Top VAR Jade Systems Is Sold

Jade Systems was sold by co-founders and co-CEOs John and Debbi Milner for an undisclosed amount to Jerry Schmitt, president and owner of Dempsey Business Systems, an Irvine, Calif.-based solution provider.

During the past 10 years, Jade Systems grew into a $100 million business. The solution provider specialized in providing services for a multitude of IT areas, including network infrastructure, storage and servers, security, wireless and e-business applications. In addition, the company had reseller partnerships with some of the biggest technology companies in the world, including IBM, Microsoft and Hewlett-Packard.

The Wasmer Group, a consulting firm based in Alexandria, La., facilitated Jade Systems with finding a buyer and making the deal with Schmitt. Ken Wasmer, managing partner of The Wasmer Group, said the Debbi Milner felt her company needed a new direction. Jade Systems was in the process of transitioning from a product-focused business to a professional services-led company, a task that Wasmer was also assisting with.

"Debbie loved her business and her people, but she had a hard decision to make. They needed to expand the business," Wasmer said. "They were profitable in 2002, which was a great accomplishment in this environment, but it was time to move on."

Despite seeing revenue increase during the past few years as it transitioned to a professional services firm, Jade Systems' workforce decreased in 2002. In addition, Wasmer said the transition to high-margin IT services instead of reselling product is tougher than most believe. "The reality is that the professional services model is way of the future, but VARs are less profitable today because of the way they sell services," Wasmer said. "We're consistently seeing customers that are losing their shirts selling services, because they're not anticipating a lot of the costs, such as certifications, training, education and engineer salaries."

Wasmer said Schmitt will run Jade Systems as a separate business alongside Dempsey Business Systems, which is a storage and server VAR.

In other business news, ownership of Technical Solutions, Inc., also changed hands recently. The solution provider, based in Troy, Mich., was recently purchased by Detroit Technologies, Inc., a supplier and manufacturer for the automotive industry. DTI said it was looking to expand into the IT industry by adding a midsize VAR to help increase the range of services and products for its strong client list in the automotive vertical.

"We saw an opportunity to further leverage our customer base in the automotive industry and introduce new value-added services," said John Lychos, vice president of operations and CFO of DTI. "Technical Solutions now gives us an even greater opportunity to knock on the door of our clients and not only influence and advise on technology but provide it as well."

Technical Solutions was founded in 1992 as a system integrator and in recent years has developed a strong storage business. Tom Gotshall, president and co-founder of Technical Solutions, said his company will remain a stand alone unit under DTI. Gotshall said he will remain as COO of the business.

"I had a number of offers for my company, but we ultimately went with DTI because they're a solid company with a proven record and bright future," Gotshall said. "DTI has a great automotive services practice and they saw an opening to offer IT, and that's where Technical Solutions came in."