Invaluable Lessons From An MSP-Turned-VAR
By The Business Solutions Network
Recognizing the unique skillsets between project-based IT and managed services is key to this IT solutions provider’s projected double-digit growth.
UltraLevel
Founded:
2001
2014 Sales Revenue:
$12 million
2014 Sales Growth Rate:
4.5%
2015 Projected Sales Revenue:
$13.2 million
2015 Projected Sales Growth Rate:
10%
Employees:
26
Phone:
(248) 595-7135
Website:
www.ultralevel.com
Verticals:
engineering, financial, healthcare, insurance, manufacturing, SLED (state and local government and education)
Vendors:
Aras, Citrix, ConnectWise, Dell, Kaseya, Microsoft, VMware
Distributors:
Arrow, Ingram Micro, SYNNEX
Create An Open System, IT Infrastructure Differentiator
When hosted private cloud solutions provider UltraLevel decided to become a VAR in 2007, there were some who must have thought it strange that an “as-a-Service” provider would want to sell hardware. And, even more people would have questioned UltraLevel CEO Michael Butz Sr.’s mindset when he made the decision a year later to become an exclusive Dell Premier Partner. At the time, Dell was becoming controversial in the channel due to the growing size of its direct sales force and its vendor acquisition strategy. “There were lots of rumblings in the channel predicting Dell would eventually abandon its resellers and sell only direct,” recalls Butz. UltraLevel had a different perspective on things thanks to Butz’ involvement with the Dell Premier Partner Advisory Council (PPAC). “I could see that Dell’s strategy was to go from being a product manufacturer to a solutions provider, and I knew they needed the channel to be successful,” he says. “I also believed that going all in with them would enable our company to develop a closer partnership with greater benefits.”
It wasn’t just about business strategy that led to UltraLevel’s decision to partner exclusively with Dell and not resell servers and other IT infrastructure equipment from Cisco, EMC, IBM, Oracle, and other competitors. “Dell had an open systems strategy early on that was very attractive,” he says. “Unlike the big competitors that have their own proprietary software and firmware that prevent intermixing of brands, Dell products can be integrated easily with other complementary IT solutions.” Ironically, between 2008 and 2012 Dell acquired many of the complementary products UltraLevel used to sell, such as Force10 Network’s data center networking solutions, SonicWALL firewalls, Wyse thin clients, EqualLogic storage area networks (SANs), and enterprise data storage systems from Compellent Technologies.
Butz says his company has had several years of double-digit growth that he attributes to his company’s loyalty to its top vendor partner. “There have been several instances where Dell’s direct sales team has brought our company into opportunities to assist or take over deals,” he says. “If we weren’t certified in so many Dell products and committed to selling only Dell solutions, it would have created fear, uncertainty, and doubt, which would have made such engagements impossible.”
There has been another key advantage of being a Dell focused reseller, too, says Butz. “Some of the solutions we compete against offer a lot of features and functions our customers really don’t need and will never use. We show customers that they can get everything they need at a much lower total cost of ownership [TCO] by investing in technology that meets their needs. In some instances, the cost savings are enough that we can upgrade a customer from spinning disk to high-performance solid state storage, for example, which they would have been unable to do with a competitor’s solution.”
Dell has reciprocated UltraLevel’s loyalty on many occasions, says Butz. On one occasion, the vendor went above and beyond to help its VAR win a large deal. “The client was skeptical about replacing its legacy firewalls and network switches with Dell products,” he says. “Dell allowed us to offer our client a try-then-buy on 14 firewalls and 6 network switches that they could pilot for 60 days and either purchase or return within that timeframe if they still had any reservations. Most manufacturers will allow prospects to do this with one or two products, but I have never seen anything like this. If the customer had returned the equipment, Dell would not have been able to sell the equipment as new to someone else, and it would have been a significant financial loss for them.”
The try-and-buy plan did work, and Ultra- Level’s customer moved forward with the project, which led to a $75,000 sale for the VAR. “What’s even more exciting is that the initial project led to a much bigger data center refresh, which we closed in April of this year for just under $300,000.”
UltraLevel has become so effective at beating out Dell’s competitors that it’s not uncommon for a competitive manufacturer to contact it about reselling its products (especially a certain network equipment company). “Each time it’s the same story; I tell them I would sell your product if it wasn’t so expensive and overly complex with each network infrastructure layer oversubscribed to the next,” says Butz. “It’s like needing to build a two-lane bridge but trying to build an eight-lane bridge instead. You’re either going to run out of materials before the project is completed, or you’re going to cut corners in other key areas just to get it finished. The truth is I have seen people get fired for selling ‘Big Blue.’ Selling or buying IT infrastructure equipment that’s way beyond a company’s needs is a waste of resources and typically leads to cutting corners in other critical areas such as security and data protection.”
One of the biggest pitfalls solutions providers fall into is thinking that they need to fulfill all their customers’ IT needs with their internal resources, says Michael Butz Sr., CEO, UltraLevel.
Photo By Tim Schermerhorn
Most IT solution providers (ITSPs) follow a similar growth pattern that begins with selling break-fix IT services then evolves into proactively selling project-based IT solutions and services. Eventually, these VARs make the transition to selling managed services and then cloud services. UltraLevel’s journey took nearly the opposite approach.
In 2002, only a year after inception, UltraLevel released its Desktop-as-a-Service (DaaS) offering called Office Online, which allowed clients to lease remote access to full desktops and hosted applications, such as Microsoft Office and Quick- Books. It also offered an IT-as-a-Service (ITaaS) solution hosted in a tier 3 class (i.e., dual-powered equipment and multiple uplinks) colocation facility.
However, the problem with selling cloud solutions nearly a decade before the cloud became a mainstream concept was that very few end users were ready for it. In fact, only about 1 in 25 prospects converted to the IT subscription model in the early days of UltraLevel’s business.
Five years later, UltraLevel found new growth by becoming a VAR selling customer premise IT solutions, such as storage virtualization and consolidation, virtual desktop infrastructure (VDI), backup and disaster recovery (BDR), servers, networking, and security.
Today, about half of UltraLevel’s business comes from selling project-based IT solutions, while the other half comes from selling hosted private cloud and staff augmentation services. The company is projecting more than $1 million in new business growth this year, which CEO Michael Butz Sr. admits could have happened much sooner had he learned a few critical business lessons early on.
Your Techs Shouldn’t Be Doing Double Duty
When Butz first made the decision to become a VAR to supplement his slow-growing hosted private cloud services business, he decided to hire technical consultants and cross-train them to do outbound project services work as well as manage the company’s private hosted cloud environment.
In hindsight, this was a mistake. “We had all kinds of internal data center and customer premise projects going on, and it was taking forever to complete anything,” recalls Butz. “After investigating one internal upgrade project that was projected to be completed in 40 hours, we found that it took 180 hours of effort and more than 6 months to complete because of the inefficiencies involved with all of the starts and stops and resource assignment changes associated with trying to use consultant bench time to complete the work!”
UltraLevel’s profit margins were not the only thing tanking; morale was becoming a problem too. “What we eventually identified as the culprit was that the consultant and data center operator roles required two completely different skill sets — and personality types,” says Butz. “It’s kind of like the difference between sailors and ship builders. Just because someone is skilled at building a ship doesn’t mean that person is equally talented at sailing the ship.”
Moreover, IT consulting requires someone who enjoys traveling, engaging with people, and being surprised every day with a new problem, project, and work environment. An IT administrator or operator, on the other hand, prefers working in the same environment each day, troubleshooting warning and error messages, continually tuning and improving IT systems, and having a highly predictable workday.
After pinpointing the problem, Butz committed to hiring the appropriate staff and separating the data center specialists from the consultants, allowing each group to specialize where it is most effective. “Within our first year of forming two distinct groups, we saw a 30 percent increase in productivity,” he says.
“Separating the business into two companies ensures that each operation sticks to its core competencies.”
Michael Butz Sr., CEO, UltraLevel
Recognize Your Core IT Strengths
Most ITSPs recognize that their customers would prefer to work with a single solutions provider for all their IT needs rather than a security specialist, IT infrastructure specialist, server specialist, BDR specialist, and virtualization specialist. However, the mistake many solution providers make is thinking that they have to deliver services across all of these competency areas with their internal staff in order to keep customers happy. “That business strategy is a recipe for failure,” says Butz. “It’s a lot like a small retailer trying to compete against Wal-Mart. Eventually the bigger retailer, which is able to more easily compete on price, is going to put the smaller one out of business.”
UltraLevel recognized early on that to avoid this pitfall it needed to identify and internally deliver services aligned with its core competencies and outsource the rest. “We identified IT infrastructure, virtualization, VDI, data center consolidation, and BDR as our core competencies, and we decided to outsource other solutions and services, such as desktop security deployments and VoIP, to partners with expertise in these areas,” says Butz. Getting focused enabled UltraLevel to ramp up its IT expertise in a few areas and differentiate itself from competitors. “There are some companies that claim to be everything to everyone, but the reality is that they can’t do everything well. This is where we compete and win,” he says.
A year after separating its hosted private cloud and VAR professional services teams into two distinct business units, Butz decided to take the next step by spinning off his cloud services business unit into a separate company called CloudSAFE, Ltd. (www. cloudsafe.com). “ Separating the business into two companies ensures that each operation sticks to its core competencies and allows CloudSAFE to form new strategic partnerships with other IT solutions providers like UltraLevel that have complementary skill sets,” says Butz.
Butz believes UltraLevel is a real-world example of a saying attributed to Charles Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” UltraLevel did what was necessary to survive while never letting go of its vision of what we now call cloud computing. If CloudSAFE embraces the same adaptability philosophy, its prospect of surviving — and even thriving — looks promising, too.