Growing Like Gangbusters
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If the 2006 CRN Fast Growth 100 companies prove anything, it's that there's still plenty of opportunity for solution providers to expand their businesses. This year's top-ranking companies grew hundreds or even thousands of times their previous size in just two years. And, contrary to conventional wisdom, at least 11 of them did so while also improving profitability.
How did they achieve such stellar growth rates? Interestingly, the answer to that question doesn't lie in the general profile data. In fact, on the surface, the Fast Growth 100 don't seem to differ very much at all from the general population of solution providers: Their most common business activities are IT consulting services and the design and implementation of networks and infrastructure, and the most common industries they serve are health care and financial services. Also, their average mix of revenue from products and services is about half and half.
Perhaps, then, it shouldn't be such a surprise that the answer lies not so much in what the Fast Growth 100 do, but rather how they do it. When you look under the hood of any of these top companies, what you find most responsible for their galloping growth is their unique value proposition: Time and time again, it's their ingenuity and the investments they make in their people, their infrastructure and their customer relationships that earned them a place on the list of top performers.
"Our plans have always been to provide long-term valued partnerships with our employees, customers and vendors," says Mark Metz, CEO of Optimus Solutions, based in Norcross, Ga., and No. 42 on the Fast Growth 100 list. "Fast growth hasn't been the objective, but it has been the result," he says. Optimus grew its net sales 150 percent from 2003 to 2005.
Certainly, another key attribute of the Fast Growth 100 is a drive to satisfy the customer and manage those relationships. This drive to serve customers better also has been an inspiration for ingenuity among the Fast Growth 100.
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ProSys Information Systems, also based in Norcross and ranked No. 33 with 187 percent growth, invested in a sophisticated e-commerce application that interfaces with its clients' systems and includes a workflow module that allows the solution provider to be more integrated with customers, says Bruce Keenan, CEO of the company. ProSys also wrote a custom deployment application that he says "allows the client instant access to view the status of a project with a simple 'red light, green light' view, but they can also drill down and see what serial number went to what user."
In order to give customers precisely what they need, San Francisco-based Technology Deployment Research (TDR), whose 336 percent growth rate earned it the No. 14 spot on the list, has taken a hard-line stance vis-'-vis its many vendor partners, according to TDR President David Gottesman. When vendors try to pressure him to drop their competitors, he stands his ground and the vendors back down, Gottesman says. "We don't have the manufacturer's agenda on our mind, what we have is building a solution that makes sense for [our clients]."
Gottesman says TDR specializes in a few technology verticals where it has achieved a lucrative reputation among enterprise customers that are happy for a choice other than one of the few overpriced major system integrators or the biased professional services arms of the equipment vendors. TDR's multivendor expertise in networked application optimization and in archival storage is an investment that pays off richly, according to Gottesman, because it's the only way TDR can recommend and accurately tune solutions that best fit its clients' needs.
Evolving business models played an important role in some Fast Growth 100 companies' performance. Data Recovery Services (DRS), Youngstown, Ohio, No. 32 on the list with a 190 percent growth rate, can credit most of its growth to its managed services division, started about three years ago. President and CEO Michael Meloy says managed services provide such a scale-efficient growth plan that the company invested in buying its own carrier hotel. The company now has two data centers totaling about 30,000 square feet of space. DRS, seizing on the opportunity this move opened up, now even makes money renting collocation space to competitors. DRS now stores about 6 Tbytes a night for its data backup managed services clients, mostly small businesses.
Investment in employee expertise is another common thread among the Fast Growth 100. It's not unusual to hear about solution providers investing in the knowledge of their technical staff, but Technologent, Lake Forest, Calif., No. 18 on the list with 281 percent growth, does something unusual by investing heavily in its outbound-call sales team. President Tom Gallaway attributes much of Technologent's stellar growth to its sales team based in and recruited from a rural Nebraska town. The team is put through Sun Microsystems, MOCA (Arrow) and Technologent training to prepare them to do the legwork so the field sales reps can spend their time closing deals. It's a sales strategy that, according to Sun, has made Technologent one of its top performing resellers in the United States, especially on the vendor's x64 server product line.
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True as it is that the "how" is more important than the "what" and "where," it's also true that some industries provide more fertile fields for growth than others. The average growth rate for solution providers serving the media and entertainment industry is higher than all others at 296 percent. And VoIP integration service is the business activity associated with the fastest average growth rate, 275 percent.
Indications are that the media and entertainment vertical will continue to be good for solution providers to serve: Research from Forrester released in May shows that 46 percent of media and entertainment companies plan to increase IT budgets in 2006, beating the average for all industries by 10 points.
Ned Yousefzadeh, president of Los Angeles-based Micro League, No. 4 on the list with a 538 percent growth rate, does a good deal of his business with the local entertainment industry. "As the economy has perhaps worsened, the entertainment companies have been pretty steady. As everything else is slowing, they're growing," he says.
On the technology side, DRS' Meloy says that with VoIP "becoming the de facto standard," it's now easier to sell, and it also boosts the size of deals. "VoIP technologies have really made people look at just forklifting their entire infrastructure," he says, "so your average deals are much larger because you're encompassing both their normal infrastructure and their phone infrastructure."
Yet, despite these pockets of increased opportunity, putting customers first emerged as the foundation of the phenomenal growth for most of this year's top performers. As Gary Alexander, CEO of Alexander Open Systems, Overland Park, Kan., No. 34 with 178 percent growth, says, "Most of all, we focus on customers' needs."
The 2006 CRN Fast Growth 100 shows that nothing could be simpler—or more important—for growing a strong solution provider business.