As I’ve written elsewhere in Above the Clouds, focus is critical to successfully building enterprise value, particularly among small-to-mid-sized consulting firms. Many firms choose to focus on a particular technology horizontal, vendor or vendor product. A much smaller number choose to focus on a particular industry vertical. Suburban Washington DC-based SusQtech is an interesting example of a consultancy that focused both on a specific vendor product – Microsoft SharePoint – and a specific industry vertical – Associations/Not-for-Profit. The firm has over 60 employees and 170 active customers and is well-known for its deep SharePoint expertise, including a number of niche add-on IP/product offerings, and its dominant position within its targeted vertical.
The firm is run by CEO Mike Steadman, an industry veteran who started his career in the Air Force before several senior IS roles in industry culminated with the management buyout of a small consulting group that became SusQtech . I sat down with Mike to learn more about SusQtech and to get his perspective on a number of issues.
Randy Grigg: When and how did you get into the consulting business?
Mike Steadman: My passion for technology got started while in the Air Force. I worked for several Joint Special Operations units as a Satellite Communications specialist, so I traveled the world providing all types of communications services, like secure voice, data, and imaging. After the Air Force, I worked with what is now Cargill. I was in IT, but as a “young man” I was chosen to help them create their very first product website. That project snowballed, and eventually I was the “webmaster” for the entire company. Back then the title “webmaster” was pretty powerful and there was no formal education or playbook. HTML was a programming language, and if you knew some script or how to integrate anything from the web into a back-end system, you were a hero. Our team basically made it up as we went along, learning on the fly, but we had a blast.
RG: What’s the founding story behind SusQtech?
MS: When the e-commerce bubble appeared in the late 90’s, I left Cargill and joined what is now SusQtech. Back then we were a digital media firm created as a spinoff from a large, national printing company called Perry Judds. I immediately got to work with some of the original e-commerce pioneers along with some major customers. That first year was another whirlwind of hard work and fun. We helped launch Martha Stewart’s e-commerce empire, had clients like Reba McIntyre (at the peak of her career), Black and Decker and quite a few magazine catalogers. Remember, this was when the world was terrified of “Y2K” and the Internet was scary… and we were building some of the first multi-lingual, multi-currency e-commerce websites. It was an amazing time. In 2001, Perry Judds decided to focus exclusively on printing, so we went on the market and were quickly acquired by Susquehanna Media, a national holding company with radio and cable assets, but nothing in the Internet space. That’s when we became Susquehanna Technologies. Our mission was to add a growing Internet division to the parent company’s portfolio. Everyone remembers when the bubble burst for dot-com’s, but we had so many recognizable brands and companies that we made it through unscathed. Unfortunately, the parent company had no experience in the services industry, so we experienced a carousel ride of “professional” CEO’s for the next few years. As each new CEO came and went, I was learning something new every day, so I stuck around and really got to understand the nuances of running a services business. All of this paid off in 2005, when two other leaders of the company and I executed a management buy-out. We knew that in order to make it we had to focus. Therefore, we were selective in the buy-out and started out very small, with 9 people (including us 3) and around 20 customers. The rest, as they say, is history. Today we have over 60 employees and over 170 active customers.
RG: How do you differentiate vis-à-vis your competitors?
MS: One word: Focus. When we re-launched ourselves in 2005, we set out to be the dominant SharePoint services provider in the Associations and Non Profit Marketplace, and that’s exactly what we did. Today, we do serve other markets, with the #2 and #3 markets being government and professional services, but we are still entirely in the SharePoint ecosystem, which includes so much more than just project services. In fact, we have four distinct and largely autonomous business units around SharePoint: Project Services, Support Services, Training, and Products. The support division has been the fastest growing division for 3 years in a row.
RG: What was the genesis of the Microsoft relationship and how did you come to focus on SharePoint?
MS: In the late ‘90s, we were early players in building information and e-commerce sites and web content management systems using the Microsoft Information Worker stack. Back then, the core product was “Microsoft Site Server, Commerce Edition.” We were one of 11 Gold Partners in the Mid-Atlantic Division, and were well known by both Microsoft and the industry at large. We held a seat on the “partner advisory council,” where we routinely visited Redmond and helped define the future for what is now the Office Server platform. Around 2000, Microsoft acquired a company whose product went on to become Microsoft Content Management Server (MCMS) and we were one of a handful of partners who focused on that technology. Our SharePoint business grew quickly when the 2003 release hit the streets but back then we were unable to use SharePoint “outside the firewall,” so we supported both SharePoint and MCMS. When MCMS was rolled into SharePoint 2007, business exploded because we had a major head-start on leveraging SharePoint for public and partner-facing websites. That’s when we decided to focus exclusively on SharePoint as the core of our business. Even so, we have to maintain competency in all of the peripheral applications that plug into SharePoint, so SQL Analytics and Reporting Services, Commerce Server, and Dynamics/CRM still play a big part in our solution set.
RG: How and why did you decide to begin hosting your annual SharePoint conference and how many attendees did you have for this year’s event?
MS: The people who make up the Association market are a very tight knit community; everybody knows everybody. Every large technology vendor holds regular customer meetings and conferences, and as we grew, our customers came to expect this from us. To meet this expectation, we began with monthly user groups. These were largely just “get-togethers,” but as attendance grew, and we ended up with more suggested topics than time, we decided to host an annual conference. Our first conference was in 2008, and to be honest, we really didn’t know what we were doing. We were shocked when we had over 170 people show up. The conference has grown a little bit each year, and this year we had 250 attendees and 12 sponsors.
RG: How did you come to focus on the Associations & Not-for-Profit industry vertical and what unique aspects does it present to a consultancy?
MS: Back in the days of Judds, the Association market made up a significant portion of the revenue stream, since most Associations published a monthly magazine (with Judds), and hired us to port their magazines online. If you think about it, you’ll realize that while the circulation numbers may not be as high as mainstream consumer magazines; there are a LOT of monthly association magazines. In the early 2000’s – when HTML was a language – we had an army of content specialists who literally scanned images and then migrated and reformatted print content to web content. There wasn’t an easy way in the beginning, so the brute force method was the only means available. Early content management systems (CMS) cost millions of dollars, so we quickly wrote our own CMS and it was a big success among magazine publishers. We didn’t want to be a product company early on, so in 2001, when Microsoft came out with Content Management Server, we quickly became experts in that product and introduced it into the Association space for both magazines and member-facing websites. Again, the Association market is tight-knit and can be very demanding, particularly in terms of support expectations, but they all consider vendors to be business partners and are loyal if you do a great job for them.
RG: Many consultancies struggle with the issue of how far to go in developing proprietary IP and figuring out a workable operating model that combines traditional consulting around third party tools with product development, ownership and marketing. How have you dealt with this in your line of SharePoint add-on products?
MS: SharePoint was developed as a horizontal technology that fits across all industries. Our strategy has been to find gaps in what SharePoint provides out of the box within our targeted verticals. With our vertical expertise, we can identify specific need gaps and fill them. We evaluate these potential investments using three primary criteria: 1) does it directly compete with our services business, 2) is there an existing solution out there, and 3) is the required investment small enough that we can generate sufficient IRR? Our product add-ons tend to be the only options in their niches. We only develop light weight, quick-to-market products. Our long-term strategy is not to be a product company but it is to be a consultancy with highly differentiated expertise and IP.
RG: What does your sweet spot client look like in terms of size and any other criteria?
MS: Our average clients have annual budgets between $20 million and $100 million and have between 50 and 250 employees. Over 50% of our clients are located, or have a major presence in, the greater DC area but around 30% are in the Chicago area. The remainder is spread out all over the country.
RG: What does a typical project look like in terms of types and numbers of consultants involved, engagement length, etc.?
MS: Our average deal size is over $100K, with 2 near full time team-members, and another 3 or 4 part time team members with specific subject matter expertise, such as Information Architecture or Content Strategy. We aren’t a body-shop, selling only full-time 100% billable work, so our typical project can take between 3 to 6 months to deliver, depending on how fast the customer wants to work. With website projects, we do a lot of hand-holding and making sure that the executive teams and board members are involved or at least aware of the direction we are taking the client. In the end, this extra work is well worth it for us and for our clients and is critical to one of our key project philosophies—“no surprises.”
RG: What are the key metrics you focus on in managing your business?
MS: For financials, I look hard at EBITDA, operating cash flow and billability. We use a gross and net billability formula, where net billability is gross minus PTO. For sales and operations, we track our backlog and pipeline on a weekly basis, and customer retention and satisfaction is tracked quarterly and via a customer “report card.” We also recently implemented a per-ticket tracking system, where support customers rate each ticket. Any ticket with a bad rating gets sent directly to our Vice President, Professional Services for personal follow up.
RG: What’s your sales model in terms of lead generation?
MS: Within the Association vertical, we have strategies around trade shows and events (e.g. the annual conference and lunch and learn or breakfast sessions with SMEs talking about specific topics/products). Our user group generates quite a few sales, too. On the products/training side, we heavily use social media and interactive campaigns, resulting largely in e-commerce sales via the web. Our inside sales and our marketing teams are compensated more heavily for internet sales than for standard paper-contract sales.
RG: What was your revenue growth rate for ’10 and what are you expecting for ’11?
MS: Our revenue growth for 2010 was behind target, and the final number was just over 8%. This was largely based on the pipeline freeze that happened at the very beginning of the year. Sales tempo going into the year was high, and everyone was excited about SharePoint 2010, but nobody wanted to be the first to jump. By Q2, the gates were open, and we saw tremendous sales growth, but the overall yearly revenue had already been affected by that point. This is actually part of the natural, 3-year release cycle we have seen several times, so we were prepared. In 2011, we expect 18% growth. At the mid-year point we are actually ahead of target. The same thing happened in 2005 and 2008 with the previous year’s major SharePoint releases. This is because we get new customers, but we also help existing customers through the release upgrade.
RG: What are your biggest challenges for ’11?
MS: Managing growth and finding good people. In the SharePoint space, finding talent is the #1 challenge. We stopped looking specifically for SharePoint expertise and instead we look for quality, talented people with potential. This has been a great strategy for several years now. We hire 3 or 4 people at a time, and, because SusQtech has an outstanding SharePoint suite of training, we leverage that first. After that, we run in-house, 45-day intensive “boot camps” where different employees are assigned to meet with the group every day, in ½ day increments, to cover different aspects of the business and technology. Inside the walls of SusQtech it is well known that you must know SharePoint in order to be an employee here. That is priority number one for every position, from sales to marketing to delivery.
RG: How has offshore consulting competition impacted your business?
MS: It hasn’t had any impact. SharePoint is much more complex than basic .NET and there just haven’t been good offshore options given the high-touch, highly collaborative nature of our web-based development work.
RG: How are you using social technologies in your business?
JH: We run the largest SharePoint user’s group on LinkedIn, with over 26,000 members, and we have our own private online SharePoint group. We spend lots of time online answering questions and building thought leadership. We’re also active on Twitter and our products are advertised on Google and Facebook. These venues are how we populate our “one to few” marketing events, which are generally lunch-and-learn or breakfast thought leadership sessions.
RG: How do you see the Cloud impacting your business over the next 3-5 years?
MS: We think it will have a major and positive impact. While do we do think hardware and network providers will try to jump into the SharePoint space to increase revenues, they will have a difficult time competing with themselves and then with Microsoft. As a tried and true services provider, who doesn’t resell hardware or hosting, we’re better positioned than anyone with a hardware agenda to handle SharePoint online, from customization to training and support.
RG: What background and set of skills or experiences does the ideal potential consulting hire possess?
MS: Someone who already knows or has the capacity to learn SharePoint inside and out. Beyond that, we look for people who are accustomed to working on multiple concurrent projects with different clients. We really look for lifelong learners who are not change-averse. Whether it’s SharePoint or some other technology, you have be willing to reinvent yourself every 18-24 months to remain viable in this industry.
RG: What sort of things do you do to make sure you retain your “A-player” employees?
MS: We have outstanding benefits and our salaries are largely based on higher-cost DC levels, even though we’re 100 miles outside of the city. We have an ESOP, so there’s an ownership opportunity for every employee. Everyone knows how much they have and what it’s worth. We also work hard to foster a very family friendly environment, with a “fun-committee” whose annual budget provides opportunity for monthly happy hours, movies, baseball games, picnics, etc. We also allow work from home and most of our people do so at least 1 day/week on average.
RG: What’s the most difficult aspect of managing a consultancy?
MS: With both a project division and a support division, the transition between where the project ends and when support begins is one of the most difficult to communicate and contract with clients. We have worked on making this transition smoother for years, but we still have room for improvement.
RG: What’s one piece of advice you wish you’d received before starting your business?
MS: How best to manage expenses and staffing through cyclical environments. The annual professional services related peaks and valleys are bad enough, but the 3-year SharePoint release cycle can be tough to manage.
RG: What’s been your favorite book you’ve read over the last year?
MS: I’m a little embarrassed to say that I generally read horror mystery books, so I’ve read everything by Dean Koontz, but beyond that, the book that stuck with me the most was “The Last Lecture,” by Randy Pausch. I read that on my Kindle, then bought a few copies for family and friends because I thought it was so moving.
RG: What are your favorite resources to keep up with industry/market news?
MS: I like INC and Fast Company and read them cover-to-cover. I also like BNet and get their regular emails.
RG: What’s your favorite gadget?
MS: My IPhone. I have an iPad but I’m still not 100% iPad ready.
RG: What do you enjoy doing when you’re not working?
MS: Keeping bees and brewing beer and playing with my twin daughters. And those are independent activities, not to be intermixed. I have 13 colonies of bees right now and summertime is busy bee season. I tend to brew in the fall and spring, and focus on bees in the summer. Of course, the girls are a 24/7 activity. They are toddlers, so when they aren’t asleep or eating, I’m basically chasing them around the house, or vice versa.
Thanks to Mike for sharing his thoughts. As SharePoint has evolved over the years from an internal content management product to a full-blown collaboration platform, the ranks of consultancies claiming to have SharePoint expertise have swelled. As a result, the need for competitive differentiation has dramatically increased. SusQtech’s combination of technology and industry focus with the development of proprietary IP is a unique example of a consultancy playing all three common differentiation cards in one hand.
We’ll continue to blend these types of interviews with commentary on industry trends, operating models, M&A activity and other content (hopefully) of interest to technology consultancy executives. Please let me know your feedback and ideas for topics you’d like to see covered here.