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DLT Solutions' New CEO Outlines His Vision: 'Protect The Legacy, Grow The Business'
Sarah Kuranda and Ramin Edmond
Acquisitions and major company changes often go hand in hand. But, that’s not always the case when the new owners like what they see.
DLT Solutions jumped into the headlines last week when it said it had been acquired for an undisclosed amount by Millstein & Co., a financial services, merchant banking and private equity firm.
However, the acquisition won't change the growth trajectory the company has been on for years as a software product solution provider, said Alan Marc Smith, who was named CEO as part of the acquisition. That means a focus on the current business model, Smith said, instead of a drastic overhaul.
"Our thesis is to really grow, protect the legacy, protect the machine and grow the business," Smith said in an interview with CRN after the announcement.
DLT has made a name for itself over the past 20 years as a premier public sector solution provider, with public sector accounting for 98 percent of sales. The company has been on a rapid growth trajectory, rising from $857 million in revenue in 2013 to well more than $900 million in revenue last year, according to outgoing CEO Rick Marcotte. The company has landed major contracts over the past few months, including multimillion-dollar contracts with the Social Security Administration, Department of the Navy, NASA SEWP V, Department of Defense, Internet 2 and more.
Marcotte said DLT has taken a stand in the market as a software "product VAR," an area that accounts for more than half of the DLT business, as well as methodically adding capabilities around services and the cloud. While other solution providers have moved away from focusing on products, Marcotte said that is not part of the DLT strategy. Instead, the focus has been on "more of an augment than an overhaul" when it comes to services.
"We love being a product VAR. We're good at it. We don't have a strategy like some of the other VARs in the commercial sector to actively transition themselves from a product VAR to a services VAR. That's not our goal at all. ... I think we can run for years and years and years as primarily a product VAR, just like we’re doing now. But, I think we have to be cognizant of the fact that we have to enhance our services and product and be at the front of big trends like cloud in the public sectors,’ Marcotte said.
The public sector market is notorious for being slower to adopt new technologies, such as the cloud, and generally being less agile than the commercial market, Marcotte said. The public sector is challenged by a "perfect storm" of a growing need for software despite shrinking budgets and a need to better understand assets, Brain Strosser, executive vice president of sales and marketing said. The key is to remain focused, Strosser said, with a broad portfolio of IT assets and experienced people.
"We have to be laser-focused," Strosser said. "We need to be very strategic here. Understanding your customer, what it is we represent and providing a differentiating value that our competition doesn't offer. That's been the key and it's core to our business and moving forward."
Having Millstein & Co. on board will help add to that focus, Smith said, as the company’s leadership adds a deep federal expertise and connections to the equation. Founder Jim Millstein has been involved with many major government departments in high-level roles, including the IRS, Office of Management and Budget, Small Business Administration, Department of the Treasury and more.
NEXT: Bringing The Cloud, Emerging Technologies To The Public Sector
Cloud, in particular, is one area that DLT has invested in over the years and is expected to be a high growth area going forward, with Marcotte predicting triple-digit growth over the next few years.
DLT started getting into cloud technologies close to seven years ago, with the conversation morphing more recently into securing and procuring the cloud, said David Blankenhorn, DLT vice president of engineering and chief cloud technologist. The cloud is now DLT's "top agenda item for the U.S. public sector space," Blankenhorn said.
Behind the company's go-to-market strategy in the cloud is the Cloud Navigator, which launched in June of last year to help public sector clients understand cloud technologies and build strategies. The premise behind the Navigator is that a "well-educated customer is a happy one," Blankenhorn said, and because of that the Navigator has "been a door-opener in many cases."
"The government is [traditionally] very risk-averse for a very good reason. It's a very nurturing approach to helping them, one step at a time, to understand and embrace cloud technologies," Blankenhorn said.
In addition to the Cloud Navigator, DLT has also rolled out CodeEvolved, which is a Platform-as-a-Service offering to help public sector clients looking to develop software while facing shrinking budgets.
The challenge with cloud in the public sector, Marcotte said, is scale. The go-to-market for cloud in the public sector is still "belly to belly, one customer at a time," with each department presenting its own problems and reservations to cloud technologies. However, he said that doesn't mean that the opportunity isn't there.
"The point I explain to my people, and I think it's evident ... don't dismiss [the cloud] even though the government is slower to take it on. Don't dismiss the transformational nature of the cloud. You'll see [the government's] entire road map is being evolved and doing what's called a pivot to the cloud. We intend to pivot right along with them,’ Marcotte said.
Going forward, Smith said as he takes the reins of the company, the focus will be on reinforcing the value created by Marcotte as CEO. He praised Marcotte’s leadership over the past 10 years, saying it laid a strong foundation for the company going forward.
’As I told the staff, it’s not about changing the tire on the car, it’s about putting more grease on the wheel so it runs a little bit faster and a little bit smoother,’ Smith said.
However, Smith said he does see an opportunity to enhance some key areas of the DLT portfolio. He said DLT will have a continued focus on the cloud as he hopes to take on some other emerging technologies, such as big data and analytics as well as cybersecurity. Smith expects big data and analytics, in particular, to be a ’huge growth area’ for public sector that will gain traction over the next two to three years.
"We need to make sure that we are in a position to build value-added solutions for our customers that represent what they need," he said. "We just need to make sure we stay at the forefront. It's very important for value-added resellers to be thought leaders in markets that they are going to drive solutions and provide value to the customer base and to the vendor base, and I see that market expanding.’
In addition to new technologies, DLT executives said they plan to make some bigger moves in the state, local and higher education markets. Growth rates in those markets are a little faster than the federal market at around 3 percent, Strosser said, giving DLT more opportunity for growth without turning its focus away from federal.
’We’re not defocusing on federal ... state and local we see as additive,’ Strosser said.
In addition, Marcotte said DLT will continue a strategic move started in 2014 to go more "aggressively" after key contracts, especially those with multi-agency blanket purchase agreements such as SEWP V and Internet 2.
The bottom line, Smith said, is that there won’t be a radical post-acquisition transition. Instead, there will be a continued focus on the core business, with key emerging technology additions.
’If there’s anything that I’m going to do, it’s going to be to reinforce and build the value proposition at DLT,’ Smith said.
PUBLISHED FEB. 10, 2015