically nascent office equipment dealer to be a cloud provider.
What are some of the bigger challenges you are seeing the dealers facing right now?
I believe one of the things that dealers are challenged by right now is that they are trying to figure out whether they should build a managed services business or buy one for the capability and the capacity. Our most successful partners to date have actually made small acquisitions to solve this issue. They’ve typically acquired a very small managed services provider in their geography, one that doesn’t necessarily have a lot of big capacity and scale. They just need to have a good, core technical bench and leverage our NOC and Service Desk for the service delivery. There isn’t a direct correlation between the size of the opportunity or the success of the acquisition relative to the purchase price. It is immaterial. There is such high leverage in a well-functioning BTA sales organization that all you need are one or two good virtual CIOs (VCIOs) behind your program, and you’ll be ripping through 7,000 accounts in no time. You can cover a lot of accounts with a very small acquisition.
Qualifying is the key to this strategy. We help our partners understand that their job is not going to be to sell in this case — it’s going to be to qualify. They need support from a sales engineer or VCIO, but the sales people just need a few key questions to ask their customer and that’s where we spend our time — helping train the salespeople to qualify. If the sales team can properly qualify, then just a little support from the VCIO will close the deal. The sale will happen because the IT solution has been discussed at the right level. Great sales professionals are great story tellers — we help them get a story of their own.
So, for challenges, I’d say dealers don’t know where to enter or how to get started with managed services in a way that doesn’t hijack their core business.
The concept of acquisition is important to highlight in this converging market. There are some real challenges in the channel — they’re existential. BTA dealers also tend to have some resources that can be utilized in this way to optimize their business formula.
Yes — the idea of going through the process of hiring one person, then hiring another person, then trying to go out and get accounts — that’s slow organic growth. It’s hard for everybody because if you are that one or two person department that just got hired in, you’re trying to build a book of business and that is a really lonely place to be. It’s not a fun job. However, if you are one of two or three people who already have a managed services book of business that is getting integrated into a dealership, then critical mass has instantaneously been achieved for the buyer.
It’s also a happy integration because the acquired managed services team now gets to focus on doing what they love. No more selling, no more administration. The dealership can relieve that burden and take all that undesirable work out of the equation.
These two pieces of the puzzle are beautifully matched with a relatively low entry fee. Most of these successful purchases are in the $1-3 million dollar range.
What are you investing the most in this year?
We have reorganized our company around this market. We have spent large amounts of capital, time and energy getting a lot more field presence out there for our partners in the form of a senior account management group and they have a number of resources that are available to them. The groups are geographically organized. We have the country divided into five different geographies, and within each of those regions we have a certain number of people who are called “Technical Account Managers,” or TAMS. They serve as resources to the partner community. The TAMS work with our dealer partners and help resolve technical questions and build solutions. They also show the partners how to go to market, how to sell. In addition, we’ve put a lot of investment into sales and marketing materials; we do a lot in the digital domain and help our partners build a digital presence.
Just in terms of people, we finished up last year with 710 employees, and our hiring budget for 2014 is an additional 214 people. We have already hired over 70 people since the beginning of the year. That’s a lot of growth.
As a company overall we are growing at close to 40 percent. We’re trying to make sure we have the people in place to support that growth and focus.
If you could think of three words to describe Continuum as a company, what would they be?
1) Appropriately Ambitious.
I’ll count that as one word.
2) Strategic focus — We’ve made a deliberate effort to go out and find the channels that we believe are the future, even though they might not be the obvious channels. The BTA channel is front and center for us.
We are in this for the long haul — this is not a short-term business. We’re willing to sit down and make big investments that will pay out in three to five years. We put a disproportionate amount of energy, effort and resources into this channel because we think this is the channel that is going to “own” this market. Committed BTA dealers are going to buy up the small but strong MSPs. Of course there will be a certain number of larger MSPs that remain, but we think that “he who owns the customer” is going to win. And the BTA channel already has that customer relationship. Let’s say you have 7,000 customers — every one of those accounts has IT. They all have somebody supporting them today and they are all going to run into a problem that will be the impetus to make a change. You want to be the one who is there, at the ready and with the trusted client relationship. You want to be the one that knows how to build and scale a more professional sales organization and you need to have sales capacity — that package is going to win this market.
3) IT DNA. This is a phrase that relates to the BTA and the channel and why we are so focused on it — we have a unique value proposition to this channel. If we ask the dealers what their biggest problem is when building a managed services program, they tell us that they don’t know where to start, they don’t have the labor or the technology knowledge base.
We are their IT DNA.
On the web: Continuum
This article originally appeared in the July 2014 issue of The Imaging Channel.