Even as FusionStorm’s hardware revenue continues to grow, the San Francisco-based solution provider is looking to a series of ongoing acquisitions to expand its professional and managed services business.
Hardware sales will remain an important part of FusionStorm’s business, but services—mainly acquired but also developed internally—is where the true growth will come, said John Varel, CEO of the Sun Microsystems partner. “The acquisitions all have to do with driving more services,” he said.
The reason is simple, Varel said. The gross profit on hardware sales is a maximum of 12 percent, compared with 30 percent for professional services and up to 75 percent for managed services. As a result, hardware now accounts for about 50 percent of revenue vs. more than 80 percent two years ago, he said.
FusionStorm prefers to acquire companies that have a single focus. “We want companies that sold only one product, where we can sell everything to their customers,” Varel said. “These are companies who, if their customers want more offerings, have to either partner or pass on the business. We want to do it all.”
FusionStorm last month acquired the Sun Software business unit of Orinda, Calif.-based Intraware, which sold about $20 million in SunOne software to about 1,700 new customers and has the potential to do substantially more, Varel said. “Those 1,700 customers are used to buying from one supplier,” he said. “We believe we can sell all 27 of our product offerings to them.”
In July, FusionStorm acquired BMD Solutions, a security solution provider with offices in Los Angeles and Las Vegas. BMD consisted mainly of engineers and conducted sales by word-of-mouth.
FusionStorm in March hired a dozen salespeople and a few engineers from Marathon International, Sunnyvale, Calif., giving FusionStorm a presence in Boston, where many of those employees were based.
FusionStorm hopes acquisitions will double its growth to $140 million this year, and to about a half-billion dollars in two years, Varel said. For instance, next year Varel expects to add $100 million to FusionStorm’s top line through possible acquisitions of a small Cisco shop and a small Oracle shop.