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Interview with Zenith Infotech CEO: Private Equity Investment Allows Increase in R&D

Akash Saraf
Akash Saraf

On Wednesday, Zenith Infotech announced that it was spinning off its remote monitoring and management (RMM) business as Zenith RMM, LLC. On Thursday, we caught up with Zenith Infotech's CEO and managing director, Akash Saraf, to get more perspective on the reasons behind selling the majority stake in the RMM side of the business to a private equity firm, and for some insights on his plans for the rest of Zenith Infotech.

At a high level, Saraf, who also sits on the spin-off firm's board, said the move will greatly increase the companies' combined R&D spending, allowing faster and more comprehensive product improvements, and will create the management bandwidth for both Zeniths to expand their businesses.

The deal with Boston-based Summit Partners effectively split Zenith Infotech into the Summit Partners majority-owned RMM company, and left Zenith Infotech to focus on its MirrorCloud backup/disaster recovery (BDR) product line and its new SmartStyle private cloud computing product line.

Zenith RMM, based in Boston, will have about 600 employees and own the Network Operations Center (NOC) in India that supports Zenith's 3,000 RMM partners and 400,000 managed endpoints. Zenith Infotech will have about 500 employees with headquarters in Mumbai and keep its U.S. headquarters outside Pittsburgh in Warrendale, Pa.

Of the former Zenith Infotech's $80 million in annual revenues, the RMM business accounted for about a third of the business, Saraf said. The 4-year-old MirrorCloud line makes up most of the rest of the revenue, with SmartStyle growing quickly since its January launch, he said.

The primary motivation for the split is getting additional resources for all the product lines, he said. "The net positive should be new feature sets and new innovations. Essentially, each business will get the resources it needs to be able to compete and innovate in this space," Saraf said.

He said Zenith spent about $22 million on R&D last year. Between the two companies, that amount should ramp up, based on Summit Partners' investments and Zenith Infotech's ongoing investments.

Aside from R&D, the addition of an experienced technology management team at the helm of Zenith RMM, led by new CEO Michael George, vastly expands Zenith's management capability.

"We were a relatively small company trying to do [several things]," Saraf said. "Our management team was finding it hard to manage all these businesses. It gives us more management bandwidth in the company."

In a separate interview Thursday, George confirmed that R&D spending would be increasing on the RMM side and left the door open to Zenith RMM making acquisitions to flesh out its technologies. Describing the due diligence process that he participated in with Summit Partners in the months before the deal, George said, "Categorically, we heard from Zenith Infotech they were facing some constraints and some resource contention because they were experiencing growth in their cloud initiatives and experiencing growth here [in the RMM business]."

"I can tell you, we have an absolutely outstanding partner in Summit Partners, [which has] over $11 billion in assets under management," George said. "I don't see any constraints on us in terms of our growth and the amount of resources that we have, or for that matter, what we may choose to do in and around acquisitions."

On the Zenith Infotech side, the R&D investments will be focused on enhancements of existing products. "I don't think you'll see any major new product from Zenith," Saraf said. "SmartStyle and MirrorCloud will be enhanced a lot more."

Meanwhile, Saraf assured partners the integration among products of the two Zeniths will continue to be tight. "Our cloud and the BDR products are tied into the RMM system, and they'll be tied in for a fairly long time. Though we are spinning it off, it's not like both companies are going completely different directions," he said. "Except for getting two invoices, which partners [selling both RMM and BDR or cloud] get anyway, they won't see inconveniences from this."


Posted by Scott Bekker on September 29, 2011