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All Covered's Acquisition Fever
In Redwood City, managed services player All Covered was growing rapidly as well. Founded in 1997, the company started out as a 10-person IT consulting firm and grew not only through SMB-focused managed services but also through an aggressive acquisition strategy. CEO Todd Croteau had arrived at the company in 2000 when All Covered bought his consulting firm.
Like I.T. Pros, All Covered's approach of offering managed services and IT outsourcing to SMB clients was incredibly successful -- as was the company's acquisition strategy. Croteau said All Covered made strategic purchases of small, regionally focused solution providers to expand geographic coverage and open up new offices.
After Wall Street's collapse in the fall of 2008, Croteau watched as IT spending dried up, and finding new SMB clients for its managed services business became harder and harder as months dragged on.
"If you had asked me two years ago if we at All Covered thought we were recession-proof, I would have said yes," Croteau said. "The idea was always that you have a big number of small-business clients, and losing any one client or even a few clients won't hurt you that bad because your business is so spread out. But we were wrong. And we had a problem."
Soon, All Covered wasn't acquiring small VARs just for its regional expansion plans. As the SMB market became more competitive, the company saw acquisitions as key to adding new clients.
"We spent the better part of 10 years experimenting with the best ways to go to market with small businesses, and we've learned that it's hard to find new small-business clients," said Croteau. "And about two years ago in late 2008, it really got bad."
NEXT: Roadblocks Ahead