Next Generation Cloud UC Solution Provider - Interview with Mike Gleason of Netrix LLC
CR: This is Clark Richter from UCStrategies. I’m joined by Mike Gleason, a partner at Netrix LLC in the north suburbs of Chicago. Thanks for joining me today, Mike.
To start with I wanted to give you an opportunity to give a brief overview of Netrix and the types of problems that your company typically solves for your customers.
MG: Netrix has been around since 1988. The value that we bring to our clients is that we work with them to understand what the business issues are they are struggling with today, and we match those to technology solutions in regard to how they want to consume, support and finance key initiatives. Let me explain what I mean by “consume, support and finance IT.” Netrix is in a unique position in the industry in that we have multiple technology delivery models, whether it is our private cloud solutions out of our data centers, public cloud offerings we resell or ordinary on-premise deployments. We work with our clients and ask, “I am interested in understanding how you want to consume the technology that runs your business and can to grow your business, not well, 'you have bought it this way in the past so I can sell it to you this way again?'” We can deliver solutions to them customized for how they want to consume and deploy it, compared to other technology firms, which might just sell the products, install them and walk away.
Netrix has grown rather significantly over the last couple of years. Last year our growth was about 76 percent. This year we’re looking to go over the $100 million mark and we’ve got about 225 employees. If you look back about 18 months ago, when we merged the two main companies, we were 110 employees, so we’re growing very rapidly and continue to expand.
CR: So Mike, you mentioned the mergers. I know you came into Netrix through bringing Global Enterprise Technologies (GET) together with Netrix in October 2012. You merged pretty similarly sized companies. How has that merger gone, overall? Obviously, you keep growing. It sounds like it’s going well, but is there anything that you’ve learned from that as well with the most recent merger with ChicagoMicro?
MG: Back when we brought GET and Netrix together, it was a great marriage, because GET was very focused in the Cisco space and in the managed services space and Netrix was focused in the Microsoft space, the virtualization space, the storage space and cloud/data center offerings. We both had gaps in our service lines, so when we brought the two companies together, we had a complete portfolio that we could bring to our clients across the board. And so, the merger has gone very, very well. We didn’t have any layoffs, our sales professionals are now armed with a complete solution base they can bring to their clients. It was sort of the same strategy when we brought ChicagoMicro into the fold, where can we strengthen our portfolio? Another recent acquisition we did was a Tier 3 Data Center called CDGI. So we’ve tried to look for where the gaps are in our products and services and what our clients asking for, and then fill those in through strategic mergers and acquisitions.
CR: So you plan to continue down that path, looking for other companies to merge or acquire?
MG: Yes, we are definitely looking to expand our national footprint, service lines and bring great professionals onto our team. We’re always looking to bring other technology services sets into the mix that will allow us to offer a competitive solution to our clients, whether that’s in the cloud space, whether that’s in the data center space, the pro serve space or any type of the procurement or implementation services that we provide to our clients. We’re still looking for companies to acquire and bring into the mix and we’re not going to stop any time soon.
CR: I’ve worked with Netrix for many years and the company has had its own data center and was selling cloud-based services before they became mainstream solutions. How does Netrix differentiate itself, now that so many companies are offering public/private cloud solutions from the manufacturers or reselling other service provider solutions?
MG: I think that what we’re trying to do is not be everything to everybody; we want to provide differentiated services. We’re not looking to be the Amazon Web Services of the world or to build some massive data center. We just acquired our third data center, which is a 38,000 square foot facility out in Mt. Prospect (IL), and what we’re going to do with the space is increase what we’re doing in our cloud offerings, but at the same time, bring customized space and connectivity solutions to our clients. So we’re working to understand what kind of private cloud solutions they need, what types of solutions we can offer them, and helping them build out their own private clouds. We are very flexible in our data center solutions and provide the client the confidence that their systems are being supported by leveraging the redundancy we have with owning three data centers, as well as having a 30-seat world class cloud management center that’s managing and monitoring our client’s networks & systems across the globe. So I’d say that our strength is really in customized, differentiated services we bring to our clients. We don’t have very generic, vanilla-type offerings. And we’re not out there saying, “Okay, you wanna buy this much disk space or this much compute, we’ll sell you that…or, hey, we can give you hosted virtualized servers like everyone else.” Rather, we’re about “How do you want to leverage infrastructure-as-a-service?” And we’re building client infrastructures typically for their businesses or their verticals, not just very generic ones like a lot of the large firms out there are.
CR: Who do you compete with most out there these days? Have you found the profile has changed a lot over the last five years or so? Or are you competing with different companies you didn’t compete with before?
MG: I think a lot of it has to do with 10 technology pillars and service offerings that we go to market with and we have competitors within each pillar, but rarely do we have a competitor that can do everything we can do across the board. Basically what we’re saying is, our real differentiator is that the client tells us how they want to consume, support and finance the IT initiatives and we build the solution around THAT. Where a lot of our competitors say, “Okay, you have a problem. We’ll sell you this product that might fix it.” Or, “You have a problem. You can buy this cloud offering, but you can only buy it THIS way.” You know, owning our own data centers, being a CLEC, having our own managed services, having 100+ engineers to do strategic deployments for our customers—we’re very flexible in our deployment options and I think that’s what’s really allowed us to differentiate against our competitors and be able to help customers from beginning to end. A lot of our competitors can just do one specific service to fill a niche and then they have to turn to a partner or somewhere else to fill gaps…where we can do it all in-house and allow our client one complete solution from one provider.
CR: Does Netrix sell a lot of network services, for example from carriers, or are you approached by them to bundle in those types, like the lines into the solutions?
MG: You know it’s unique because we actually are a CLEC. We own our own backbone and we’re also a master agent of all the carriers out there. A lot of our clients are looking for custom solutions and what they’re looking for is to go to one company. What I mean by that is, let’s say you want to build a private cloud solution. Well, you’ve got to have someone that owns a data center, that owns the backbone, that provides managed services and has the engineering services to deploy that. So, under one umbrella we can give it all to our clients: “Put your systems in our data center, we’ll attach our Internet circuits to it, and we’ll manage it from our cloud management center. We have the engineers to deploy the services for you. We can sell you the equipment and give it to you in a way that you want to finance it.” So whether it’s capex or opex—there’s a lot of flexibility we give our clients.
CR: That’s a big differentiator for you. I hate to use the term, but you’re the one throat to choke, essentially, for entire infrastructure.
Sounds like Netrix has been selling in the recurring revenue model for a while. Are there challenges that you still face with compensating your sales people compared to the more traditional where reps make their money selling products off a gross margin—up front versus over time? How do you address that?
MG: Yes, I think everybody in our market is facing that challenge and there’s no secret sauce to it. We have people that have been selling monthly recurring services, cloud services for a long time and we also have great sales reps that have been selling, say, “products” for 20 years. It’s harder to take people that have been in a traditional product procurement model and try to move them into managed services and cloud services consultative solution selling model…it's very difficult, so what we’ve done is we’ve definitely upped the upfront compensation for the traditional procurement focused folks to allow them to sell those advanced services so they can see the profitability to their wallet day one. Also we are going out there and looking for a sales force that—you’ve heard the term “born in a cloud”—that has only sold the monthly reoccurring model. We also have reps who come from a systems integration background; we’re putting together compensation models that will allow our reps to really look at MRC as something that is going to make them a lot of money immediately as well as allow them to build an annuity business. So there are a lot of different strategies that we’ve used. It’s not easy; there’s no perfect model. But we’re continuing to evolve that.
CR: So changing gears a little bit and talking about Unified Communications, specifically, are there any particular vendors where you’re seeing some really good growth in terms of your business and service revenue?
MG: You know, I’d say in the UC space, we’re definitely seeing a lot of growth with Cisco. We’re also seeing a lot of growth with Microsoft Lync. I’d say both of those companies have really just taken the leap forward as compared to others that are in this space, whether it be ShoreTel or Avaya or Mitel. You know, it’s really coming down to a two-horse race and both of our engineering practices around Cisco and Microsoft are blowing up. Both of those are really just taking off and we’re having a challenging time just finding talented engineers that can do it based on demand out there. But I would definitely say Microsoft and Cisco are pulling away from the rest of the pack.
CR: Do those vendors drive a lot of service revenue for you, as well, or is it more product sales?
MG: I’d definitely say on the Microsoft side, it’s more services, since their software selling strategy is a little bit different than Cisco’s. There’s a very big push and we’re doing a lot of O365 and cloud type deployments around Microsoft solutions.
With Cisco, we are still moving a lot of hardware, software and services and our Cisco numbers are up significantly. Cisco’s services are still extremely profitable and we’re doing a lot of that.
CR: You mentioned one of the challenges you face is trying to keep up with having the right technical people on staff to provide services, to deploy a lot of these technologies. I think this is a challenge faced by many other solution providers out there, too. Is there anything specific that Netrix is doing to address this? Is there a process that you go through to decide when the head count is right or is it just when get a certain utilization rate? And how do you keep feeding that growth of hiring people in a competitive market like we have right now?
MG: We are always looking for the top sales and engineering talent that are out there. We have many open positions for them. But at the same time, we just don’t want to hire to add head count. You know at Netrix, I’d say that our culture is definitely something we value highly. We want to bring people in that can help us grow with their ideas, so we interview a lot of people and we pass on a lot of them. We have to, because we’re not looking to just bring on head count. We’re looking to bring in innovative sales people that can help drive our overall consultative sales strategy. We are looking for engineering leaders who understand the business side of the IT equation. For sales we are looking at reps who know how to sell very differently than 10 years ago. Back then, it was much more of a traditional systems integration-product type sale. Whereas now, we’re looking to find people that have financial and business backgrounds and can talk to business line managers as well as talk to the IT people, so the people that we’re looking to hire are the people who understand how to sell to the CFO, sell to the CEO—the ones who really are able to use technology to drive profitability in their companies—instead of just only moving product, as we did 10 years ago.
CR: So looking back at UC specifically and the industry, how do you think the industry will be different in five years? You’ve been in this space for quite awhile, I think—almost 15 years and maybe even a little more. What do you see changing most dramatically in the next five years?
MG: You know, I definitely see unique approaches as it relates to the cloud. I think there’s a lot that’s going to happen with VDI and cloud coming in together. There’s going to be a lot of change. Microsoft for example, has made a huge push into the cloud with O365 and Azure, and they are still perfecting their Enterprise voice solutions. I’ll be interested to see how that’s going to go down that road. Cisco’s continuing to evolve and adapt in that space, and its cloud strategy leveraging Intercloud through their partners is a differentiator. So I think that probably the biggest disruptor in the next five years, with so much UC actually going in the cloud, is how much of it is going to be easy to manage, easy to integrate into existing networks and seamless to the end user. I think that whatever vendor can figure that out—how to make UC in the cloud easy to use, reliable and completely seamless to the end-user—is going to win the game. I still think we’re a ways away from that, but whoever can figure out that cloud usage strategy, I think they’re the ones that are really going to end up winning this game. I really think the bulk of it is going to be in the cloud, whereas now, the UC manufacturers perfecting the cloud model for the end user is minimal.
CR: I see Cisco has recently changed its position and gone away from Unified Communications as a sort of umbrella term, using “collaboration” more. Do you like “collaboration” as the branding? Are there other terms that you like to identify these types of technologies?
MG: I think “collaboration” makes more sense when you look at it, but at the same time, we’re still communicating. At the end of the day, whatever any vendor wants to call it, it’s going to come down to, “Can I use this product as easily as I use my iPhone at home with my wireless router connected to my Gmail that I set up myself?” You know the interesting thing is that some of you go home to technology that just works. And then go into the office and deal with having the pain of logging into multiple systems or dealing with “this system’s going to be down” or “I can’t use this on my personal tablet because it’s not an approved device.” We make it very hard in the corporate network to work seamlessly. You know, I was talking with a CIO of a very large financial company recently and he said, “I have one job, Mike. To make sure that people don’t know who IT is.”
And I started to laugh. I said, “Hey, I’m going to steal that. Can you expand on it?”
He said, “Why do employees call the IT department? You go to the IT department at your company so that they can fix something, because it didn’t work and you are sitting there not able to work… Then, all of a sudden you go home and right when you walk in the door, you connect to your wireless network, you connect to your Sonos, your home automation systems, your devices and everything just works. Back at the office, it doesn’t work.” So, he says, “It is our jobs as leaders in the IT industry to make technology as seamless in a work experience as it is in a personal home experience.”
So I think that’s what’s going to change a lot of the collaboration space—when you have the tools as easy to use as they are at home, in the work space.
CR: I think that’s a great point. If you look back 10 to 15 years ago in the industry, just in general, what has changed the most?
MG: I think two things have changed drastically. I think the role of the IT salesperson has drastically changed. You know 10-15 years ago, the Internet was still evolving and product/technology information was not readily available, so as salespeople we were bringing in a lot of slicks, product briefs and educating the client, “Hey, here’s this product. And that product.” Now when you walk into a client today and you’re looking to help them and to sell them solutions, 60 percent of the sales cycle is gone. They already have researched all of the products and have personal thoughts on what they’re going to buy and have their minds set on what they think they need.
So we have to challenge the client, understand the business need, what the business outcome is expected to be and why they’re going to buy it. And so I think that has changed a ton in the last 10-15 years versus how people are consuming technology and what they think they need as compared to what they might need. As sales professionals we need to step our game up and spend more time questioning the client on why they feel they need a specific solution or why they think a product is the right choice for them. We need to work toward becomimg more or a trusted advisor instead of a sales person pushing products.
And I think the second thing that’s really changed is just the personalization of IT. You know, 10, 15 years ago, the end-user wasn’t that IT proficient. Now everybody loves his technology 24 hours a day. They say the average person carries 2.8 devices. Everyone these days lives on technology. Technology has become a critical utility we have to have. The more people leverage technology in their personal lives it will help our segment of the industry evolve, which is great. It’s a very, very different world, because technology now is driving the growth of companies. Whereas before IT departments used to be a cost center, it’s turning into a profit center. I think that’s really the biggest change.
CR: Is there anything else that we didn’t cover that you’d like to add?
MG: I don’t think there is anything specific. I think that you came up with some really, really good questions. I’m just interested to see how the whole corporate UC space evolves and how it adapts like the personal usage models such as the Skypes and Google Hangouts of the world. I’m very interested to see where and how some of these free services are going to transition from consumer to potentially business solutions. And then how the business solutions are going to compete against some of the free services. I’m definitely interested to see how that’s going to evolve, because it’s something that we acknowledge as in-the-middle-of-the-road work, on the personal side and the professional. I start to see all these technologies coming together—some are free, some are not—but are they going to be interoperable? That’s probably the biggest challenge.
CR: Great. Well, thank you very much for your insights, Mike.