A Force for Change -- and Cost-Cutting
Matrixforce offers a compelling business case for taking over its customers' IT departments: guaranteed performance and savings of 50 percent.
- By Paul Desmond
- March 01, 2006
If you can promise prospective customers you'll cut their current costs by 50 percent while guaranteeing their satisfaction, chances are you're going to get your fair share of business.
That's been the case for Matrixforce, a 28-year-old service provider based in Tulsa, Okla. When founded in 1978, the company focused on data collection, bar code technology and time, attendance and labor tracking. It was essentially reborn in 1992, when it joined the Microsoft Solution Provider Program, the precursor to today's Microsoft Partner Program. "Today, we're solidly a Microsoft consulting and support firm," says Matrixforce CEO Kevin Fream. "All we do is business support with Microsoft infrastructure."
Five years ago, the company had yet another epiphany of sorts, when it embarked on an effort to offer services, backed by a service level agreement (SLA) that would obviate the need for companies to have their own in-house IT staffs. "Our value proposition is that we come in [costing] 50 percent less than a full-time employee," Fream says. In addition, Matrixforce's SLA guarantees that it will identify and respond to IT problems, perform regular maintenance and provide weekly satisfaction reports, among other services.
So far, the approach is working well. The company has grown between
22 percent and 30 percent per year for each of the last three years,
with annual revenue now between $5 million and $6 million. Meanwhile,
income from the services side of the business has jumped, from no
more than 35 percent historically to 60 percent of the company's
overall revenues. And that services work yields healthy margins
of 40 percent to 70 percent. Compare that to the typical 4 percent
to 6 percent margins for hardware, and you can see why Fream says
the services focus has transformed the company.
In the Beginning
Fream is something of an oddity in the IT business -- or any business
for that matter -- because he's stayed with the same firm since
graduating from college. He was a self-described "wide-eyed
college kid" when he joined the company fresh out of Tulsa
University in 1989. (Matrixforce was then known as Computer Technology
Solutions, a name recently changed to avoid confusion with 16 other
companies in the Microsoft Resource Directory with similar names.)
key to making Matrixforce’s SLA strategy fly was
developing and documenting repeatable processes for
virtually everything the company does. That kind of
blueprinting helps the company keep quality up and costs
Fream had other employment options, including managing a worldwide
financial system upgrade for Cessna Aircraft and being a lead developer
for Citgo Petroleum. Ultimately, he chose Matrixforce because, he
recalls, "I wanted to do something where I had a good opportunity
to do everything."
That's exactly what he's done, climbing the ladder from programmer analyst to system analyst to project leader, director of integration services, general manager and, eventually, to CEO. Three years ago, Fream bought out Ross Brown, the company's original owner, so now he holds the title of owner as well.
In late 1993, Matrixforce changed its corporate strategy. Rather
than spending time traveling to serve clients scattered from Rhode
Island to Alaska and working with a variety of vendors, the company's
leadership decided to focus on customers in their home territory
-- and on Microsoft technology. The new tack began as one division
within the larger company that focused on networks and some custom
development, then expanded to encompass the whole business. Today,
the Microsoft Gold Certified Partner focuses strictly on business
support, primarily serving customers in Oklahoma.
Finding Profit in SLAs
But it was five years ago, when Matrixforce adopted its SLA strategy,
that things really took off. One key to making that strategy fly was
developing and documenting repeatable processes for virtually everything
the company does -- and not just on the technical side. "I think
we're one of the few organizations that actually have a playbook for
sales," Fream says. That playbook includes an "elevator
statement" -- that is, a brief summary of the company's mission
and focus -- answers to questions about the company's qualifications,
solution-selling steps to follow and documentation about the company's
various packages. That kind of blueprinting helps the company keep
quality up and costs down.
Web Site: www.matrixforce.com
Top Executive: Kevin Fream, CEO
Line of Business: IT consulting, business
Microsoft Partner Level: Gold Certified
Microsoft Competencies: Security, Advanced
Infrastructure, Networking Infrastructure and
Information Worker Solutions
Annual Revenue: $5 million to $6 million
Growth Rate: 22 percent to 30 percent over
past three years
Employees: About 25
Target Markets: Midmarket professional
services firms, government agencies, nonprofits
Key Milestones: Adopting SLA strategy in
Differentiators: Real-time alerting, 24x7
support, all-MCP staff
Long-Term Goals: Double amount of business
The company also picks its spots, focusing primarily on midmarket
firms in a handful of vertical industries. "We decided some
time back before vertical focus was really ‘in' to focus on professional
services as our No. 1 niche -- law firms, CPAs, doctors, architects,
anything in that area," Fream says. Other focus areas include
government agencies and nonprofits, including churches, humanitarian
organizations and even a couple of American Indian nations. "Midmarket"
in Oklahoma typically refers to 250 or fewer users. The company's
ideal professional-services customer is even smaller, with just
50 to 100 users.
In what Fream calls a growing trend, those customers usually don't have full-time IT departments. Many IT consultants tell such companies that, for 25 users, they need one hardware staffer and one software specialist. But Fream uses a different formula. "The real number today is that for 50 to 100 users, you need one very good IT resource," he says, adding that Matrixforce saves clients 50 percent even over that modest staffing level -- while giving them access to resources they wouldn't have otherwise.
While convincing companies to essentially outsource their entire IT departments may sound like a tough sell, Fream says that's not necessarily the case. Matrixforce uses a model that allows customers to plug in numbers for a full-time employee and compare them to Matrixforce's costs and features.
Chief among those features is help desk support. "We have a help desk system that has a profile on all of our clients," he says. Most customers opt for coverage during business hours, although 24x7 support is also available. In addition, Matrixforce's Insight real-time alerting and monitoring service is often able to detect IT problems before they turn into major system failures.
Another differentiator: Matrixforce employs only Microsoft Certified
Professionals -- generally those trained in multiple areas. Employees
get a bonus for each certification they achieve that helps them
meet predefined company goals.
Matrixforce also offers incentives for maintaining high customer-satisfaction ratings, generating revenue and other achievements. "We're heavily bonus-driven," Fream says. "Our salaries are probably mid-range, but in terms of total compensation with bonuses, we're probably one of the higher firms in our area."
Having all these highly trained professionals provide ongoing service helps establish Matrixforce as a trusted advisor, as do the five-year business technology plans the company creates for its customers. The plans take into account Microsoft product lifecycles and the established mean time between failure numbers, such as five years for a server and three years for a workstation.
Similarly, the company provides each SLA customer with a quarterly "CIO review," a breakdown of what the customer spent and why.
While the company has focused chiefly on customers in Oklahoma
in recent years, its leadership team is considering opening a branch
office in Denver. That's a sign that Matrixforce has come full circle.
As Fream puts it, "We're getting ready to take the next leap and
grow back out."