Velocity Buys JD Edwards App Hoster WTS

October 3, 2011 Timothy Prickett Morgan

Velocity Technology Services, an application hosting provider with a specialty in Lawson M3 and S3 ERP suites and Kronos time keeping and employee management software, got together a bundle of cash earlier this year and is now using that money to expand its business. Last week, Velocity announced that it acquired WTS, an application hoster and disaster recovery provider that specializes in JD Edwards ERP suites and has more than a passing interest in the Power Systems-IBM i platform.

There are a couple of different Oracle connections in here. (We are not looking for Oracle news that is impinging on the IBM i market–it is just happening all by itself in the past few weeks.)

The first connection is NaviSite, which was founded in 1997, the same year as WTS and doing the same thing: hosting applications on behalf of midrange shops. Just before Oracle ate PeopleSoft in December 2004, and thereby got control of the JD Edwards World and EnterpriseOne ERP suites, NaviSite inked a deal to host these applications from its Minneapolis, Minnesota data center and another one it had in the United Kingdom.

Fast-forward five years to February 2010, and Velocity, which is based in New York, acquired the NetASPx application hosting business from NaviSite, giving it hosting customers using the Lawson S3 and M3 suites and various Kronos products as well. As part of the transaction, Velocity also acquired the SAS70 Type II-certified data center in Minneapolis operated by NaviSite, allowing for uninterrupted service for those midrange customers using the hosted Lawson and Kronos apps. As it turns out, Velocity had already been a business partner of Lawson’s for 20 years at that point, so they were not strangers to each other. (A year later, Time Warner Cable bought all of NaviSite, minus the Lawson and Kronos hosting biz that had already been sold, for $230 million. In filing on that deal, Time Warner Cable said NaviSite sold that business for $65 million, and booked a gain of $20.5 million on the deal. Not too shabby, particularly considering that NaviSite had revenues of $612.9 million over the five fiscal years prior to the Time Warner Cable acquisition and had lost $64 million all told.

Kronos is owned by private equity firm Hellman & Friedman Capital Partners, which took it private in early 2007 for a $1.8 billion acquisition, and Lawson has just been taken private this year through a $1.83 billion acquisition by Infor, which is owned by Golden Gate Capital. The wonder is how Kronos and Lawson have not been eaten by Oracle. There’s still time for Kronos. (These are the jokes, folks.) Heck, there’s even time for Infor to eat Kronos and for Oracle to eat Infor. . . .

Velocity was founded in 2003 by Tom Bruno, the company’s current president and CEO, and was originally set up a few years earlier as an IT technology practice within a New York-based accounting company called Eisner. The company focused on consulting Lawson’s ERP suites early on, and in 2007 it partnered with Tudor Investment Corp, which gave Velocity the money to fund strategic acquisitions. Velocity operates data centers in Minneapolis; London, Ontario; and Tampa, Florida. The company uses Verizon as its network backbone connecting these data centers to each other and to customers and it uses IBM systems to host its applications (including but not limited to Power Systems running IBM i).

In March, Velocity secured an $80 million credit facility with Fifth Third Bank, based in Cincinnati, Ohio, which was granted to build out the Velocity hosting business and to do acquisitions. And here were are, seven months later, and Velocity is expanding its hosting from Lawson and Kronos out to JD Edwards with the acquisition of WTS.

WTS, which is based in Seattle, Washington, was founded as World Technology Services in 1997 by Tom Hughes, a JD Edwards customer who decided to build a hosting business for the JDE World suite on the AS/400. The company is not only a strong partner of Oracle’s, but the database and application giant owns a 49 percent stake in WTS–or more precisely, did until Velocity bought Oracle’s stake in WTS last week as part of the acquisition. WTS offers JDE application hosting as well as co-location services in its data centers, which are located in Seattle and Denver, Colorado, and since June 2009 has offered managed disaster recovery services for customers using Infor, Lawson, or Inovis. IBM i disaster recovery expert Richard Dolewski is chief technology officer at WTS.

Financial terms of the WTS acquisition by Velocity were not disclosed. A company spokesperson tells The Four Hundred that Velocity had 200 employees and around 175 customers and that WTS has around 50 employees and 75 customers. Velocity will run WTS as a wholly owned subsidiary, and Tom Hughes is remaining as president of this subsidiary to run it. All of the employees at WTS are staying on.