Vology's Acquisition Of Vital Is Another Bet On Services Vs. Products

Fast-growing solution provider Vology has acquired Vital Network Services as it continues its acquisition spree of service-focused companies.

"The one common theme of these last few acquisitions we've made is to continue to invest in the services side of our business," said Barry Shelvin, CEO and founder of Vology, in an interview with CRN. "Our three-year plan is to get to the point where half our revenues are coming from services. … There's clearly more growth in the services side of the business than products -- just look at the way Cisco's changed their focus on delivering services and growing recurring revenues versus one-time hardware sales."

Both Vology and Vital are based in Tampa, Fla., which is in one of the strategic regions Vology is targeting for acquisitions. Total revenue for the newly combined company reaches more than $215 million. Terms of the acquisition were not disclosed.

[Related: Solution Provider Consolidation Trend Picks Up As Vology Acquires Offsite Technology Solutions]

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Vital is an international provider of network support services representing some of the largest corporate brands in the nation, with 100 percent of its revenues coming from services, according to Shelvin. In March, Vology purchased MSP Offsite Technology Solutions because of its similar technical IT service offerings -- 80 percent of Offsite's revenues coming from services, Shelving said.

"We're aligning with the way customers want to consume technology going forward," he said. "Even with hardware, some of our customers that want to reduce CapEx would rather buy the hardware as a service as opposed to just buying the hardware outright. That service would include us monitoring, managing and maintaining the equipment at the same time."

Vology, which climbed up 16 ranks on CRN's Solution Provider 500 list to No. 123 this year, provides network management solutions in virtualization, storage and networking and related full-service outsourced management. By the end of 2016, about 25 percent of its revenues will have come from services -- a figure Shelvin plans to double over the next few years.

The solution provider has been doubling its business every three years because of a healthy mix of organic growth and acquisitions, according to Shelvin.

Shelvin expects Vology will make two or three acquisitions in 2016 in strategic areas the company is targeting: Texas, California, Florida and the New York tri-state region.

"It's going to take us awhile to integrate Vital, so I doubt we'll do anything within the next six months, but three per year sounds about right," said Shelvin.

Through the acquisition, Vology's staff will reach more than 400 employees. The company is also expecting to add more than 85 new positions in the near future, half of which will be engineering roles. Shelvin said his company recently passed the 100,000 mark on the number of devices it manages.

"We crossed an important threshold where we're now monitoring, managing, supporting over 100,000 customers' devices now -- that’s a big milestone for us," said Shelvin.

Vital will become a wholly owned subsidiary of Vology.