Talking Digital Transformation With The New And Prior CEO
September 9, 2019 Timothy Prickett Morgan
Here is a situation that each and every IT manager and chief information officer has experienced and will continue to experience: Having a very long conversation with the president or chief executive officer of their company about how to engage in or continue with digital transformation and the application and database modernization that this entails. And sometimes, that conversation will happen as a new person takes the helm of the company.
That’s precisely what we did this week, but with a twist or two. We are not an IT manager or CIO, but rather an observer in the boardrooms of IBM i shops around the world, and the current and prior CEOs that we were talking to not only had to do some digital transformation and modernization projects of their own, but more importantly they run a company that for more than three decades has been involved in helping other organizations make this transformation. Specifically, we talked to Daniel Crépeau, who has just been appointed president and CEO at Fresche Solutions, one of the largest IBM i business partners in the world, and Andy Kulakowski, one of the co-founders of the company and the leader of the management buyout of what was then called Fresche Legacy and what was also a much smaller company with a much narrower market.
Kulakowski is now officially an observer and advisor to the new CEO, who came on board a year and a half ago with the express purpose of eventually taking the reins of Fresche Solutions. Crépeau has a Bachelor’s degree in Electrical Engineering from Polytechnique Montréal and has more than three decades of experience in the IT sector. Crépeau was a manager at Bell Canada after getting out of university, and then spent more than two decades at CGI Group, rising to the rank of senior vice president. After growing that consulting business by many orders of magnitude, Crépeau became the vice president of information technology at PSP Investments, a pension fund set up by the Canadian government for its own employees, building its systems from scratch. After that was done, Crépeau formed a consulting company called Essor2.0 Stratégie Conseil with his wife, specializing in giving strategic advice to financial services firms. And in May 2018, Crépeau was tapped by Fresche Solutions to be its chief operating officer and the heir apparent to Kulakowski.
Crépeau starts his new job officially on September 1, but he is already making the rounds with Kulakowski to talk about their plans for Fresche Solutions. The two sat down with The Four Hundred to give us a little perspective on where they are coming from and where they want to help take IBM i shops.
Timothy Prickett Morgan: So you know that I believe in story, the narrative arc. The one thing I realized when I sat down to do this interview this morning is that I know people at Fresche Solutions but my compatriots at IT Jungle, Dan Burger and Alex Woodie, have done a lot of the writing about the company and know more than I do. That’s the bad thing about delegating responsibilities, but it also has let me focus on other things. So Andy, I know from the start that you are a lovely man, and that you have been running one of the largest players in the IBM i market for the better part of a decade since the management buyout in 2010.
Andy Kulakowski: Thank you very much for that. It’s only a reflection of the great people and the great team that surrounds me. I’ve been blessed over the decades being involved with Fresche, with a great leadership team and very skilled people – and very nice people, both internally and externally. That’s the testament to our great success and our ability to sustain this business since the mid-1970s.
Of course, I have been with the business for many years and am about to hit my 34th work anniversary. I have an IT background, of course, but for the purposes of cutting to the chase, the history of Fresche is a fascinating one. We’ve done a little bit of everything, but I guess through the years we found our core competency and our DNA to be exactly what we are today. And that is the company that is very driven to protect the decades of investments that our clients have made into their platforms and to leverage those investments into a modern paradigm, into one that’s going to support our clients growing business goals and business objectives.
So many years ago, we had found ourselves taking advantage of an opportunity in another market, in the HP 3000 minicomputer market. During those years, we had become this 800 pound gorilla, the go-to leader in the market that provided modernization and migration services to the HP 3000 client base. And here’s the funny thing: In talking with our clients at that time, we would ask them why they chose for Fresche, and it wasn’t because we knew that HP 3000 or that we had specific HP 3000 skills. Our clients consistently told us that the reason why they trusted us was because we knew how to go through a process of business transformation. We knew how to go through the process of a platform modernization. We had expertise on how to maintain applications and how to modernize them.
And it was really through that realization that we felt we could transform our business from the HP 3000 market into the IBM i market, as we have done.
TPM: When you were doing those migrations, were you moving HP 3000 customers from the MPE operating system and integrated database to HP-UX Unix and Oracle running on HP 9000s? What was the migration and modernization that you were doing?
Andy Kulakowski: We were taking them over to HP-UX, yes. One of the reasons why we were great partners to Hewlett-Packard was because we kept them within the HP family, and that is really part of the formula that we keep in the new IBM i market that we’re serving today. That is why we are very closely partnered with IBM. Our goal is to make sure, once again, that we leverage the investments that our clients have made for many years and to make sure that they stay in the IBM i family. It is very much the same business strategy that we executed in the HP 3000 market.
TPM: Well you clearly jumped from one horse to another one gracefully, and you got on the right horse at the right time, too.
Andy Kulakowski: Indeed, indeed. We feel that our repositioning and our execution over the last decade has been good and it was the thesis of the MBO. And today we find ourselves very well positioned to bring value to our clients. We feel very well positioned to assist our clients into what is the very challenging and great opportunity for them to adventure into.
As you know, digital transformation is really a market that’s speeding up and we feel that Fresche is very well positioned to take advantage of that opportunity. And it’s really for those reasons that we make a full circle to what we’re kind of talking about today with Daniel’s appointment and what the company has been executing for some time now. It has always been part of my own personal DNA and leadership to continually surround myself with the capabilities and the skills that could always take the company to the next level. And today we’re very proud to take advantage of Daniel’s extensive experience and track record in growing companies. And I’m very proud to continue being partnered with Daniel through our next growth phase.
TPM: So Daniel, tell me a little bit about you. What’s your background?
Daniel Crépeau: I’m basically an engineer, out of school for many, many years.
TPM: I think we can all say that. [Laughter]
Daniel Crépeau: It’s funny. About 35 years ago, I started with a small company called CGI Group, and I was an executive in this company for 20 years before leaving in 2006. And now, of course, CGI is a very large system integrator.
TPM: CGI has been large for a long time, and they had an AS/400 practice as well. They did a lot of different things.
Daniel Crépeau: When I started, there were 230 employees and when I left there were 26,000 employees; and now, more than a decade later, they are in the range of 70,000 employees and are a very large and successful organization. But in 2006 I left CGI to pursue another opportunity as a CIO on a large asset manager in Canada. I was there for eight years, building all their infrastructure for trading, all of their back office systems and such. We were really starting this almost from scratch.
TPM: Wait just a second. How wonderful is that? I never have told this story in my life. I have never heard of somebody building infrastructure from scratch. Every company I know is dealing with legacy of some sort, unless it is some upstart in Silicon Valley who thinks subscribing to AWS services with a credit card is building infrastructure. Forgive me, Airbnb.
Daniel Crépeau: With the Public Service Superannuation Act in 2000, the Canadian government decided that it would create a fund from the pension assets to support the pension liability going forward for all employees that started to work after the year 2000 for the federal government in Canada. Before 2000, this pension fund was paid on a yearly basis, about $6 billion Canadian cash out of the government. But starting in 2000 they decided to build a pension fund and at least to get some return on the money they would be accumulating. When I started there, the fund had about $27 billion Canadian in assets under management but still had no pensions to pay for many years into the future, and in eight years it grew to $185 billion Canadian. And when I started at the fund, they were managing the company on a spreadsheet. So the legacy application was Microsoft Excel.
Andy Kulakowski: Like at so many companies. [Laughter]
TPM: Well, I am not going to criticize. I have the same Excel spreadsheet I started IT Jungle with 23 years ago. But I have got to ask: What platform did you pick when you started from scratch?
Daniel Crépeau: We were a Microsoft Windows shop, end to end. [Laughter]
TPM: Argh. . .
Daniel Crépeau: All of the service bus was on BizTalk Server, and we selected Windows Server because the manpower available in the Montreal area where the main office was were all .NET people. We were starting from scratch, and these were the skills we could find. We had literally nobody in IT.
TPM: Well, no. They knew Excel spreadsheets. They stayed on Windows because they went with what they knew.
Daniel Crépeau: Obviously, it was a best of breed approach because there is very specialized software in the investment business. We put all this together, in a loosely coupled environment, and it is very solid infrastructure that the pension fund has right now and it was basically a job of keeping the lights on.
So I moved on and started my own company with my wife. And then after two years of doing that, suddenly I received a strange call from a company called Fresche Solutions and went through an interview process. I was not looking for a job but when I met with Andy, who is a lovely man, and the investors, I was not able to resist.
So I came on board as chief operating officer and the plan was in a year or so I would get to know the business, to understand the people, and see the strengths and the weaknesses, and then take on the CEO role while Andy stayed in the company because of the very important role that he’s playing right now and in the future. And that is maintaining the great relationships with that customer base and also being more involved with the board of directors. Andy is a great ambassador of the company and we’ll maintain this role, obviously. I’m more on the results-driven side, driving growth. It’s a good mix of both of our talents that will promote this company going forward.
TPM: The other thing is that Andy’s been doing it for so damn long – and I say this with a certain amount of knowledge of what this feels like – that he doesn’t know how to stop it.
Andy Kulakowski: Yes, well said. [Laughter]
Daniel Crépeau: That, and I think it’s when you work at Fresche, stopping this kind of life is pretty tough because it’s an interesting company, culturally speaking. It’s a big family that has offices around the world. So even if you come from Australia or India or all of that there is this feeling of being part of a family. So it’s a very refreshing kind of environment to work. So the people never retire. They’re not even allowed to retire.
TPM: I’m at a pretty sure that’s probably against Canadian law. Maybe not American law. . . .
Anyway, so I don’t know how big, how many, how much. Andy, when you started out with this in 2010 after the MBO, you were starting out at essentially zero in the IBM i market. So how big is the company today and how far do you think Daniel can grow it? You can always get more share of wallet from existing customers to a certain point and you can build out the customer base with the tools you have created or acquired.
Andy Kulakowski: About seven or eight years ago, we had maybe two IBM i resources and today we are 350 strong. We had, of course, no IBM customers, but today based on the merger and acquisition strategy that we executed to acquire skills and to acquire customer bases, we have 22,000 customers. So that gives you an idea of how big this has gotten.
TPM: My best guess is that there are somewhere between 125,000 and 150,000 unique AS/400 and IBM i customers worldwide, depending on which set of numbers you want to believe. And I happen to think that somewhere around 30,000 to 40,000 of them are actually very active. For your business purposes, all of the IBM i base is a target, right? You’re not trying to sell them on a new machine, but they may end up buying one after you help them. But that’s not a goal there. Their primary goal is to not touch a working system until they absolutely have to. And having run a business or two myself I know what that feels like. I’ve done it. It was on Windows 2000 far too long, and then then I eventually jumped to WordPress and got out of managing iron entirely. The point is, I think there’s a potential for you to double or triple your customer count but there’s also this ability to double or triple your dollar spend within the accounts that you already have. Does that sound reasonable? Is that a shape of a possible future 10 years from now?
Andy Kulakowski: Yes, exactly, and well said. I think your observations around the dynamics of the market and how we deliver value to the market are very well put. Regardless of what clients are doing with their IBM i systems, we have solutions that help them.
The most basic demands that we hear out of the market is that there is a lack of resources and skills, and we have great solutions to resolve those kinds of challenges as well. And so regardless of what is the strategy of these 125,000 to 150,000 clients, we have something that brings value to them. And so this is why we see this tremendous growth opportunity, not only in terms of acquiring new clients but continuing to add value to existing clients. And that’s why it’s precisely why we can see that the potential growth of the company and why we are surrounding ourselves with people like Daniel to lead this company through an accelerated growth era.
TPM: Do you have an acquisition strategy at this point going forward? Are you happy with the tools that you have in the market you have. To me, looking at this broader IBM i market, it looks like you Syncsort has kind of stayed where they are in disaster recovery and high availability, and HelpSystems has built out a lot of things for system management and automation but it does not have a lot of application development tools. Fresche has amassed a huge toolset for application development, application modernization, database modernization, and so forth. You have all kind of all picked your spots, but at any time any of you could decide you need more of the IBM i stack. So what are you thinking about how to build out from here, if at all?
Andy Kulakowski: Right now, we are very happy with the portfolio of technology and offerings that we bring to the market. So we do not have any active M&A cycles going on. Having said that, this company, and particularly under Daniel’s leadership, will continue to have a very entrepreneurial spirit and we will still keep our eyes and ears open to opportunities that come our way. Naturally, because of our track record, our phones do ring and we do listen. But at the same time, we are not looking to change our strategy in any way. We feel we are very well equipped to bring digital transformation value to our clients. And so for right now we don’t see anything that we need to add. But like I said into the future there might be something that might that we might feel would be worthwhile adding to the ports to existing portfolio.
Daniel Crépeau: And if you look at the last year, we have invested in a toolkit and built that into a very comprehensive approach, which offers one stop shopping and lets companies create a kind of factory where you take the legacy code, the legacy database, the legacy front end and modernize these things in a new environment.
Obviously, we are looking at following the direction of the customer. A lot of them want to be on the IBM i. Some of them want to stay on the IBM i but want to have the opportunity – if it happened in a predictable way – for more cloud services and more open source tools.
This digital transformation journey is a fairly long one. It’s not the six month project, and we will be there with customers for years as they go through modernization because when they start, the code is mostly like for like. But once they take the first step and start modernizing, they can think about microservices or using AI extensively in their strategy going forward. But they need the first step of modernization to do that.
That’s why we are quite busy these days and we continue to make significant investments in integrating our product suite to have a modernization system that can be used directly by the client, through system integrators, through partners like IBM, or directly through ourselves expanding our market reach. But we’re looking at growing like 25 percent to 30 percent a year – and with very good margins at the end of the day. And that’s a pretty healthy company, which is very important for our clients because they want us to have such critical mass from the financial point of view that we can support those big digital transformation contracts. Now we’re looking at products but the little bit larger span with the methodologies, automated testing, and all that stuff that make those transformations a success because obviously the modernization has to be test-driven and where it had to extensively invest in this kind of approach where we can guarantee a very good level of quality and consistency on the code that we’re delivering to clients.
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