Nick Pegley – Vice President of Marketing
All Covered was founded in 1997 in Silicon Valley and grew its IT services business rapidly in the SMB market, offering services in 25 metropolitan cities. Rick Taylor, president & COO of Konica Minolta, quickly realized the future was in IT and recognized how difficult it is to grow an IT Services organization internally. In 2010, Konica Minolta acquired All Covered, signaling a major shift in Konica Minolta’s business to the IT and service-oriented model. During the recent Konica Minolta Business Conference and Expo held for its dealers in Las Vegas, ENX had an opportunity to speak with Nick Pegley, who has been with All Covered since 2006 and now serves as Vice President of Marketing for All Covered IT Services from Konica Minolta. Pegley is very enthusiastic about the SMB marketplace consisting of an estimated 1.4 million businesses with between 10 to 100 employees each. All Covered currently has about 2-3,000 recurring clients, and Pegley believes this is a small fraction of a fast growing market with a lot of business opportunity over the next few years.
Tell us about how All Covered’ s business has changed since the acquisition by Konica Minolta.
Pegley: Our revenue has grown from $30-35 million, now we’re closing around $150 million this year. Much of this growth comes from expanding our footprint into new cities and building up our vertical expertise. We did this through internal growth and an aggressive acquisition strategy – acquiring 13 companies since 2010. We now have 750 employees, up from 350 employees, and are serving close to 30 cities.
It’s been a big transformation for All Covered and Konica Minolta. Not only do we have dedicated All Covered sales, we also have the Konica Minolta sales channel and its dealer channel. This is one of the reasons we have such a big presence at this year’s Konica Minolta Business Conference. To stay competitive, dealers need to provide customers with complete solutions that include hardware, software and IT services. However, not every dealer will be able to do what Konica Minolta has done. The executive team at Konica Minolta wants to help dealers transform their businesses by building a program that makes offering IT services easier and seamless. Some dealers may choose to use our IT services for the short term while they build out their own service structure and others will opt to partner with All Covered for the long term. We’re offering the IT Service program for strategic reasons – to be a good partner to our dealers by helping them make that change to services and capture new market opportunities.
We first launched the IT Services offering to dealers in 2012 and we are now entering our second phase by expanding the program by opening up the All Covered Cloud to dealers so they can offer customers reliable and secure cloud solutions.
Can you explain more about the dealer program?
Pegley: The dealer program is a national program. Dealers do the selling and onsite support, and All Covered provides support remotely through our help desk and our NOC (Network Operations Center) which monitors clients’ devices and provides the two data centers where the All Covered Cloud resides. With our cloud offering, end users pay monthly for the use of the server environment we’ve built for them, and they have the ability to access their data anywhere. Equally important, we can transition their applications and data into the cloud and the data is secure and automatically backed up. Our unique cloud environment allows us to build a secure web environment for the SMB market, something large companies have taken for granted. We have additional security modules and new backup technologies and are steadily adding more down the road as dealers become ready for them.
We’re also opening up our application development team to the dealer channel so they can offer application development support for Microsoft SharePoint and microsoft.net applications.
You probably get a lot of questions about security. How do you address them?
Pegley: Security is part of our DNA. Whether it’s our client’s data or our employees working on the client system, our support systems are built with tracking and secure login. So every time somebody accesses the system, it’s password protected and we know which employee did it, when, and what they did. Security is a significant part of our service and what we help clients address. We’ll deploy and set up a client network with enhanced security – oftentimes with more security than the customer had themselves with antivirus and malware protection.
From a dealer perspective, they can now upsell advanced web protection to their customer. It’s a very complex area and almost all small businesses need help in this area, because they tend to assume everything is OK. We have developed specialized diagnostic tools that identify where a firewall is weak, and we can even simulate attacks on a customer’s firewall and routers, which tend to be weak points in a Web infrastructure, and adjust them to make sure the customer is protected. We even have a team of security experts who can do forensic investigations when companies get hacked.
What are three areas that you are proud of so far?
Pegley: There is a lot to be proud of at All Covered. First is how we developed the All Covered Cloud to the scale that we currently have. No one else in the business has made this kind of investment. We were able to thanks to Konica Minolta support.
Second is helping Konica Minolta transition into IT services. It’s a very different market now than just 1 ½ years ago. Now IT Services are part of the dialog when talking to customers. The cloud is our crown jewel and we’re excited to be opening it up to the dealer channel.
Third is the speed with which we’ve been able to grow. When you move from an independent company to being a part of a large national company of nearly 7,000 employees there is a fear that your growth rate will slow down. But things don’t slow down with Rick Taylor. He’s all about building a strong plan and having the leadership to support it. When you look at the way we’ve grown, there are not many businesses in this economy that have grown as fast. We couldn’t have done it on our own, without KM’s support.
What areas would you like to see improve?
Pegley: I wish I could snap my fingers and have all dealers participate. So far, we have 20-25% of dealers participating in the first phase of the program. I think we’re going to see real acceleration after this event, because we are moving beyond the point where dealers are just thinking about IT Services; now they realize that they need to do something about it.
Dealers are thinking long-term and strategically. They know they need to have an IT component in their business and are evaluating the options of partnering or building it internally.
What are some measurable goals you’ve set for yourself?
Pegley: By the end of March, I want to double the number of dealers we sign, which is aggressive but attainable. The end of year is when people sit down and lay out their plans for the next calendar year. I don’t think any of those meetings will happen without a discussion around IT. Another other goal is to grow the All Covered Cloud. I’d like to see dealers start offering the cloud to their customers. One of the main reasons we chose to do the seminar on the cloud rather than just IT offerings is that the word ‘cloud’ is used by a lot of different vendors in different ways. We want dealers to understand what the “cloud” is and what they can sell. It’s not complicated. At its most basic level, instead of your servers being in your office, you run your servers outside of a secure data center – in cloud environment. We even show photos of what our NOC looks like.
How would you compare the dealer channel to the IT VAR channel?How would you compare the dealer channel to the IT VAR channel?
IT services line up well with the dealer channel. The traditional VAR channel is fairly transactional–VARs go in and sell something if there is a need, and then they move on. The MFP channel, from what I have observed, is more about relationships and partnering with dealers and customers. Konica Minolta is a well-established company with a proven track record of retaining customers and dealer partners for years. It’s a different approach than the traditional VAR model.
IT services is an annuity business and looks very similar to the MFP channel. Once customers are on board, they’re paying a monthly bill. You’re providing ongoing service and you keep these clients for decades, because you keep supporting them, offering them value and they keep paying the bill. The MFP channel may be a sales driven channel, not a technical channel, but once you have established that relationship and trust, the easy part is to deliver on the quality products and services.
Another difference is you don’t start at zero every month when you are selling IT services. Every client pays monthly, with revenue spikes during projects, but overall it’s a growing annuity business. People mistakenly think the IT business is selling computers / hardware, but that’s not really what it is. It’s a service business.
Can you outline the areas where you’re specifically helping dealers?
Pegley: We’ve been doing this for 15 years and know what it takes to be successful at IT Services. Not only can we provide turn-key IT Services for dealers, we can also educate them on how to be successful at it. We can help dealers grow their business through services and understand the nuances of a services business. We help dealers to understand P&L, margins, compensation programs, appropriate quotas, etc. We help dealers anticipate the challenges they will face at each stage in their development. We also give them a big lead over their competitors. The services business is as much about the people as the technology provided and it will take other companies a long time to build it from scratch.
Under the Konica Minolta Dealer offering, there is no investment, no upfront monetary requirement from dealers. There is only the time requirement to learn to sell IT Services. Dealers need to remember, if you’re not providing IT services, someone else is providing it to your customer. That’s a foot in the door you probably don’t want your competitors to have. It also provides dealers with a very strong proposition to the customer, because they can offer a complete portfolio – hardware, software and IT Services. This is what a sales person calls account control. You can now say, ‘I’m the complete vendor with a long-term relationship with this customer.’ That’s what ultimately drives profit.
I’ve been in the product business and the service business. The product business is classic Silicon Valley. You design a product, everybody wants to buy it, you produce millions of them, and you suddenly become a $100 million company. You cannot do that in a service business. In the service business, it’s a slower burn, but annuity is very valuable over time, because you start from 100% from last month, so now you’re just trying to grow 3%. That’s a very nice book of business for dealers to have.
What would you say the All Covered business model will look like in 2-3 years?
Pegley: I think it would look like the Konica Minolta model. I don’t see any reason why it wouldn’t be the same 50-50 split between direct branch and dealer channel. KM has been very successful with this two channel approach. For me, the next big milestone is for services to hit the $1 billion mark. I won’t put the timeline on that yet, but I’d love to see that happen. By our next Business Conference, it’s going to be a lot bigger, there is no doubt. I’m looking forward to that.
