SSI, Hub City Complete Merger9:56 AM EST Thu. Feb. 05, 2004
It's not often that a solution provider can get the presidents of two major distributors to give keynote addresses at its official coming-out party.
Yet Rich Severa, president of the MOCA division of Arrow Electronics, and Steve Tepedino, president of Avnet Hall-Mark, were at the Borgata Hotel Casino and Spa in Atlantic City, N.J., this week to give presentations to the staff of Sun Microsystems' newest solution provider, SSI hubcity.
SSI hubcity was formed last year after Sales Strategy Inc. (SSI), a Metuchen, N.J.-based Sun solution provider, acquired a majority stake in Hub City Media, a Highland Park, N.J.-based software application developer. The merger created a profitable solution provider with annual revenue of $35 million from hardware, services, and software application integration and deployment, said Tom Kuni, president and CEO of SSI hubcity and one of only three people serving on both the Sun VAR council and the Sun One council.
More important, the merger was done while keeping SSI debt-free, Kuni noted. "A lot of other solution providers made acquisitions and took on debt, leading to their demise," he said.
The merger arose from SSI's continued commitment to Sun, its key vendor partner, Kuni said. "It's easy to bash Sun," he said. "Everybody seems to be getting off the bus. We're getting on it. We're driving it."
Though Sun has been a disruptive company in terms of hardware, today it's also becoming disruptive in software, Kuni said. "Analysts question Sun's spending of $2 billion a year on R&D," he said. "But most of that is going to software. They're spending on the software stack, security and its operating system. Sun has the most secure environment of any vendor." The merger also addressed a solution provider's inability to present a complete offering to customers looking to address their entire IT needs, Kuni added.
SSI's core competency traditionally has been storage, and in the past couple years it has added network security and IT services, Kuni said. So as customers have consolidated their partner relationships, SSI has been able to work with them. "But we could only go so far up into the customer," Kuni said. "Customers were going elsewhere for their applications. A lot of customers realize that systems integrators can't handle their application needs, so they look at boutique firms. Hub City lets us get that business."
Steve Giovannetti, CTO of SSI hubcity and founder of Hub City, said the merger marries an existing integrator with a top-line product card and an aggressive sales force with a supplier of application development services. Hub City's success stemmed from getting solutions to customers as quickly as possible, he said.
"We take an existing architecture and technology and deliver it piece by piece in functional pieces that customers can relate to," Giovannetti said. "We let them guide the development."
That piece-by-piece deployment provides the "stickiness" with customers that all solution providers desire but find hard to achieve, Kuni said. "My old mantra is, 'I don't want deals; I want customers,' " he said. "We want long-term relationships."
The merger also comes as SSI's traditional partners are moving more and more into applications, Giovannetti said. As an example, he cited EMC's acquisition of enterprise content management developer Documentum and Veritas Software's acquisition of application performance monitoring developer Precise. "They need partners like us," he said.
Adding application expertise from Hub City gives SSI hubcity a leg up on the competition when it comes to some of the latest technologies, Kuni noted. For instance, SSI hubcity is one of the few solution providers that can work with Veritas' application performance monitoring software, which is part of that vendor's utility computing offering. SSI hubcity also has two ongoing proof-of-concept projects moving forward for Sun's Java Enterprise System (JES) software, he said.
And the new SSI hubcity has received strong support from its partners. Before this week's launch of SSI hubcity, MOCA's Severa told CRN, that it's interesting watching Kuni double-down his bet on Sun.
"SSI was born under a star different from other IT organizations," Severa said. "They don't take the well-worn path. He developed the company from internal funding and prospered in a sideways market when others got their comeuppance. SSI wasn't negatively impacted in the aftermath of the dot-com boom."
Severa said he has seen a lot of mergers, but none like this one. Some solution providers develop or acquire software expertise, but most of them sell software as a point product, not as part of an integrated solution, he said.
"But the cost of sales to sell hardware and to sell an integrated solution is about the same," Severa said. "So it's important to get better leverage on the cost of sales."
Gary Grimes, vice president of partner management and sales at Sun, said Kuni is making a great move with the merger. "Tom [Kuni] was an infrastructure provider, but this [merger] brings a whole new dimension to his customer base," Grimes said.
The merger also validates Sun's hardware and software moves, Grimes added. "What's neat about this is that Kuni feels so strongly about us and the future that he is willing to double-down on us," he said. "He believes the ROI is there."