MSP Incentra Buys Another Sun VAR: SSI


Incentra, Boulder, Colo., on Thursday said it acquired SSI hubCity, a Metuchen, N.J.-based Sun solution provider, in a deal worth about $6 million, including $4.75 million in cash, 1.37 million restricted shares of stock, and an unsecured three-year note for $250,000.

The move comes less than three weeks after Incentra acquired Helio Solutions, a West Coast Sun solution provider headed by Dave Condensa, president and CEO of that company and one of the co-presidents of Sun's VAR council.

Incentra, one of the few survivors of the storage service provider (SSP) part of the dot-com era, currently manages over 1,500 Tbytes worldwide. That capacity is in place in data centers around the world, and managed from the company's own network operating center in Boulder.

A CRN report late last year found an acceleration of solution provider acquisitions this year as vendors, service providers, and other VARs look to beef up their channel expertise.

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SSI brings Incentra a team of 20 people headed by Tom Kuni, president of SSI and one of two co-presidents of Sun's VAR council in 2006. "But more than that, it's the volume of work they do," said Thomas Sweeney, Incentra chairman and CEO. "They don't just fill orders, but bring full solutions."

While Incentra, which in addition to its managed services offerings is a major Sun solution provider, can leverage SSI's personnel and customer base to increase product sales, that customer base is also ripe for more services, Sweeney said. "We can broaden the amount of services SSI offers, including first call services and our own managed storage services," he said.

Incentra will also help SSI and its customers tackle IT issues of a number of enterprises with operations spanning the Atlantic, Sweeney said.

"SSI has customers with requirements to work across the ocean, but they haven't been able to do it before," he said. "Incentra has offices and people in London, and Tom (Kuni) can extend our capabilities to his customers."

SSI had revenue of about $40 million for the 12 months ended June 30, and is itself the combination of two solution providers. That happened back in late 2003, when Sales Strategy Inc. (SSI), a Sun hardware solution provider, acquired a majority stake in Hub City Media, a software developer.

The acquisition gives Incentra a revenue run rate of about $240 million, a size that Sweeney said makes it easier for companies like his to offer a wide range of products and services to enterprise customers.

The acquisition of SSI and Helio continues a consolidation of the Sun channel, a move that Sweeney called both good and disconcerting.

"From my perspective, it doesn't bother me in terms of product selling," he said. "It's been happening with many vendors' channels. But for services, I'm not worried. We have better services offerings than 99 percent of our competitors. When we talk to customers about solutions, we can give them real-world experience."

Funding for both the SSI and Helio acquisitions come from a three-year, $12 million note Incentra put in place a few months ago.

The fact that the funding was already in place before the impact of the current credit crunch was too widespread helped the deals go through, Sweeney said.

"The credit crunch had an impact on getting the funding," he said. "But what worked in our favor is, the companies we acquired had solid structures, so we were able to get an attractive rate. I wouldn't want to go and try to get it today. We were very fortunate. It will be more difficult going forward. If you want to get financing, and have a solid structure and plan, you will get it. But it will be more expensive going forward."

SSI and Helio are only the latest in a string of acquisitions by Incentra as part of a push to bring its services capabilities to a wider part of the channel.

Last September, Incentra acquired Tactix, a Portland, Ore.-based storage, networking, and security solution provider, for $3.6 million in cash.

In April of last year, the company acquired Lombard, Ill-based NST, a $25 million, 300-customer VAR in the Chicago area, for $25 million, for $5.5 million in cash, $1.5 million in unsecured debt and 1 million shares of Incentra's common stock.

In 2005, Incentra acquired Star Solutions, a San Diego-based solution provider, which Incentra officials said nearly doubled Incentra's revenue, and Kirkland, Wash.-based PWI Technologies.