Managed services News
Converge Technology Solutions’ $2B Services Push
‘With the $5.5 billion we’re targeting, we want to drive almost $2 billion of that around services,’ says Converge Technology Solutions CRO John Teltsch.
Channel consolidation superstar Converge Technology Solutions expects to continue its rapid growth pace of increasing revenue by $1 billion per year in 2023 regardless of any potential recession ahead.
“We wanted to do eight acquisitions this year. The official acquisition number I think will be 11,” said John Teltsch, CRO of Converge Technology Solutions. “That completes our acquisition commitment to increase revenue by $1 billion in 2022. … The plan is to be about $5.5 billion in revenue through 2025.”
However, growth ahead won’t all come solely from M&A.
Converge Technology Solutions will temporarily halt its blistering acquisition pace to focus on driving net-new managed and professional services sales.
[Related: Gartner Top 10 Tech Trends For 2023: Metaverse, AI, Cloud]
The nearly $3 billion Toronto-based company today generates between $450 million and $500 million in managed and professional services.
“With the $5.5 billion we’re targeting, we want to drive almost $2 billion of that around services,” said Teltsch, who joined Converge Technology Solutions this year after spending more than 25 years at IBM in top executive roles.
Customers Don’t Want To ‘Manage Infrastructure’
Converge Technology Solutions is doubling down on investments in services to help its growing customer base around advisory, implementation and managed services.
“A lot of clients don’t want to manage their data centers anymore. They don’t want to manage the infrastructure. So we’re offering a full range of capabilities, whether it’s cloud, analytics, digital infrastructure, digital workplace, security—clients want us to advise them and help them implement the solution,” said Teltsch.
“Some say, ‘You know what, we want you to manage the whole thing in a managed service environment.’ So we bought a company last year called ExactlyIT and that is 100 percent managed services,” he said.
Acquisition Strategy And ‘Pull Back’ In Early 2023
Converge Technology Solutions has acquired nearly a dozen smaller solution providers in 2022, including three Germany-based IT companies at once that specialize in the education market.
The company’s acquisition strategy is to buy a mix of companies from Europe and North America.
Most recently, Converge Technology Solutions unveiled plans in September to acquire U.K.-based education specialist Stone Technologies Group—which will mark the company’s 35th acquisition over the past five years.
The company’ sacquisition strategy is two-fold: either buy a solution provider that has longstanding and strong midmarket customer relationships or acquire one that owns the IT expertise and skills capabilities that are hard to come by.
However, over the next six to nine months, Converge Technology Solutions will “pull back” on its acquisition spree.
“Specifically, a pull-back in acquisition execution. We’ll focus on integration, optimization and organic growth,” said Teltsch. “We’ll keep looking at other companies [to potentially buy], but we’re not going to get into deep due diligence until mid-2023.”
For its second-quarter 2022, gross revenue for Converge Technology Solutions increased 61 percent year over year to $730 million. Gross profit for the quarter reached $133 million, up 70 percent year over year.
In the first half of 2022, the company has captured $1.4 billion in revenue, representing an increase of 63 percent compared with the first half of 2021.
Potential Recession In 2023
In a recent keynote address at XChange Best of Breed 2022, hosted by CRN parent The Channel Company, former director of the Congressional Budget Office, Dr. Douglas Holtz-Eakin, said he expects a modest recession to hit during the middle of 2023.
Holtz-Eakin cited the Federal Reserve increasing rates, continuing inflation and uncertainty ahead with China and with Russia’s war on Ukraine as why an economic recession is likely next year.
“I would say that by the second and third quarter of next year—the middle of next year—the chances of a modest recession are quite high,” said Holtz-Eakin, a former chief economist for the President’s Council of Economic Advisors under President George W. Bush. “Personally, I put it at about 75 percent [chance of happening].”
However, the IT industry and solution providers might be in good shape in 2023.
“IT is the core systems for not just their worker communications, but their audits and their financial services—all of that management stuff. So a lot of those companies took advantage of the pandemic as downtime when they could put in new IT systems,” Holtz-Eakin told CRN.
For Converge Technology Solutions, the outlook for next year looks bright.
“We do understand that with everything going on with the war, with the devaluation of the currencies, that there may be some headwinds,” said Teltsch. “But right now, the outlook for many of our businesses continues to be strong in 2023.”