Customer Perspective: Infrastructure Keyed the 8-Figure Sale of Our Company

Executive Summary:

  1. Improving the infrastructure of a company we acquired added tremendous value, helping to key a lucrative investment.
  2. Our technology leader was skeptical of Amazon Web Services.  Investigation confirmed that AWS did not provide the flexibility, scalability, and economy we needed to achieve our business goals.
  3. Infrastructure specialists, not developers, can most reliably plan and manage a high-performance website with optimal uptime and security.

Well built, well run IT infrastructure is essential to success, and when it comes to investing in a business for a potential equity event down the road, it is an often overlooked factor in a software-centric world.  Our story of a private equity team taking a small company and turning it into a significant success had a great deal to do with our belief in the importance of technological infrastructure.  Our success is proof that a well-designed infrastructure and cloud solution can help turn around a company and create significant value.

Since we have executed a sale of the organization for contractual reasons this success story cannot have a company name attached. But it is hardly a unique story, and I firmly believe that the one thing a high percentage of software companies can do to increase the value of their organizations is to improve their infrastructure.

This isn’t just a theory; it is our actual experience, as improving the infrastructure was one of the important factors in a fantatsic return on our investment. As we now evaluate potential new acquisitions, we see similar opportunities to enhance value through infrastructure investment and optimization.

The Story:  Our team envisioned a fledgling company with infinite possibilities when we acquired it from a .com pioneer that didn’t see company’s true potential. We saw an opportunity to add significant value and ultimately achieve strong returns, but we also knew that there were significant challenges to overcome. The business had been ignored in areas, gutted in others. We needed to act decisively to stop the bleeding and grow the business.

Customer Experience, More than Just the Code:  We were fortunate to have a strong development team and an excellent product. But delivering to the market, particularly the competitive content aggregation and current awareness market, requires more than just a strong product. It requires continuous availability, a responsive user experience, and the ability to rapidly scale as we acquire new content and as breaking news events throughout the world occur.

Delivering business services and software online is NOT just about the code. Software is important, and having a top-notch development team is a requirement for many businesses. Access to this talent is not typically a problem, as there are a great many qualified people to bring in as part of a successful development team. This does not mean that these are hires to be taken lightly. But there is a pool of talented developers out there, and a qualified dev team can be built.

Unfortunately, skilled infrastructure professionals with a track record of helping engender business success are MUCH harder to find. There simply aren’t that many of them out there. Why is their limited supply a problem for you and your business?

Skilled Infrastructure Pros are a Necessity:  As critical as the software is, infrastructure is equally important. Numerous studies have shown that the performance and responsiveness of a website have a substantial impact on sales and customer retention. And, it goes without saying that availability—100% availability—is paramount to the success of any Internet business. The work of developers and programmers is critical, but if the product of their work does not translate into a high-performance, always-available website, it may not matter.

Developers and infrastructure pros have distinct skill sets with less overlap than is commonly understood. The creativity that defines a strong development team is acutely different from the disciplined infrastructure mindset. Unfortunately, with qualified, top-level infrastructure specialists more difficult to uncover than qualified developers, it creates a significant challenge and a potential trap for my fellow entrepreneurs.

That trap is to react to the lack of infrastructure talent by simply knee-jerking to Amazon Web Services (AWS).  We were very fortunate to avoid becoming fully ensnared.

The Value of my AWS Skeptic:  In acquiring our company, we were taking on a running, established product and a development team with a full roadmap ahead of them. But they were lacking something critically important, and didn’t even know it.

The company lacked even a single infrastructure specialist. As a result, AWS seemed like a natural choice for us, avoiding early capital expense and sparing us the difficulty of finding those hard-to-find specialists. Fortunately for me, I had a very capable, smart IT pro running my technology, who in his experience had developed an understanding of the importance of infrastructure. While respectful of the capabilities of AWS for the largest enterprises, he was skeptical that it was the best solution for a company our size, and he was careful to ensure we were careful to just dip our toe in the waters with AWS instead of doing a full on cannonball, which is typical of so many software companies.

The Uncomfortable Truths of AWS:  Here’s what we discovered in our experience with Amazon Web Services:

  • AWS was very expensive for what we got, especially if you wanted opportunities to truly scale.
  • Long-term contracts were required to get competitive pricing. These long-term obligations were no different than the capital costs we wanted to avoid and carried a significantly higher price tag.
  • When we started there was little assistance from AWS, and when they added support services they were very expensive. We had to pay significantly more for any help and consulting from the AWS side.
  • The AWS “solution” was not truly redundant. We couldn’t guarantee that our redundant servers were on separate hardware unless we put them in separate AWS data centers, which explains some of the highly publicized outages AWS clients have had. A truly redundant solution required a level of cost and complexity that made little sense for an organization such as ours.

AWS shortcomings:  It was clear that AWS was not providing an optimal combination of cost, performance, reliability, flexibility, and scalability. In fact, not only was the combination of these factors not optimal, but none of them were individually a strength.  Digging down into the truth of what AWS delivered for us (which most organizations emphatically DO NOT), we quickly became uneasy about getting too wrapped up into something that would be difficult to unwind.

Our Pivot to a Better Solution:  Our tech executive was lukewarm on AWS in the beginning, and our experience led him into full skeptic mode. With it apparent that AWS would not meet our needs, he helped us to find a better solution through Rhythmic Technologies.

What Rhythmic Technologies did for us is most important, including:

  • Teaching us how to swim. Our infrastructure was managed by the parent company, a large organization with an enterprise approach to IT systems. The first day of the acquisition, our piece of this “Build Big” infrastructure was dumped on our laps with no manual or guidance. Rhythmic helped us develop and implement a step-by-step plan to adapt what we had to what we needed.
  • Improved availability and resiliency. Our customers had become weary of regular technical issues, which threatened our relationships. We needed to establish ourselves as an indispensible service to enterprise-level customers, so clearly we had to improve the company’s systems. Rhythmic identified root causes behind outages and implemented fixes, reallocating hardware, working with dev to fix hot spots, etc. As a result, we reached a level of unsurpassed reliability that enabled enterprises to trust us with their mission-critical operations. The ability to deliver a true 5 9’s (99.999+% uptime) was a game changer for the business.
  • Led us to shed outdated legacy infrastructure and upgrade: The roots of the company were a decade old, as was some of the code and infrastructure. Rhythmic worked closely with our dev team to prioritize and strategically eliminate legacy baggage. The result was an infrastructure that went toe to toe with the billion dollar company that acquired us.
  • Outshined AWS by implementing a true backup and DR plan: Rhythmic implemented geographic redundancy for our most critical revenue generating systems and ensured that all of our data was protected, improving our previous disaster recovery stance. This was something AWS simply couldn’t do for us in a workable, affordable way.

The Payoff: A Multi-Million Acquisition:  The result of our investment was a home run, an acquisition by a large organization a large multiple of our initial investment.  After seeing what the deep team at Rhythmic Technologies does for us the acquiring company has gone from wanting to wrap our infrastructure into their own to trying to see how they can incorporate more Rhythmic Technologies into their life.

The Next Step: Another Equity Play with Similar Value:  As I begin the process of finding the next acquisition, I see plenty of organizations that have unrealized potential.  Like my last company, they need to get their infrastructure right.  Working with Rhythmic Technologies has been working to help us see the total potential value in these firms, as improved web performance and reliability will immediately enhance their position in the marketplace.  Getting the infrastructure right will again enable us to concentrate on building the business. The ability of our team to execute with similar results and return has been greatly enhanced by my relationship with the Rhythmic team and my experience with them has given me great confidence that they will be a part of our next success story.