Presidio CEO On AWS, Cisco, M&A And Biggest IT Bets
Bob Cagnazzi, CEO of $5.4 billion Presidio, explains his investments and strategy this year with AWS, Cisco, M&A and what’s driving the most sales growth in 2023.
Presidio CEO Bob Cagnazzi has huge growth plans in store for his $5.4 billion solution provider superstar in 2023 and beyond, backed by a large backlog thanks to its innovative services strategy and tight partnerships with the likes of Amazon Web Services and Cisco.
While many tech companies are laying off employees, New York City-based Presidio is continuing to add to its 3,400-employee headcount and will likely look at acquisitions this year thanks to sales growth via large-scale projects, “true recurring revenue,” and transforming itself into more of a service provider.
“We’ve got a backlog that is literally eight-times larger than it would have been, say in 2019, for the size of our business today,” said Cagnazzi, whose been CEO of Presidio for over a decade.
“We do 11,000 projects a year with our average revenue, per client, is probably close to a million dollars because we’re doing these large-scale projects,” he said. However, Presidio is shifting award from a project relationship with customers into more of a service provider relationship.
“Revenue per client for people that are under those [Presidio service provider] contracts, is probably about 30 percent higher than clients who are not under one of those contracts,” he said. “So our ability to sell across our portfolio and to penetrate deeper within the client group to gain greater wallet share, is enhanced by moving to more of the service provider relationship.”
AWS And Cisco
Presidio is one of Cisco’s largest channel partners in the world.
“Cisco’s made some enhancements to their sales organization to really understand how to drive partner managed services along with their product set in their solutions—that’s been really helpful,” said Cagnazzi.
One of Presidio’s largest bets in its history is being place on the global cloud market share leader AWS. Last year, Presidio signed a historic multi-year strategic collaboration agreement with AWS to drive cloud consumption and create innovative new services and solutions. Cagnazzi is bullish on AWS and its channel strategy.
“Amazon is going through that shift that somebody like a Cisco went through when Cisco started going heavily into channel. AWS is really understanding the power of a good channel partner,” said Cagnazzi. “And that’s filtering out to the field.”
Presidio is doubling down on AWS. Why are you betting so heavily on AWS and do you like their channel strategy?
First and foremost, they’re incredibly innovative.
I mean, they have many offerings that are really tuned to what clients are looking for, even down to specific verticals. They give us a lot of tools that we can go work with a client with to drive greater agility for them, greater opportunity, greater efficiency, and quicker time to market and all that. So from a technical standpoint, they’ve got a great product offering and a great set.
They also have a really good partner program. I think it’s certainly come a long way. [Former AWS channel chief] Doug Yeum started it and he started the organization down the path. I think [AWS Channel Chief] Ruba Borno has continued to really improve that.
Amazon is going through that shift that somebody like a Cisco went through when Cisco started going heavily into channel. AWS is really understanding the power of a good channel partner. And that’s filtering out to the field.
So we’re seeing really great engagement with Amazon’s field sellers because we help them sell more, we help them grow the footprint of Amazon product sets across the portfolio within clients, and we’re helping the clients optimize—so they’re happier. But then we’re also driving greater consumption. So Amazon’s happy as well.
They’re also incredibly responsive. They’ve got this mantra around moving really quickly, and they do. So we’ve found that they’re a been a great partner to work with, and I expect us to continue to grow at a really fast clip with them.
What is Cisco doing correctly in today’s market? Are they still your largest partner?
Cisco is still our largest partner that we deal with. We still grow with Cisco at a good clip. I think generally, we’re taking market share. So we’re growing faster than Cisco is growing.
They’ve made some nice innovations and enhancements to the entire WebEx portfolio. They’ve got as-a-service offerings now that are more relevant. We’ve had great success with contact center. They’ve also got some items that they’re working on right now around networking and as a service, and a few other things, that I think are going to be really impactful in the in the marketplace.
Cisco is recognizing right now the real value of partner managed services wrapped around their products. They’ve made some enhancements to their sales organization to really understand how to drive partner managed services along with their product set in their solutions—that’s been really helpful.
It’s a win for us and for any other partners who has a robust managed services model. It’s a win for the client. And I also think it’s a win for Cisco, in that, you’re getting a really great client experience because the Cisco product set is going to be managed at a really high level by well qualified partners like Presidio.
What does Presidio’s backlog look like in 2023?
Our fiscal year started July 1, so through the first eight months of the year, it’s the second biggest bookings year ever, by far. Last year was the largest by a lot.
So last year, our bookings were 30 percent over the previous year. But we’re still more than 20 percent up over that normalized baseline. So we’re still seeing a lot of demand.
We’ve got a backlog that is literally 8-times larger than it would have been, say in 2019, for the size of our business today. Half of that is tremendous growth in these recurring services. But the other half of that is literally a 4-times backlog on what the steady state would be for our traditional side of the business—like the project side of the business.
So you’ve got this tremendous backlog that’s bleeding off really barely any today. When it bleeds off, you’re replenishing it with new bookings. But our backlog has been fairly steady for quite a while. That backlog is going to burn off for 18 to 24 months.
Is Presidio hiring while other tech companies are firing employees?
We’re still hiring for key roles today.
We’re mindful that there could be a recession. We’re all mindful of a potential economic disruption. We haven’t seen a tremendous amount yet. So we are being a little bit more thoughtful about our hiring. But from an engineering standpoint, sales standpoint, even within the back office, we continue to make key hires.
How is Presidio innovating and transforming itself?
We’re doing so much on the digital transformation side now that is really incredible and innovative.
For example, we have a number of clients in the healthcare space. There were some regulatory changes that requires a different reporting on how they bill. We helped many of these folks essentially rewrite and create middleware so that they could scrape all the data and the reporting that was required from the government to provide an audit in a timely fashion. Those are things that we probably wouldn’t have been doing five years ago.
Another example: we are rewriting—I can’t specifically say who—but for one of the major sports leagues, we’re rewriting their draft application. Like for the draft for the sports league.
We’re also working with a customer who’s got a large library of a video and content that is not cataloged. So we are creating some applications right now to help them scrape that and pull out all the metadata so that it can be searchable, and it can be distributed in a really in a timely fashion, and usable. So they can start generating more revenue out of that.
It’s just a host of things that we wouldn’t have thought that Presidio would have done in the past, but cloud-native application development, application re-platforming, AI, and data analytics are all tremendous growth areas for us.
Hence, you’ve seen us go from zero people in our application development and data analytics group, to over 600 people now.
What’s driving sales growth at Presidio in 2023?
We’ve seen great growth for the last three years in our cloud business, security, managed services business, and our professional services around cloud and our cybersecurity. That’s where our Lifecycle Services come in.
We’ve always been this high-level project provider for our clients. We do 11,000 projects a year with our average revenue, per client, is probably close to a million dollars because we’re doing these large-scale projects. We’re not selling a widget here or widget there. Ninety-five percent of our revenue comes from clients that are consuming our services. So we’ve always been tasked with the most critical, important projects. We’ve seen the uptake around that: clients are saying, ‘Listen, I want my IT resources to be focused on things that are really strategic. I want somebody to operate that entire infrastructure data and application layer for me.’ That’s what Presidio’s been doing and that’s how we’ve been growing.
If we look back four or five years ago, true recurring revenue was about 4 percent of our revenue streams. It’s about 20 percent today.
What do you mean by ‘true recurring revenue’ and why is it better for growth?
What I mean by true recurring is, I’m not talking about when we resell a software license for three or five years—that’s not recurring revenue for us. It is for the manufacturer. We have maintenance, again, that’s recurring revenue for the manufacturer, not for us.
True recurring revenue means our cloud services and management contracts, and our managed services contracts are now about 20 percent of our revenue on a monthly basis and growing. They represent about 50 percent of our backlog.
We’ve continuing to move from a high-level project relationship, which we’ll always have, but move more to a service provider relationship. This is where we’ve got these contractual relationships with clients and we’re servicing them in a management standpoint, whether it’s across the entire platform— from legacy infrastructure up through cloud— or in collaboration, or in cybersecurity, or whatever it might be. That just makes us even sticky with our clients.
What we found with those clients is that revenue per client for people that are under those contracts, is probably about 30 percent higher than clients who are not under one of those contracts.
So our ability to sell across our portfolio and to penetrate deeper within the client group to gain greater wallet share, is enhanced by moving to more of the service provider relationship. This is kind of the concept that we had about five or six years ago. We’re really pleased that we’re starting to see that come to fruition over the last few years.
Can we expect any acquisitions from Presidio in 2023?
There’s still a good pipeline out there. We talk to great businesses all the time.
We built the business organically and inorganically—about 50 percent of our growth has come organically and 50 percent has come through acquisitions through the years. And we’ll continue to do that.
We’ve had great success and acquired a number of great companies. The culture that we’ve built has been one that’s really welcoming to acquisitions and helps them succeed quickly.
They’re always really well-run organizations out there—whether they’re traditional, like we would have looked years ago when we were local or regional provider; or whether they’re a cloud professional services organization; or cybersecurity; or a managed services business.
They get to a point when the owner-entrepreneurs say, ‘OK, I’ve got to start making really significant investments to grow my lifecycle services up and down the stack and grow my technology toolset across more technology areas. I can’t just be relevant in public cloud. Clients are going to have a multi cloud environment. I’ve got to make investments.’
Those can be really capital intensive and they can certainly chew up a lot of operating capital as well. These owner- entrepreneurs want to sell their business to someone they know is going to take really good care of their people, increase sales and opportunity, and still get to continue to participate in the upside as the business grows. That’s what [Presidio] can do.