Magazine Article | October 17, 2016

The Road Less Traveled To Double-Digit Managed Services Growth

By The Business Solutions Network

A former MSP (managed services provider) business owner discusses lessons learned over the years and why being the boss isn’t the only way to drive growth and have a fulfilling career.

MJ Shoer (l), former owner of Jenaly Technology Group, and Pete Peterson (r), cofounder and VP of sales, Internet & Telephone, found that merging their companies enabled them to realize their growth goals much sooner than they could have working separately.

If you’ve been to an IT channel event within the past few years, there’s a good chance you may have seen MJ Shoer. In addition to being active in multiple IT channel peer groups (Robin Robins, Taylor Business Group) and industry associations (ASCII, CompTIA), he attends several industry events.

We featured Shoer on the cover of the June 2012 issue (see “Why Now Is The Right Time To Sell Cloud Computing”). At the time, his company, Jenaly Technology Group, was an eight-person operation projecting 30 percent revenue growth that year. We followed up at the end of 2012, and he confirmed he reached his goal (see “Where Are They Now? Jenaly Technology Group”), but in a much different way than he originally imagined.

Since 2012, Jenaly continued to grow, reaching 11 employees and nearly 100 active customers in 2015. I caught up with Shoer at Business Solutions’ Channel Transitions VAR/ MSP conference (he participated on a panel) in Boston a few months ago and was curious to get an update. In typical MJ fashion, he was transparent about lessons learned (sometimes the hard way) as well as his decision last year to be acquired by telecom service provider-turned-MSP Internet & Telephone.

Lesson #1: Think Twice Before Starting Your Own Cloud Company
In 2012, Shoer and 16 other business owners and members of his Robin Robins Producers Club group formed a cloud company called TOGL. The concept started as an answer to the complaints each member had experienced reselling cloud services from other providers. “We decided to pool all of our resources and build our own cloud service offering,” he says. The venture lasted only two years before shutting down, but it left Jenaly and the other MSPs with several lessons. “Jenaly faced several objections from customers in the New England area, such as not enough ROI compared with on-premise computing, and there were lots of concerns over potential productivity loss should the internet go down,” he says. “The amount of education business partners and customers required before considering the cloud was much greater than we realized when we first started the business.”

But those objections were not what ultimately caused the cloud company to fold, says Shoer. “Operating a company by committee simply doesn’t work. It’s too easy to lose focus, and that’s exactly what happened to TOGL. Initially, the focus was on reselling our own cloud services to businesses that were a fit for our MSP practices. But things quickly evolved into, ‘Let’s sell cloud services to the channel as a master cloud MSP.’ We violated the principle we had been talking to customers about for years: ‘Don’t go after the shiny object. Stay focused.’”

Another challenge with creating your own cloud service is that it puts you in direct competition with companies such as Amazon and Microsoft, says Shoer, and you just can’t compete with their economies of scale. What does make sense, however, is partnering with reputable cloud providers and selling hybrid cloud services. “Microsoft endorses this approach, too, which makes sense, since some IT resources are best left on-premises and others can and should be moved to the cloud,” he says.

Lesson #2: Doing Multiple Job Roles Simultaneously Can Be Draining
If you were to ask employees at a 10-person managed services company for the names of the lead salesperson, senior engineer, human resources director, and marketing manager, chances are good the answer for each one would be the business owner. Shoer knew this all too well. “Everyone’s had the experience where you go to work with the intention of being productive and from the moment you arrive until well past 5 p.m. you’re dealing with nonstop urgent employee problems. By the time everyone leaves, you’re too tired to work on the things you wanted to get done that day. As a small business owner, it’s easy for this scenario to become your everyday reality, which over time can become very frustrating as you watch your strategic objectives take a back seat to these more tactical matters. It’s the classic battle of working in the business when you really need to be working on the business.”

Over the years, Shoer learned to optimize his time by getting to work early and sticking with a rigorous CrossFit training program three times a week to help reduce stress and improve focus. But, he still spent a good portion of each workweek mired in HR and admin tasks. His real passion has always been researching the latest IT solutions and consulting with clients to help them choose the best solutions for their businesses.



“When I informed my employees about the acquisition, it was a shocking announcement that they had not seen coming.”

MJ Shoer, former owner of Jenaly Technology Group

 

 

Lesson #3: Getting Acquired Can Be A Win-Win
We’ve all seen examples in the hardware and software manufacturing world where one company acquires a competitor for the sole purpose of dissolving the other company. Nearly everyone at the acquired company loses out as the acquirer cleans house and puts its managers and executives in place. Shoer knows, however, that there is another kind of acquisition that ends with a much different result. That’s what he discovered when Paul Cissel and Pete Peterson, cofounders of Internet & Telephone (see “3 Pillars Of Managed Services Success” in the May 2015 issue of Business Solutions magazine), approached him about acquiring his company last year. “I have known these guys for 25 years, and we had actually been customers of one another over the years,” says Shoer. “As their telephone business expanded and evolved to include IT services, we had a gentleman’s agreement in place to help each other where we could. We even shared a few mutual customers.” Shoer says he didn’t think anything of it when Cissel invited him to lunch, and he certainly wasn’t expecting to be asked if he wanted to sell his company to Internet & Telephone and to come work for them as their CTO.

“When Paul and I started talking about potential mergers, Jenaly vaulted to the top of the list because we knew MJ and his team would be a perfect fit with our team and our culture,” says Peterson. “We actually prefer to use the word merger rather than acquisition, because we wanted employees from both companies to feel empowered about the benefits of joining forces.”

Cissel concurs and adds, “Not only did we want to expand our managed services practice and technical team, but our former CTO moved into a COO role, so we felt MJ would be a perfect fit to fill the CTO role. We are excited about his vision and having him as a key member of our executive team moving us forward.”

Shoer admits he was initially taken aback by the proposal. “Up to that point, I had never thought about a merger or acquisition as an option,” he says. “Over the next eight weeks, however, I thought long and hard about all the pros and cons, and in the end I could not come up with any good reasons not to do it. I knew I was looking at making some radical changes at Jenaly, to properly reposition the company for the type of growth I was looking for. Realistically, this would have taken many years to achieve. By joining Internet & Telephone, I could more quickly accomplish similar goals and focus on the things I am best at, plus all my employees would have better career growth opportunities, too.”



“We actually prefer to use the word merger rather than acquisition, because we wanted employees from both companies to feel empowered about the benefits of joining forces.”

Pete Peterson, cofounder and VP of sales, Internet & Telephone

 

Postacquisition Reflections And Future Predictions
In hindsight, Shoer has only one regret with the merger/ acquisition. “I wish I had been more understanding of the fact that I had eight weeks to process everything and come to this decision and clearly understand the benefits of the merger,” he says. “When I informed my employees about the acquisition , it was a shocking announcement that they had not seen coming. What was clear to me at this point was new and raw for them, and I didn’t account for that in my planning. There were a couple of guys who had major concerns and reservations, and it took time to get them on the same page I was on. In the end, we learned some valuable lessons about the process and how to improve it for all concerned.”

Today, Shoer is part of a five-person executive team that directs Internet & Telephone’s business decisions. “Each one of us has our area of responsibility, and no one oversteps their bounds,” he says. “We have a high level of mutual respect for one another. It’s nice, too, that the group is small enough that it doesn’t become paralyzed with indecision like the 17-person committee that ran the previous cloud company (TOGL) did.”

One of the projects Shoer is working on now is Internet & Telephone’s security practice. “We’re adding more sophisticated offerings that go beyond antivirus, backup, and basic perimeter security,” he says. “According to the Cisco 2016 Annual Security Report, more than 85 percent of organizations studied were found to be infected with malicious browser extensions. Additionally, current industry estimates indicate that the time to detection [TTD] for security compromises averages 150 days (five months). Today’s security threats require more sophisticated defenses, including SIEM [security information and event management] services, which constantly monitor and analyze traffic patterns on customers’ networks and help MSPs more quickly identify patterns that are out of the ordinary. We’re evaluating these kinds of services right now along with reporting that can help us present our key findings to customers in a succinct manner as opposed to a 90-page report that no one has the time to read.”

Shoer describes his new role as CTO as being like a kid in a candy store. “I’m getting to do the things I like to do most, and I no longer have to worry about reviewing the sales compensation plan, evaluating insurance plans, or being the HR manager, to name a few. Someone else is in charge of that. This move is not a fit for every small business owner, but my advice to other entrepreneurs is this — keep an open mind, carefully weigh the pros and cons, and don’t let pride hold you back from having a better career experience.”