Post-Merger, Mega-VAR Presidio Is Pumping Itself Up

Presidio Networked Solutions (VARBusiness 500 No. 72) is a newly formed $800-million VAR that comprises the former Presidio Corp., Networked Information Systems (NIS) and Solarcom Inc. Presidio Networked Solutions' portfolio includes unified communications, wireless, security, optical, telepresence, storage, managed and hosted services as well as supporting network, systems and Microsoft infrastructure solutions. The breadth of services and product are aimed at meeting the needs of Presidio's varied customer base, which includes companies from the Fortune 5000 as well as the government agencies such as the Department of Homeland Security.

Robert Murphy, Northeast Divisional Co-President for Presidio Networked Solutions, recently spoke with Senior Editor Jennifer Bosavage on the merger that catapulted $216 million (2005 revenue) Presidio Networked Solutions into the mega-VAR realm. He also discussed what the future will hold for the security and storage markets, and addressed the age-old question of how to get customers to secure themselves appropriately.

Presidio revenue jumped more than 220 percent between 2005 and 2006. What do you think was the main impetus for that growth?

Robert Murphy: It's obvious that those types of numbers were driven by acquisitions last year. The company as a whole, when you combine it, has shown 17 percent growth overall. The growth is still aggressive.

Unified communications played a big role in that growth. Cisco refers to unified communications as a 40 percent growth area, for example. Teleconferencing, from a revenue perspective, has had a lot to do with our growth. We carry Cisco, Polycom, Tandberg. But Cisco's Telepresence is bringing visibility to teleconferencing, which hasn't always been the case. Cisco is taking it to a high level. The system is not as flexible as others, but it is bringing awareness. We've seen a great benefit from Cisco's entry into the market. It's helping our overall proposition, which is focused on convergence.

Other areas giving us revenue opportunities include security and storage. Storage revenue is almost up 90 percent in the Northeast, when we compare the first half of year with the prior year. That has to do with major architectural changes in the marketplace. iSCSI is part of that [as iSCSI-based Storage Area Networks have become a less costly alternative to creating Fibre Channel-based SANs].

Government regulations are causing some of that growth in storage, as companies are legally being required to hold on to so much more information. The space lit up mainly in the end of 2006. We're seeing growth in many areas, especially in legal. Now, every bit of electronic evidence needed, all that correspondence must be archived. Email that is missing can cause you to lose cases: It's considered negligence. The legal exposure for companies is just so great today that they have to invest in storage.

Customers tend to be reluctant to invest in technology that doesn't directly link back to the bottom-line. In terms of upgrading storage and security, how do you get customers to do what they ought to?

Murphy: Persuasion needs to come from the threat of what the real risk is in not doing it. Everyone talks about security, for example, but only in the financial markets were the penalties real. Just now, HIPAA is coming into that arena of penalties for noncompliance. And if you do work for credit card companies, if you are not compliant with their requirements, they can put monetary penalties on you. There's also a difference between exposure for public companies and private ones.

Now, companies are starting to see penalties. We've bridged the gap between legal realities and the IT reality of where companies are today. Instead of talking about midmarket companies locking down network security, we are talking about the repercussions of not doing that and what the legal ramifications are. We are bringing C-level people to the discussion. The IT departments in midmarket companies want this to be done, and they applaud it. The C-level needs to be educated, they need to validate it to the business people, they need to open up their budgets, and then have IT get it done.

Of course, companies can't do everything, and [security and storage] has been prioritized out. But now there is urgency; for example, we've sold more archiving software in the past four months than in the previous 36 months.

We bring in law firms to customers. Bringing law firms is very important; we are identified as technologists, so we don't have the legal knowledge to make the case.

NEXT: Organizational challenges

The company went through a huge organizational change. What have been some of the challenges that have been part of that?

Murphy: Actually, our challenges are not that unusual for any growing VAR. Our underpinnings are to maintain regional execution and focus. We are not focused on integration for the sake of integration. Our target is growth and customer satisfaction. We are very regionalized, and focused on our manufacturers and our relationships with them.

Our challenges are growth, profitability and staffing. The supply of qualified employees continues to not meet the demand. So we're working harder at building organic training programs. Profitability is always a challenge, because the products we carry we don't have exclusivity. We are always trying to find the right blend with services. It's a constant turning of the 'radio knobs.'

Mergers often result in streamlining the activities among the various companies involved. What are your plans in terms of such consolidation?

Murphy: Our strategy was not to smoosh everything together to lower cost. In fact, it is the opposite: We recognize how these companies became successful, why they are part of the merger, and we are trying to make sure we maintain leadership roles. Absolutely we have taken advantage of some best practices opportunities, for example, in approaches to project management, billing. We viewed these as opportunities toward improving the quality of life for our employees.

We are all pursuing the same mission statement. It's a work in progress and going well. All the companies were well run. They have pretty lean operations. We are trying to pursue a place in the marketplace timed five years from this to be number one in this space. That's what the focus has been all about. We couldn't be happier than how we've executed.

A lot of people make these exercises more complicated than they need to be. They try to attack the cost structure rather than realize the growth potential. They attack what it takes to be successful. We have so much experience in this company, we wouldn't want to lose them. These are well-balanced and smart people who understand our business. We are not trying to shove a discrete manufacturer's P&L into our business.

And the employee's take, from your point of view?

Murphy: We've been very upfront with this approach with our employees. There seems to be a real appreciation for that. We've had no employee turnover associated with this integration over the past two and a half years.

One of the things that has made this work is that the employees are engaging in the process. They meet with peers that do what they do and (mainly) how they do it. There is a 'common language' between them.

When companies see problems, it's when you merge companies that are not identical in approach, in culture. Making sure there is a synergy between the companies is key to achieving growth. You need to get the leverage that comes from the additional companies. There is not a doubt in my mind that the breadth of knowledge that is coming from the integration is beneficial.