Colorado success stories: Latisys

Success is in the "private cloud"


Posted 08.10.2011 in Colorado Biz Magazine

By David P. Mead

Editor's note: This is another in a series of Colorado company success stories as told by CEOs and business owners.

Latisys provides data center solutions, including colocation, managed hosting and managed services, that extend and enhance a company's IT infrastructure. Customers are primarily Fortune 1000 companies and government. Latisys, headquartered in Englewood, was listed on the Inc 5000 List of Fastest Growing Companies in both 2009 and 2010, and has enjoyed consistent 35 percent year over year revenue growth and 45 percent annual EBITDA growth.

It currently has 145 employees in four strategic geographical locations across the U.S, including suburban, non-Central Business District locations in the Orange County, CA, Chicago, Washington, DC and Denver markets. Since 2007, the company has raised over $225 million in debt and equity capital to fund its expansion. I recently had lunch with CEO Pete Stevenson, who shared some insight about Latisys' growth and opportunities.

Latisys was created as a consolidation of data centers. Historically, most consolidations - or roll-ups - don't succeed as ongoing entities. What has helped Latisys succeed?

We saw a consolidation opportunity in 2007 in a data services arena that was a fragmented industry. More importantly, there were three of us who set out to build a great company, work with the very best people, those we wanted to work with, and to have fun. It was fortuitous that, at this same time, we met with some private equity investors who saw a similar opportunity but had not yet met the right management team to back. The timing was right and it has been a great partnership.

Having major investors certainly helped you get started, but why do customers select Latisys?

We have several big advantages based on our strategy: The first is flexibility. We have a customer -focused service approach. We offer flexibility in contracts, for example. We understand that customers need to change over time, modify their needs, and do things that were not in the original agreement. We also invest heavily in developing automation and software tools that make it easier for the customer to access information and to do business with us. Second, we have a "power strategy." We have developed a physical infrastructure that is built for the future with lots of power and lots of high density computing capacity. Third, we believe in investing in capacity. We believe that in order to attract large enterprise customers you must demonstrate the ability to meet their current and future needs. Currently, we have the capacity to quadruple our business. Fourth, our people are the very best "A players" that can offer our customers the technical know-how and strategic direction, project management, and customer-focus they need.

You have spoken about the changing role of the Chief Information Officer?

The role of the CIO is changing rapidly to the purchaser and manager of resources and services - both internal and outsourced. Latisys is offering a suite of services aimed to help the CIO accomplish his/her goals within the enterprise and truly function as a strategic partner to the business.

You have accomplished growth both through acquisition as well as internal organic growth. Is there more M&A activity in the future?

We expect that to continue. We have some real advantages when it comes to acquisitions. We know what we are looking for so we don't waste time -either ours or our prospect's. We are credible because we are funded and have completed some acquisitions. We take the time to build relationships with the target companies. They know we will take care of both their employees and customers. They want to know they will be selling to a reputable firm that is committed to the customer.

What's in store in the future for the Managed Services Industry and Latisys?

We're really only in the second inning of the outsourcing business - of a 15-year trend. The industry will continue to evolve. Latisys needs to continue to have the right products and services. That means innovation in the "private cloud". A few weeks ago we made a major announcement that Latisys has selected HP CloudSystem as the core infrastructure platform for the Latisys Private Cloud. This platform is a key component of the firm's unified architecture that supports highly secure cloud services and enables a hybrid managed hosting cloud. In plain language, this means a highly secure, highly available and privately managed cloud for large enterprise customers.

Technology is very important. But we are in the "trust" business. If you don't have a customer focus, customers will not continue to grow with you and they will cap their business. We strive to provide a great customer lifecycle experience - from our pre-sales contacts throughout the process. We are very transparent and we have the customer's back and learn from our mistakes. Our culture is focused around the customer, teamwork, trust, and better communications. As we like to say, we make better decisions faster. 

Grandpa, what were you doing during the Great Recession of 2007-2016?

Were you a winner, a victim, or a bystander?

By David P. Mead

Flash forward to the year 2030...most of us will be playing with grandkids. I remember asking my two grandfathers what they did during the Great Depression – how they provided for their families, took on extra work where they could find it. While this current period in is no way a direct comparison to the depression, I do think we may reflect back on these times in much the same manner.

While many find themselves in unfortunate circumstances that may be somewhat beyond their control, there are many who can affect their outcome.

In a recent Wall St. Journal survey of economists over 50% of those surveyed do not expect that the output gap in the U.S. economy would be filled until 2016 or later.  For the past few years ago I have been concerned about what I saw as an economic malaise in the U.S. It now appears that we may be in for another several years of a long slow economic slog.

Victims and bystanders: Hope is not a strategy. Now my concern is more focused on a management cultural malaise that I believe has descended on a number of companies. Hunkering down has become a management skill. Many companies have rewarded tight cash management, not taking risks, expense reduction, and retaining customers at the expense of not reinvesting in R&D, new products, new markets, new ideas, and new business models. Staying the course and hoping for the best has become the strategy. Frankly, “hope is not a strategy.”

If you’re not going to grow, get out now. Some investment bankers are advising baby boomer owners with flat companies to sell now. If you are a business owner in your late 50’s or early 60’s and not planning to be creative to increase demand, then it might be wise to get realistic about your company’s value and get out now if you can. Business life will likely not get appreciably better for the next 3 - 5 years - and could get worse - for those companies that are standing still.

No, I am not pessimistic. To the contrary, I see lots of positives:

·        There has never been a time of greater opportunity

·        There is plenty of capital for growth and investment in good opportunities with good management

·        There are new ideas, new technologies, new business models that can change our lives

·        Technology is being applied in mature industries in transformational ways

Winners: Business innovators. We are seeing more disruptive and transformational business innovation than ever before. While these companies may not YET be enjoying great volume, they are proving out new models. We may well be looking at irreversible shifts in fundamental market dynamics – buyers now know more than sellers,  mobile devices are putting more power in hands of consumers, consumer advocacy can spring up overnight, real-time customer feedback is helping design new products in real time, dramatic reductions in friction are occurring in marketplaces. ; Industries, like many in distribution, that exist because of fragmented customers or disorganized or inefficient supply chains may now be at risk. The friction-less immediate and free flow of information is transforming and enabling lower cost, faster, customized business models.

Some of these companies are in your backyard. Companies such as the company with LED commercial lighting systems that have a 10+-year life with lower energy consumption, and the business that provides market research (unbiased consumer feedback with real people using real products in real environments)at greatly reduced cost, and the organization that provides cost effective online marketing to SMBs using crowdsourcing, are transforming their industries.

Winners: Business transformers. Transformation is occurring with some older businesses as well. One catalogue distribution business has employed new data manipulation techniques to better understand how, what, where, and why customers buy. The results have changed the way they go to market, the product/inventory mix, and the way products are supplied and delivered to customers. 

Many companies have suddenly found themselves in the “irrelevant middle”- they don’t offer highly differentiated value-added products and they aren’t the lowest cost provider of the commoditized products. Some of these companies have created new models to profitably serve customers at either end – very low cost, “no frills” providers of commodity products on one end, or highly customer-focused, value-added solution providers at the other end. Companies in industries ranging from metals distribution to medical devices to selling carbon credits are all wrestling with the same issue of transforming away from the “irrelevant middle.”

A better story for the grandkids. Want to create a better story to tell your grandkids? Stop being a bystander and take matters into your own hands. The old ways of ‘waiting for the economy to come back” are clearly not going to work this time. 

Is this overly harsh or do you agree with this assessment? What do you think?