2015 RCP Rocket Award Winners: Risk-Takers Rise to the Top
For the third straight year, Redmond Channel Partner magazine and Revenue Rocket Consulting Group spotlight three companies that exemplify sustainable growth strategies for the 2015 RCP Rocket Awards.
- By Gladys Rama
- October 14, 2015
If there's a common thread linking all three of the companies that have been chosen as this year's RCP Rocket Award winners, it's that at some point for each of them, it could have all gone wrong.
For Valorem Consulting, that point might have been sometime soon after its founders decided to start a cloud company during a recession. For Uptime Legal Systems, it might have been when its CEO decided to make a critical rebranding decision. And for Pariveda Solutions, there was a potential flashpoint every time it disregarded a big project in favor of a small one.
But instead of turning their businesses belly-up, the risks have paid off for each of these companies -- by a lot.
The RCP Rocket Award, now in its third year, recognizes Valorem, Uptime and Pariveda for their innovative business strategies that have resulted in sustained growth over a three-year period, from 2012 through 2014. Here, we profile what they did right -- even if conventional wisdom might say they were wrong.
Valorem: Take a 'First-in' Approach
Risk is part and parcel of Valorem Consulting's DNA. The co-founders of the Kansas City-based Microsoft consulting partner, Justin Jackson and Domnick Parretta, had a vision of a "first-in" company -- that is, a company that's first in adopting and supporting new technology. Case in point: Valorem started in 2009 as a firm focused on Microsoft cloud technologies, at a time when cloud computing was still a largely untested business model and Microsoft Azure was still in the pre-release stages.
Valorem took a big risk betting its business on cloud, and the dividends have been significant. In the past six years, Valorem has grown from a two-person operation to a 130-person-and-growing company. In 2012, revenue grew by 73 percent year over year; in 2013, by 50 percent; and in 2014, by 65 percent. Parretta expects revenue to balloon by another 70 percent this year.
A big contributor to that growth is Valorem's willingess to embrace new technologies. In 2009, it was cloud; nowadays, it's the Internet of Things and "mixed reality" technologies like the Microsoft HoloLens. Parretta acknowledges that there's inherent risk in Valorem's first-in philosophy. "The risk there is where we spend cycles ramping up on the wrong trend," he says. "I don't think we've had one of those big missteps, but I'm sure we will, at some point."
The key to avoiding those missteps so far has been discernment, and the ability to distill real-world applications from even the most bleeding-edge concepts. "We do it smartly. We don't just jump on everything. I think we try to look out for what are the mega trends, where is the messaging, where is the bubble coming," Parretta says. "And we don't do it for the sake of being trendy."
With HoloLens, for instance, Valorem is taking steps to assess how the technology's 3-D modeling capabilities can augment its own cloud offerings and solve business problems in the manufacturing and design industries. Parretta doesn't necessarily expect HoloLens to become a revenue stream for Valorem right away, at least outside of a handful of early adopters. The payoff is in the long-term, when the technology has become more mainstream. Right now, the focus is on "building the chops" among Valorem's employees to work with mixed-reality technologies. "That way, six years from now [when it becomes mainstream], we've already established ourselves."
For Valorem, which offers services based solely on Microsoft products, this first-in approach also has the benefit of making it easier for the company to get Microsoft's attention. "It's about getting in early and building rapport and relationships before the herd comes charging in, and I'm a little guy at the table versus the only guy at the table," Parretta says. This relationship with Microsoft has been critical to Valorem's growth, according to Parretta.
Another factor in that growth has been the fact that many of Valorem's stickiest customers have also seen significant revenue growth of their own. Some of Valorem's projects that were initially worth between $20,000 and $30,000 are now worth $500,000 to $1 million, according to Parretta. "We've done a good job of profiling and retaining good customers that will grow," he says. "We bet on the right type of projects with the right type of companies."
As Valorem's coffers have grown, so has its headcount. Since 2012, year-over-year employee growth has ranged between 45 percent and 67 percent. This has been fueled, in part, by Valorem's need to diversify its employees' skills to keep up with new technology. Mainly, though, it's a matter of logistics.
"Hiring isn't easy, but it's critical to our ability to sustain growth," says Parretta, who identifies recruitment as Valorem's top business hurdle of the past three years. "We spend almost all of our time on how to market, how to recruit, how to attract the best people. Because -- at least in this day and age -- we don't have a sales challenge. We can get customers, we can retain customers, customers want to do work with us. We have a challenge in hiring people fast enough."
The developer-to-job ratio in Kansas City is about 7-to-1, Parretta says. That makes attracting and retaining employees even more challenging. To bolster its recruitment efforts, Valorem has invested a lot in infusing its headquarters with the kinds of perks that a young workforce has come to expect. There are areas to park your cruiser bike, for example, or socialize over coffee or play ping pong.
"Culture is king here," Parretta says, noting that among today's crop of prospective employees, high salaries are not always enough. "Someone's always going to pay more. I think it's about culture and about purpose."
Uptime: Do Verticalization Right
The common refrain among services providers is that specialization is critical to success. In a lot of ways, Eden Prairie, Minn.-based Uptime Legal Systems -- which started out as simply Uptime Systems -- is a poster child of that idea. But that doesn't mean the transition was an easy one.
CEO Dennis Dimka founded Uptime in 2005. For the next seven years, Uptime was a "pretty quintessential" managed services provider (MSP), according to Dimka, providing IT consulting and networking services to small companies in the area. The company was successful enough, in the sense that its revenue was growing, but it was slow progress. Uptime was hobbled by "the same challenge that every MSP generalist deals with," Dimka says. "It's always three steps forward, two steps back."
In 2012, Uptime switched to a cloud services provider (CSP) model, developing cloud-based services and expanding its prospective customer base nationally. However, still lacking a niche industry to market to, Dimka encountered the same problems as he did when Uptime was an MSP: "It was very difficult to stand out. Therefore, difficult to sell. Therefore, difficult to grow."
Uptime's transformation from a general MSP into a CSP that focused solely on the legal industry happened in stages. First, the company tried a two-menu model: one menu of services aimed at just law firms and another menu of services for everyone else. The law-focused menu consisted, in part, of existing Uptime services that had been repackaged for the legal sector, while other services had been created specifically for law firms. But that two-menu approach failed to set Uptime apart from other CSPs, Dimka says. He notes that there are plenty of CSPs that advertise themselves as legal-focused while simultaneously marketing to other verticals on their Web sites. "Everybody does that," Dimka says. "In that way, you're not a specialist at all. You're just another generalist that knows how to list industries."
Dimka eventually made the decision to fully commit Uptime to the legal industry, killing the non-legal menu and -- to make sure there's absolutely no confusion -- adding "Legal" to the company's name.
To differentiate itself, Uptime focused on developing its intellectual property. Its core offering is Uptime Practice, a private cloud platform for law firms. Besides being a differentiator, Uptime's self-described "Law Practice-as-a-Service" offering also gives the company a foothold for the future; Dimka notes that while a lot of legal practice-management applications are premises-based, the law industry is steadily shifting to the cloud.
The result of the rebrand has been 194 percent top-line revenue growth since 2012, with a projected $4 million in revenue for 2015. Uptime's client base has grown in proportion with its revenue since the rebrand, according to Dimka; its platform now has well more than 2,000 users and is used by 400-plus law firms. The company also recently launched the Uptime Authorized Partner program for legal technology consultants.
Such a fundamental shift in a company's identity certainly carries a degree of risk. Success in a newly chosen niche isn't guaranteed, while the loss of at least a few long-standing customers that fall outside that niche is inevitable. However, Dimka says that some of Uptime's legacy customers have decided to keep doing business with Uptime despite the rebrand. Moreover, while he expects to lose some non-legal clients in the future, "the growth from specializing and becoming a thought leader in the legal technology space outpaces that [loss] by 100-to-1."
As a side-effect of the verticalization, Uptime has also made some fundamental changes to its business processes. First, the company established an internal development program dubbed "Uptime University" to educate employees on the culture, software and workflow of law firms. Existing staff and new hires were required to go through the program, which Dimka describes as "essentially a boot camp for IT guys who maybe don't have any experience in the legal world."
Second, Uptime went from a company that, as Dimka says, "had little or nothing in the way of formal business plans, save a half-baked Word document that was usually written then stuffed into a drawer," to a company that conducted regular strategy meetings and had periodic performance goals. At first, Dimka says, the new structure "felt a little unnatural." However, he knew that it was necessary to sustain the kind of growth that comes from specialization.
"Every small business tends to be able to get away with a lack of formal structure," he says. "But we knew as we grew that we would outpace that kind of ma-and-pa style of management."
As Uptime's journey has shown, going vertical is a risky and multistep process that, if done right, can yield significant rewards. For firms looking to make the jump, Dimka says the key is to do nothing by halves. "Go all in," he says. "Specialization and verticalization don't just help you grow -- it helps everything snap into focus."
Pariveda: Focus on People and Growth Will Follow
Nowadays, it seems anithetical for any modern company to focus on its employees first and on its customers second. But that philosophy has propelled Pariveda Solutions, a Microsoft National Solutions Provider based in Dallas, from $1 million in revenue in 2004 to more than $70 million in 2014.
"The important thing to know is that we focus first and foremost on talent development. The development of our people. And that prioritizes [development] activities ahead of even our clients, if you can believe that," says Liem Vu, managing vice president of the West Region at Pariveda.
It isn't that profitable project outcomes aren't top-of-mind for Pariveda; it's that what's good for employees will ultimately be good for clients, too, in Pariveda's way of thinking. As Joe Davey, a vice president working out of Pariveda's Seattle office, puts it: "The belief is -- and I think it's borne out in the work that we've done -- is that if you support people, if you invest in them, good things will come from your [client] engagements. Your clients will benefit. And overall, that investment in your workers will start to pay dividends."
Those dividends are in the ballpark of 15 percent to 20 percent year-over-year revenue growth since 2012, project margins in excess of 50 percent, and referral business accounting for about 85 percent of annual revenue. Pariveda currently employs roughly 400 billable consultants across its nine U.S. offices, with plans to continue to grow headcount. Clearly, there's something to this people-first approach.
Although many other consulting companies have training programs in place, Vu emphasizes that Pariveda's approach, which is centered on what it calls an "Expectations Framework," goes beyond the usual class-based learning regimen. "We don't look at it as training. We look at it as developing on people's capabilities, not necessarily skills," he says.
Pariveda's Expectations Framework gauges consultants on five areas: Effectiveness, Business of IT, Relationships, Leadership and Others First. The framework is aimed at building consultants' "core capabilities" in each of those areas, according to Vu.
The distinction between capabilities and skills is an important one to Pariveda. "Most consulting companies -- and I've been with a number of them -- they're focused on developing skills. I'm going to get you trained up on .NET, Oracle, SharePoint or whatever," he says. However, Pariveda's Expectations Framework assumes that its consultants will learn those skills along the way; the priority is ensuring that consultants are capable of being effective advisers. Meaning, according to Vu, "that they have the networks in the marketplace that allow them to engage with clients and offer advice and help."
The consultant-development process isn't just an internal one; it also extends outward to Pariveda's relationships with its clients and determines what kinds of projects it undertakes. The company matches projects to consultants "in a very deliberate manner," Vu says, that's aimed at moving those particular consultants up the Expectations Framework.
Pariveda also favors shorter-term projects over longer-term ones, which is notable given the conventional wisdom that longer-term projects are a better guarantor of revenue than shorter-term projects. Davey explains that this strategy, while counterintuitive, is also in service of Pariveda's over-arching goal of employee development. For consultants to be eligible for promotions, he says, they need to become familiar with multiple technologies, which is hard to do if they're locked in to a single project for a long period of time. Long-term projects might be good for a company's bottom line, but "it's not always the best thing for your employees, especially consultants who are trying to better themselves," he says.
And, as Vu points out, shorter projects (or longer projects "chunked up" into shorter ones) are frequently better for customers, too. The end goals of long-term projects are often outpaced by changes in a client's industry, technologies and business processes. By the time a long-term project hits its end date, its originally stated goals may no longer fit the company's current situation. Shorter projects have more measurable and useable value for customers, he says.