Bridgenext Acquires Argentina-Based CloudX, Bets On AI For Its Next Growth Phase

‘[CloudX’s] largest client is one of the Big Four accounting firms. They’ve built an agentic platform for that client that allows the client’s people to build and leverage agents to help them do their work more efficiently, and it’s real stuff. They’ve been working on this for several years,’ says Bridgenext CEO John Castleman.

Bridgenext’s acquisition of CloudX gives the digital engineering and technology services provider the added Latin America scale, senior developer talent and AI experience it was looking for as clients move into a new technology cycle around AI.

John Castleman, CEO of Bridgenext, in an exclusive conversation with CRN, described the Philadelphia-based solution provider as a company built around engineering, design, data, AI and consulting capabilities aimed at helping clients turn software products and platforms into business growth. With CloudX, Bridgenext now has about 1,800 people across the U.S., Canada, Latin America and India.

“We help our clients build software products and platforms that enable them to grow their business,” Castleman said. “It’s pretty simple. We put this company together over the last few years very purposely. We said we need people with great engineering expertise, great design expertise, great data expertise, and certainly AI now.”

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CloudX fit that strategy, Castleman said, because it added about 330 people in Argentina, where Bridgenext was already building scale, and because that company had a developer-centric culture built around senior engineers.

“CloudX calls themselves ‘developer-centric,’” he said. “They built the company around senior developers and created a culture that those types of people thrive in and want to work in.”

Castleman said CloudX was also further along in AI than many companies Bridgenext reviewed, in part because of its work for a major client.

“Their largest client is one of the Big Four accounting firms,” he said. “They’ve built an agentic platform for that client that allows the client’s people to build and leverage agents to help them do their work more efficiently, and it’s real stuff. They’ve been working on this for several years.”

The deal also underscores Bridgenext’s view that Latin America becomes more important when technology is changing quickly and clients need closer collaboration, Castleman said.

“In my experience, when you’re at the beginning of a new technology cycle, the work starts close to the client because the technology itself is not stable,” he said. “It’s iterating quickly, and so more of the work is done at the client site or certainly in the same time zone as the client. Latin America plays nicely into that.”

There’s a lot going on at Bridgenext and in the Latin American IT industry. Following is more of CRN’s conversation with Castleman.

How do you describe Bridgenext?

We help our clients build software products and platforms that enable them to grow their business. It’s pretty simple. We put this company together over the last few years very purposely. We said we need people with great engineering expertise, great design expertise, great data expertise, and certainly AI now. The last piece is what I would call ‘consulting.’ Not management consulting. Really helping our clients figure out whatever they’re trying to create, making sure it’s aligned with their core business. Too often [when] we meet with clients, they bought software packages, they built stuff, they got stuff all over the place, and they’re struggling to figure out which of these things is going to really help grow their business. We like to be the firm that helps them sort that out, make the most of the packaged software they’ve bought, and make the most of the software that they’ve built or that they need to build. Typically, the work we do is closer to the front end or is the front end of their business. We’re not the people who are implementing ERP systems or working on financial systems or things like that. We’re helping our clients with something that is interfacing with their customers.

How big is Bridgenext?

With the acquisition of CloudX, we are about 1,800 people spread across the U.S., Canada, Latin America, principally Argentina, and India. We have I’d say about 125 clients, most of which are in the United States, but certainly global companies that take us into Europe, Canada, Latin America, etc. And we’re backed by a longtime investment firm, Kelso & Company, our principal investor. They like the space that we’re in. … They are in the private equity category, but they’re best known for inventing employee stock ownership plans, which were originally called Kelso Plans back in the ’70s. They’ve been around for 50 years, and they are very much of the mindset that if you distribute equity widely, good things happen. And so they invest in companies that are looking to grow their business. They’re not doing what a lot of people think of private equity, which is buying a big company, stripping the costs out, and then reselling it. They’re very much looking for companies like us, and we’ve done several acquisitions with their support because we’re all about building a Bridgenext that we think there’s a niche for in the market.

There are lots of firms out there that are great at building software in India. There are management consulting firms. There are data firms. Now there are companies that say all they do is AI. We found that our clients need all of those things, so that’s what we’re trying to do. It takes time to find either people that we want to hire or companies that we want to acquire. In our business, it’s all about people. With an acquisition, you’re really hiring a group of people, and you’re hoping that they come back the day after you acquire them. So you have to be patient, and hopefully disciplined, when you’re doing acquisitions.

Is Bridgenext a profitable company?

We’re nicely profitable. We measure it as EBITDA, and our EBITDA margins are right in the industry sweet spot.

So Bridgenext has made other acquisitions?

Bridgenext bought a company called Emtec, which had several different pieces to it. The core piece was their Emtec Digital Services, which was doing product engineering work that is still one of the core pillars of what we do. That’s how we got started, and we’ve added a few pieces along the way. Emtec had been around for 20-plus years. Almost immediately after we acquired Emtec, we acquired a company called Definition 6, then Folcode, which like CloudX was based in Argentina, and then CodeScience, an expert in building software products and platforms on top of Salesforce.

Let’s talk about Bridgenext’s acquisition of CloudX.

CloudX is a neat company. We have been looking to acquire companies that cross a few different parameters. One is that we needed more scale in Latin America, and I’ll come back to why in a minute. We obviously wanted to find a company which had deep engineering technical expertise. And the other thing we’re continuously looking for is data expertise, because you can’t do any really good work in terms of building AI-driven platforms or any software without good data. You just can’t do it.

In CloudX, we found a company that’s based in Argentina and has a nice size. I think about 330 people joined us a couple weeks ago. CloudX calls themselves ‘developer-centric.’ They built the company around senior developers and created a culture that those types of people thrive in and want to work in. …

We looked at a lot of companies, including some in Latin America, that had labeled themselves as, ‘We’re an AI company.’ And when you really got into what they were doing, they were dabbling, which is what most of corporate America is doing right now. We’re at the beginning of the AI technology cycle, like we were back in 2015 with mobile when Apple came out with the iPhone that all of a sudden changed the world and kicked off a whole new technology cycle. We’re in the same place today, so it’s very hard to find companies who are providing services as well as clients that have moved beyond the pilot stage, that are really doing substantive work. CloudX is. Their largest client is one of the Big Four accounting firms. They’ve built an agentic platform for that client that allows the client’s people to build and leverage agents to help them do their work more efficiently, and it’s real stuff. They’ve been working on this for several years. When we saw that, as well as their culture and people and their location in Argentina, we said, ‘Wow, this is this is great fit.’ That’s why we bought CloudX. And I like to say they chose us. They said, ‘These are the people that we want to work with.’ Because everybody has choices. It’s a good fit because we are very engineering-centric in what we do, so their team is going to fit in quite nicely with our folks.

Have you already talked to that Big Four client about continuing with Bridgenext?

Oh, yes. We wouldn’t have done the deal without it. Those conversations happened months ago.

How much did Bridgenext pay for CloudX?

It was a cash and stock deal. We did not disclose terms, but I think everybody’s happy. They had some outside shareholders who were able to exit. The management team sold shares and also received stock in Bridgenext as part of the transaction. So they’re now meaningful shareholders, like a lot of the management team. We’re excited to have them side by side with us as we build Bridgenext. We’re very happy with how it was structured, and they were excited to have the opportunity to participate in the next round of growth of the company [especially since] they were engineers, and sales wasn’t their thing. It’s hard to sell into U.S.-based companies, which is really the market that they were appealing to, without a sales team. They could only get so far without saying, ‘We’re going to have to hire people in the United States and build a sales team and go acquire new clients.’ By becoming part of us, we’re basically a sales channel for them. We have the sales and marketing machine here in the United States and in Europe that will enable us to leverage their capabilities.

And yet they did manage to sign up one of the Big Four.

They did. Some of the founders of CloudX came from Globant, which is a very successful public IT services firm founded in Argentina. They had developed some client relationships over the years, and that’s how a lot of these businesses get started. You have some contacts, and you say, ‘I should just go do this myself,’ and those that are bold enough and willing to take risks go do it.

CloudX is your second Argentina-based acquisition. Why Argentina?

I’m glad you asked that because it’s important. What we have seen over the last 10 years is the industry moving from India and Eastern Europe being the two primary sources of offshore engineering capacity. There’s a little bit in the Philippines, but not that much. And after the pandemic, we were also at the peak of the mobile digital technology cycle. The demand for talent in 2019, 2020 and 2021 was rising quickly.

I was on the board of a Latin American company, and I watched this happen. Now as we get to a new technology cycle, companies in the United States have gotten comfortable with Latin America, just like they got comfortable with India and Eastern Europe. …

In my experience, when you’re at the beginning of a new technology cycle, the work starts close to the client because the technology itself is not stable. It’s iterating quickly, and so more of the work is done at the client site or certainly in the same time zone as the client. Latin America plays nicely into that. Argentina is one hour ahead of us. You don’t have any of those issues. An India company, if you’re a company in California, is 12 and a half hours different. I’ve been working in India since 2005, more than 20 years, and we have gotten really good at leveraging and overcoming the time zone challenges. But when the technology is moving really fast, proximity helps. And so we decided this is the right moment for us to get bigger in this hemisphere.

If you wanted to extend expand your Latin America business, why not Brazil or Mexico?

I’m a simple guy. Getting critical mass in a country, getting used to the laws and how to operate in that country, that all takes time and effort and experience. We do have people in other countries. We’re not 100 percent in Argentina. We have people in Uruguay, Colombia and a couple of other places. But we were happy to find a business in Buenos Aires where we already had an office. My existing team is in the office with CloudX already. We’ve opened an office in Ecuador. That’s great. But we’re not IBM where we can bring in an army of people to help integrate and make sure it goes smoothly. We have to pick our spots, and this was a logical place for us.

On the people side of this, we’ve really enjoyed working with our team in Argentina over the last few years. They’re great to work with. They’re terrific at what they do. Argentina does have currency issues from time to time, but we’re selling in dollars, and so it works nicely. So it’s good.

Will you be combining your two Argentinian operations into a single office?

Yes. Well, not a single office. The CloudX leadership team is going to lead the combined Latin American operation.

Will Bridgenext’s existing Argentine team all be staying as well?

The new role of Hernan Garcia, who was the CEO of Folcode, is to drive the integration of the businesses, and then bring CloudX together with Bridgenext. That’s a really important job. He's going to be leading that effort.

Any other acquisitions that you’re working on now?

We’re always looking. There’s a couple that are interesting. It’s very hard to find something that is just right and actually get one of these to come together. I’ve got a team looking at deals all the time, so we’re talking to a prospective company every week.

How did you find CloudX?

A friend of our company in the industry introduced us to Folcode, and he also had worked with one or two CloudX members. He’s based in Argentina, and he has helped us look for companies in Latin America. He’s familiar with the space and the entrepreneurs who have started these businesses, and so he’s really been a terrific person to source opportunities for us. That’s really how we found CloudX.

And was CloudX actively looking for a buyer?

Yes, they felt like they were a little stuck, that they had grown as much as they could grow, and they felt like it was going to be hard for them to grow a lot more without becoming part of something bigger, so the timing worked out nicely.