Focal Point Buys UCG Technologies, On The Hunt For More IBM i Deals
January 31, 2022 Timothy Prickett Morgan
There is a wave of acquisitions underway in the managed service provider (MSP) and technical support services businesses of the IBM i market, with companies trying to amass the skillsets to provide a more complete stack of services to IBM midrange shops. The acquisitions are also being fueled by a business model of cross-selling across merged company portfolios and getting the size necessary to expand into new geographies and to find new customers as IBM i shops confront the growing complexity of their infrastructure and looming shortages in skilled IBM i personnel.
That, in a nutshell, is why Focal Point Solutions Group, which was founded back in 2014 with a high availability cluster testing service and IBM i hosting services and which is located in St Augustine, Florida, has acquired UCG Technologies, a long-time IBM i partner located in Cleveland, Ohio, with a diverse set of services that was founded back in 1987 by Jim Kandrac, just before the launch of the AS/400 after which this newsletter is named.
The terms of the acquisition were not disclosed, and being two privately held companies, we didn’t expect them to be.
Kandrac, who started his IBM midrange career at Big Blue after getting out of college in the Cleveland beat and did a few years pushing tin and iron at Leasing Dynamics before establishing United Computer Group, is very familiar to readers of The Four Hundred. Ron Venzin, chief executive officer at Focal Point, has an equally long history in the IBM midrange, and in recent years had a seven year stint as a senior vice president at strategic consultant Paradigm Technology from 2002 through 2009, was director of sales at HA software provider Vision Solutions (now in the Precisely conglomerate) from 2007 through 2010, and director of managed services and cloud solutions at Premise, based in Clearwater, Florida, from 2010 through 2014. That’s how Venzin ended up in Florida.
Both Kandrac and Venzin have been building up their portfolios of managed services in recent years.
UCG Technologies expanded out from its foundational system reselling and remote management business to the VAULT400 cloud backup business as well as selling HA as a service (through a number of partnerships with IBM i HA software suppliers), doing its own application hosting in datacenters located in redundant datacenters in the United States (dispersed in the Cleveland metro area) and in Canada (in Toronto and Calgary). The Canadian expansion was driven as much by data sovereignty issues as it was by application latency. And more recently, UCG Technologies further expanded out into security assessments to help people find and fix the vulnerabilities in their IBM i systems as well as those systems that hook into them.
Over its long history, UCG has done business with over 1,500 companies, which is pretty phenomenal for a regional IBM i business partner, and today has around 200 that are driving its recurring revenue stream through VAULT400, cloud hosting, and other services and another 300 or so who still look to UCG Technologies for new and used systems to run their IBM i applications on a non-recurring revenue basis. (What IBM calls its transactional revenue when it talks about its hardware sales.)
Focal Point is a considerably bigger company with a farther reach, and that is absolutely intentional. The company created its own IntellaFlash service using disk array replication to provide air-gapped, continuous data protection and, of course, offers high availability and disaster recovery as a hosted service (which you would expect given Venzin’s background and the market demand). The company offers cloud hosting for production applications and also has a slew of remote management and monitoring services that covers the gamut on the IBM i, Windows Server, and Linux platforms that are commonly used in IBM i shops. Like many MSPs these days, Focal Point can keep your on-premise systems up to date and babysit all aspects of them, or it can provide raw hosting or complete managed hosting in its cloud datacenters.
At this point, Focal Point has over 500 customers and is collectively running close to 1,000 virtual environments, which is fairly large for an IBM i hosting/cloud company. The company has datacenters of its own in Atlanta and Dallas in the United States, outside of London in England, and outside of Paris in France, and now picks up the UCG Technologies datacenters in the United States and Canada, which can snap right in with no overlap. Focal Point has customers in the United States and Europe, obviously, but has customers around the world, including in Africa, Asia, and South America.
One customer has three dozen IBM i environments that service its network of over 1,100 locations across the United States and is a marquee customer of Focal Point. And by the way, not all of the cloud customers that Focal Point has are using IBM i. One recent customer addition is an X86 shop that is running 64 environments on the Amazon Web Services public cloud, but after getting the bill for that, is looking for a more catered cloud experience as well as for the managed services that offload the taking care of the systems – which AWS does not do for its cloud customers. AWS has a lot of compute and data services, and connectivity into them and between them, but you have to monitor and maintain the collection of instances and storage that comprise a system.
Interestingly, one of the big conglomerates in the IBM i space – Venzin is not at liberty to say which one – had approached Focal Point within the past year and Venzin turned the deal down. “There are two things you can be right now: The hunter, or the hunted,” Venzin tells The Four Hundred. “I don’t want to be the hunted, I want to be the hunter. And we are actively pursuing a couple of other acquisitions, and I can’t disclose who they are right now because we are in due diligence. What it comes down to is this: Even the largest IBM i customers can’t put together a staff that we have been able to put together, and let’s face it, more and more customers are struggling to find talent. We have hired some of the smartest people in the IBM midrange, with deep experience at Lakeview and Vision Solutions or at a number of other software companies, and we have an internship program where we are training young people from scratch, too.”
For Kandrac, after running UCG Technologies for a long time, it was time for a change, and while he will be staying on with Focal Point as an advisor, Kandrac is going to focus on growing the Contract Guardian healthcare contract management business he bought nearly four years ago.
“You don’t just put 35 years into something and just say goodbye and close the door,” explains Kandrac in relation to the sale, which involved looking at dozens of companies to try to find the right buyer for UCG Technologies. “For me, the first consideration in the sale of the company was fit, and I wanted a tremendous fit for my customers and my people. The second thing was timing. There are many people who are trying to get into the cloud business, and they are late comers and they are not going to do it right, even if they do throw a lot of money at it. Ron and his team at Focal Point get it, they understand it, and now they have a lot of new products and services to sell. And the thing that is going to make me happiest at the end of the day is that valued customers and valued employees, who are counting on UCG Technologies, are taken care of.”
For at least a year, and perhaps for longer, Venzin is going to keep the UCG Technologies business and brand separate, but it is reasonable to see them merge over time. All of the employees at UCG Technologies are joining Focal Point, which has come up with compensation plans that take care of the employees so they will just keep doing what they are doing, and stay right where they were doing it.