Q&A: Emtec CEO Talks Boosting Growth Through Acquisitions
An Eye On Acquisition
We're about to finish an active year for mergers and acquisitions within the technology industry, both among key vendors (You remember Dell and EMC, for sure.) and channel partners. Emtec, a Radnor, Pa.-based consulting firm that partners with software giants Microsoft and Oracle, among other vendors, acquired three firms between April and December, adding to its Oracle expertise, as well as its presence in several vertical industries.
And there could be more acquisitions. Emtec – No. 117 on CRN's Solution Provider 500 list – also recently secured financing, part of which could be used to scoop up more companies.
In a recent interview with CRN, Emtec's chairman and CEO, Dinesh Desai, talked about the impacts of his company's moves in 2015, as well as merger-and-acquisition activity in the channel.
The following are excerpts from that interview.
How will the acquisitions of this year help the company strategically over the next two years?
It has helped us to solidify strategy. We have stated strategies to grow vertically in the industry, in our practice areas. So, the reason the acquisitions were made in the Oracle space (is we) increased the depth in the Oracle capabilities, in analytics, in cloud, and also on premise. As a (result), we have gained significant vertical positions in health care and utilities – and technology.
Where does the company see other acquisition opportunities?
Our focus area is what we call MAC, which is mobile, analytics and cloud.
How much revenue or percentage of revenue are you generating from Oracle Cloud? How does the market for Oracle Cloud look over the coming year or two?
The company that we acquired in the Bay Area (Intelenex, was) the nation's number one (Oracle) partner in cloud implementations. ... And we were often cited by the Oracle president (and) Deloitte … as (a) leading cloud implementation (partner) for Oracle. So that's our position (with) Oracle. And Oracle, as you know, had been in the enterprise space. … With cloud, they are (more aggressively) attacking medium-sized businesses, and they're also moving up. So the adoption of the cloud is at a very high rate … in medium-sized businesses. And typically, if you look at the new technologies, that's where a high rate of adoption happens … For Oracle, it's the other way around. … They're probably the fastest growing in the middle space in cloud implementation.
Which of the new offerings from the acquisitions will accelerate growth the most in the next year?
The cloud and analytics practices that we picked up … along with the health care verticals. We are the go-to partner in the Northeast for Oracle and we want to position ourselves as (a) nationwide go-to partner. … (with our) extensive capabilities in (hospitals, as well as) utilities … technology, and there are several other verticals we serve.
Referring specifically to health care, are you looking just at hospitals? Or are you looking at broader health-care systems?
Much broader. We look at the payer and the provider. And particularly at the intersection of the payer and the provider. … To attack that market, we are dealing with major national health care providers, as well as health care payers.
Growth by acquisition is a clear cornerstone of your corporate strategy. How successful has the company been with recurring revenue from its longer-held customers?
Roughly 40 percent of our revenue is recurring revenue, and everything we do leads us to recurring revenue. .. We believe in our philosophy (of) "clients for life." And the way we keep our clients for life is by giving them (post-implementation) support services. With cloud implementations (we have) a support package to go with that. (With on-premise), we maintain the products we develop. It's a major focus for us to keep increasing recurring-revenue percentage.
We're about to close a year that had seen a lot of M&A activity in the channel. Do you foresee a similar climate in 2016?
Our industry is one of the highly fragmented industries. So I do see a long-term consolidation opportunity. This year has been hectic, but (I do see a) fair amount of activity next year. And especially in the growth areas.
In light of the Summit Technology acquisition and its focus on health care, what other vertical industries do you see as critical to your company's growth?
Of course, health care, utilities (where) we've been increasing our presence, (and the) technology sector. (In the Midwest) we have a tremendous presence in the manufacturing area, and of course, the financial services market … That is also a significant area for us.