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Vology's transition toward an integrator business model

Vology has used a combination of acquisitions and organic growth as it transitions from a product-oriented approach to an IT services provider business model.

Vology is the Latin word for the study of speed. It has proven an apt name for the $200 million IT solution provider and integrator, which was monitoring, managing and maintaining more than 100,000 devices at over 20,000 customer locations at the end of 2015.

"Speed and responsiveness were the reasons people [bought] from us," explained CEO Barry Shevlin, who has transitioned the company he started in 2002 from a product-oriented business to an IT solution provider/integrator business model.

In 2015, Vology Inc. purchased VITAL Network Services as its fourth acquisition, and now has 430 employees, more than 200 of whom serve in technical roles. He called the Vital Networks deal "our largest and most impactful" buyout. VITAL Network Services is a provider of network support infrastructure services.

Barry Shevlin, CEO, VologyBarry Shevlin

When Shevlin rebranded his business in 2010 "we recognized the future was going to be in delivering products as a service, and that hardware was becoming more commoditized due to the growth of cloud," he recalled. "It seemed if we didn't invest heavily in growing our services organization then we'd end up behind the curve."

Selling services, he added, "is a much deeper and more intimate relationship."

Deals support integrator business model

The company's growth over the last five years has been a roughly 50/50 split between acquisitions and organic growth. "We've done a good job growing our customer base with those," he said of the approach. "We've just kind of been built that way."

Vology's first acquisition was Bayshore Technologies, which had a big Citrix and VMware practice and a small managed service practice. That 2013 purchase was Vology's initial foundation for its services practice. Then Shevlin acquired  a division of Govplace, a government technology value-added reseller, based in Reston, Va. That division, located in Irvine, Calif., provided Vology with a West Coast presence. What Shevlin  particularly liked about that purchase, he said, was that it came with a managed services contract for Orange County, Calif., which uses Vology's infrastructure "and we send them a bill every month," for how much data they've consumed for storage as a service.

"We really like that model and we wanted to take that model and apply it to our enterprise base as well," he said.

The third acquisition was Offsite Technology Solutions, a small managed service provider (MSP) in Tampa, Fla., that came with about 100 customers.

The acquisitions have not been without their pain points, however. The biggest, Shevlin said, has probably been the getting the sales organization to make the shift from being more product focused to more solution focused.

"I've read that 70% of organizations, if they've traditionally been product focused, will not be able to make that shift," he said. "We've validated that -- ours is in that same range. The product sales guys haven't really embraced selling services and a subset of them are still with us because they're very effective at what they do, but customers aren't gaining the broader portfolio from us." He said he's heard similar numbers from the Technology Services Industry Association that support that figure, and knows that VMware also experienced similar turnover when it went through a big business shift. "We don't like it, but it seems to be the way it is."

You have to make the change or you're going to be irrelevant.
Barry ShevlinCEO, Vology

On the acquisition side, the biggest challenge is getting new employees to adjust to Vology's culture, Shevlin said. "We have a high-energy culture and [need to] make sure folks joining our team are aligned with that and are okay with that."

Shevlin described one of their acquisitions as a "family-owned, closely-held business with almost a family atmosphere" and that "we're little more performance driven." As a result, he said, Vology has learned it needs to find out about cultural differences ahead of time.

"We're still working on … trying to be more careful going forward" in terms of "doing a better job assessing culture" during the due diligence phase of vetting a company Vology potentially wants to acquire, he said.

During the last two acquisitions, the CEOs came to Vology "and wanted to work something out because they felt Vology was the best fit for their employees with advancement opportunities and kind of the best fit of all their potential buyers, and that went a long way" toward helping with the cultural transition, he said.

Another factor in Vology's purchasing strategy: an acquisition candidate's target market. Vology focuses on the midmarket -- organizations with 200 to 5,000 employees -- so the company typically seeks MSPs that also focus on a similar customer set, Shevlin explained.

"We want their customer base to be aligned with ours," he said.

More purchases will likely happen in 2017 and beyond, Shevlin said. "We like this formula of half [of our] growth coming from mergers and acquisitions, and half from organic growth."

Vology acquisition timeline

January 2013

Bayshore Technologies

Contribution: Provided foundation for professional services business

March 2014

Govplace, Irvine division

Contribution: State, local and education customers in California

March 2015

Offsite Technology Solutions

Contribution: Managed services customer base in west central Florida

August 2015

VITAL Network Services

Contribution: Multi-vendor network support services

More IT services ahead

Looking ahead, he said Vology may add managed security at some point, since he thinks there is growing demand for that service. "That's a little bit of void in our portfolio and we're handling that through partners but at some point we would like to bring that in house."

Vology also has customers asking for more customization on cloud offerings like an IT service management platform that provides back-end trouble ticketing incidents and incident management as well as application support and custom development on the ServiceNow cloud ecosystem. Another area they might pursue is acquiring a company that provides outsourced IT managed services.

Considering a move toward a solution provider or integrator business model? Shevlin's advice to MSPs looking to transition their business is straightforward:

"You have to make the change or you're going to be irrelevant." He added that such transitions are "situation specific," and may not work for some smaller companies since making a business change is expensive, and they may opt instead to sell their business.

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