The infrastructure-as-a-service space is a young one, and many young companies are evolving rapidly to fill the niches in a new marketplace. The potential is clear, but providers still must establish their place within the market while fending off forays from all directions. One such company is ANEXIO. With us today to talk about ANEXIO’s approach to the IaaS space is CEO Tony Pompliano.
TR: Tell us about ANEXIO’s origin story and how you got involved?
TP: The first thing you need to know about ANEXIO is that we live to serve our customers. Customer satisfaction fuels everything we do. The ANEXIO origin story is the result of me looking at various ways to serve the mid-market customer better. About four years ago I saw the technology transformation that was occurring as companies were moving from customer premise-based solutions to one where the technology was going to be deployed either in a data center or via a cloud solution. I saw an opportunity to acquire several regionally-focused managed IT firms, and consolidate them to create some scale, both in terms of the size of the company, and in the size of the service portfolio. These days, ANEXIO operates six Tier III SOC-2 certified data centers, we have a brand-new IP network that connects those data centers and we have certified experts that can help monitor, manage and maintain your desktop to data center IT environment anywhere in the world. We’ve built a firm that is attractive to not only the mid-market enterprise space, but also small businesses to large enterprises nationwide.
TR: What attracted you to the mid-market enterprise space?
TP: These are firms that are sophisticated technology users. They typically have a CIO and/or a CTO and they use technology not only to keep the lights on, but also to generate revenue and service their own customers. They are firms that are large enough and sophisticated enough to be able to do business with the likes of IBM, HP or Dell and choose ANEXIO instead. We thought that there was an opportunity to serve that market by being very efficient, being very customer responsive and by being thought leaders as it relates to IT transformation. ANEXIO leverages decades of proven IT experience, while providing flexible, cutting-edge services in the ever-changing IT Services world.
TR: What acquisitions did you make to get the ball rolling?
TP: We’ve made four acquisitions so far and we’re currently in the middle of our fifth one. It’s too early to talk about that one yet, but I can tell you that we are a very opportunistic company and we acquire companies or assets when we find something that matches our desktop to data center vision. The first company we acquired in 2013 was named ANEXIO. It was a traditional managed service provider out of Sarasota, Florida. It had a very well-defined and repeatable set of offerings – managing and leasing servers, firewalls, desktops, etc. with highly referenceable clients in a good market. The company had a network operation center platform that was underutilized, so it had capacity to continue to grow without substantial investment. We have since made three additional acquisitions since then and are constantly identifying companies that we think can bring value both in domain expertise and a complementary set of offerings. Each acquisition has expanded our customer base, our geography and our technology footprint. We are proud to call ourselves a leading provider of mission critical infrastructure solutions, offering a complete “Desktop to Data Center” portfolio that is anchored by six data centers, an IT solutions center and a carrier-grade coast-to-coast IP network.
TR: How do you balance traditional services like colocation with other services all the way up to more software-driven IaaS offerings?
TP: For starters, there is nothing traditional about colocation. We don’t call it that. We call it Mission Critical Infrastructure services. Or MCI for short. That’s not a play on words, that’s how committed we are to the servers, networks and power that go into every customer rack in our data centers. We look at MCI as the environment in which we’re going to deploy technology for the customer. In some cases, that’s the customer’s own equipment and technology. In some cases, we’re going to be providing the hardware and software, which would fall under the umbrella called infrastructure-as-a-service. We also have additional services beyond that like ANEXIO LightSpeed which is our new IP network offering. ANEXIO LightSpeed connects our six data centers across a highly reliable and highly secure network. It also allows them to connect out to the customer premises and to all the public cloud providers such as Amazon, Google, Microsoft and IBM. We can also connect to the NYSE and NASDAQ stock exchanges for people who are dependent on access to those financial services. Additionally, we have vulnerability management solutions that sit on top of that network, so whether it’s DDoS protection or just general vulnerability monitoring and resolution, we do that every day along with providing things like Managed IT, VoIP, Back-Up and Desktop Support for our customers, too. We realized quickly in this business that every customer who needs a data center typically has hundreds, if not thousands, of desktops that can benefit from ANEXIO’s premier services and support.
TR: What kinds of deals have you been winning lately?
TP: We’re winning deals that involve customers migrating from legacy IT environments to a hybrid solution. They want a combination of private cloud with interconnection to the public clouds, and we’ve shown them how to minimize the expenditures that they need to make. We’ve had clients who initially wanted to acquire 40 cabinets of data center space, and when we’re all done architecting a solution with them, they end up with 30 cabinets. The ANEXIO business model is based on winning a customer for life by helping them move from their legacy environment to a much more efficient hybrid environment. ANEXIO becomes their trusted advisor as a customer make this transition.
TR: What kind of growth are you seeing?
TP: What we look at primarily is the recurring revenue model. Recurring revenue in this business is very important because it is generally contracted with a term typically three to five years in length with revenue counted monthly. The churn in this business is low because once people move into your data center or once you start managing their desktops and providing other IT Services they don’t have a desire to move again because it’s very complicated and expensive. Other people may use different metrics, but the industry in general, in my opinion, is growing somewhere around 20% year over year. ANEXIO’s compounded annual growth rate over the last four years has been 86% on a revenue perspective. To us, that’s an incredibly significant increase over a four-year period.
TR: How do you plan to maintain your momentum?
TP: We will continue to grow our company through acquisitions, but only when it’s accretive. Ultimately, we believe that we can continue to acquire regionally-focused companies that will bring additional scale in terms of service offerings, technical expertise and great people. We also want to build up our organic sales capability by selling direct to new accounts and by increasing the portfolio of services we provide to our existing customers. Channel sales partners also play a key role in our future growth. In fact, we just announced our new ANEXIO Advantage Channel Partner program which rewards partners who extend ANEXIO’s reach into the marketplace. For a limited time, all ANEXIO ADVANTAGE partners will receive 100 percent of first month revenue on all deals they close, two-years or longer, in addition to their standard monthly commission. Ultimately, we’ll create a business large enough scale-wise to get all the financial advantages of that scale. With the opening of our sixth data center in California, we now have a nationwide footprint. We’ve got a network deployed that is interconnected to all the public clouds. We’ve got a set of best-in-class managed services in place, and we have a set of highly leverageable solutions that we’re working on as well. There’s a lot of wind at our back.
TR: What kind of inorganic opportunities are you looking for? Are there particular geographies or products you have in mind?
TP: There’s a lot of people sniffing around this industry right now, so I won’t tip our hat and point to specific markets where we think there’s an opportunity for us. I will say that we are constantly looking at the 17,000 managed IT firms located across North America by region. These are firms with people who are likely providing a technology-enabled business services and getting contractual recurring revenue. Of those 17,000 firms, 97% of them employ less than 100 people, meaning that they’re generally small firms. So, there’s a very target rich environment to go out and do merger and acquisition work, in my opinion. A good target company has recurring revenue in data center or desktop solutions and has some scalability. So, we will entertain acquiring firms that provide customer premise solutions like our first business did because there’s value there in helping those customers transition from their current environment to a more data-centered cloud environment.
TR: Are there particular new services you’d like to add to your portfolio inorganically?
TP: I host a Customer Deal Desk at ANEXIO for all deals larger than a certain revenue threshold. Nine times out of ten those deals will request a new service that ANEXIO doesn’t provide today. It could be a cloud service, it could be a VoIP service, it could be a network service. After I see 2-3 Deal Desk opportunities all requesting the same new service I get very interested in adding that to our portfolio. One of the areas we’re seeing interest in is the hybrid cloud environment. Our customers want ANEXIO’s domain expertise in this area and we’re happy to provide it. We’re always on the lookout for businesses that can add value to the one stop shopping experience that we provide ANEXIO customers.
TR: What kind of opportunities do you find less attractive?
TP: We don’t want to acquire somebody who’s in the business of reselling other people’s stuff. If you think about the evolution of a lot of these managed IT firms, at one time or another they were either a VAR or a break/fix kind of repair integration shop. They eventually got into the services business because the margins on the VAR business were getting thinner and thinner as the equipment manufacturers sold directly and the distributors became more retail-oriented as opposed to being wholesalers. And on the break/fix side, that business has always been very difficult to create some scale because it requires a lot of truck rolls and scaling of people. I respect those types of businesses immensely, but that’s not our business model. At ANEXIO. we go the extra step and differentiate the offerings in a way that creates value beyond what may be generally available in the market place.
TR: What’s the biggest challenge in growing a business like ANEXIO?
TP: From my perspective, there are two challenges in growing a business like ANEXIO. Both involve hiring the best people. Challenge #1 is that there are plenty of acquisition opportunities out there and you’ve got to have the discipline to delegate certain parts of the due diligence process to your team. At any given time ANEXIO is looking at 4-5 different acquisitions. That’s too many for me to look at by myself, so it’s important to hire the right people who understand what it’s like to work in this type of hyper acquisitive environment. I look for people who thrive in a constantly changing environment and I try to hire people who can multi-task. At ANEXIO you need to manage your daily responsibilities, while also carving out enough time in your day to help me crunch the numbers, analyze the data and acquire a company. Challenge #2 is that that I won’t say that I’m an impatient person, but it does take some level of patience growing a business. I’d like to think we’ve done a lot over the last four years, but I always feel like we could have done more. Time is a limited commodity so the people on your team play a huge role in your shared success. They need to think big, they need to be comfortable taking risks and they need to see themselves as the creators of the IT Services future. Hiring the right people can help your company set a new standard for industry excellence as you grow to unimaginable heights.
TR: Thank you for talking with Telecom Ramblings!
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