Why Plan B bought ICONZ
- 02 February, 2016 07:18
Ian Forrester - Managing Director, Plan B, at the 2015 Reseller News ICT Industry Awards
“There’s two ways to grow,” explains Ian Forrester, Managing Director, Plan B. “Organically or by acquisition.”
Speaking exclusively to Reseller News as the ink dries on Plan B’s recent acquisition of ICONZ, Forrester’s plan for the business continuity provider involves a mix of the two, as he builds on the company’s growing portfolio of cloud, networking and datacentre services.
“We’re very focused on what we’re doing and that’s divided into clear verticals,” says Forrester, who completed the acquisition on February 1, 2016. “Firstly, we committed to our core business continuity services that we’ve always provided, this remains a fundamental part of our set-up and includes backup, replication, standby equipment and standby offices.
“But to support this business we now have data communications, which is essentially telecommunications - divided into WAN, LAN and network security and with that comes internet and hosted PBX.
“The next one is infrastructure, covering colocation and hosted infrastructure which together provides the platform that every business needs to manage and deliver their business.”
As a founding Internet Service Provider in New Zealand - emerging in the market in 1992 - ICONZ represents a natural progression for Plan B according to Forrester, which follows the company’s acquisition of voice, video and data network provider Turnstone in April 2015 and Disaster Recovery Group (DRG) in April 2014.
ICONZ's cloud offers enterprise grade computing power, operating in the local market as a managed services provider with solutions in backup, disaster recovery, security and monitoring.
As Forrester explains, key services include cloud and colocation, with the Auckland-based company servicing organisations at both enterprise and small to medium levels.
“ICONZ is a founding ISP and has built that business up, before getting into the data centre space and then the colocation and hosted infrastructure market,” he adds.
“Through ICONZ we’ll naturally have a smaller focus leading up to the medium corporate space and we can build that into a very significant platform.”
With Plan B’s core focus nestled within the medium corporate enterprise space, Forrester says the acquisition will provide additional scale across the new merged business, including access to a national data centre network of over 300 racks, and opportunities for both customer sets to access a broad range of complementary services.
“We’re always looking at a combination of organic growth or growth by acquisition,” he adds. “We’re a very cash generating business and have strong cash flows that have been built up over an extended period of time, which means we’re well positioned to capitalise on any market opportunities that arise.
“Rather than pay out cash to shareholders and stay the same, we’d rather re-invest in the business.”
Forrester says that while Plan B - who launched a world-first innovation in cloud archive-as-a-service technology with Panasonic in November - is a business continuity company, the world of business continuity as the industry knows it has changed, leading to a need to broaden the company’s range of services to customers.
“The industry I bought into back in late 2007 is significantly different to the industry today,” he says. “The introduction of Ultra-Fast Broadband and data communications has meant that customers now have more options than ever before, whether that is owning infrastructure on-premise, using a combination of private and public cloud or hosting their own infrastructure in a colocation facility.
“By having date centres around the country, we now have the ability to colocate, backup and replicate to other data centres for continuity purposes.”
For Forrester, cloud backup continues to be the “single largest revenue stream” for Plan B, with the company sitting on a “rapidly growing business” within the cloud computing space.
“We’ve got a significant data centre network through our own data centres and the dark fibre we have in other of big data centres across the country. This, combined with the ICONZ deal, gives us an opportunity to provide customers with the best of everything.”
Plan B's acquisitions follows a busy few years under Forrester's stewardship, with two acquisitions, the opening of a new data centre in Wellington and the rebranding of its colocation services, culminating in the company's crowning at the 2015 Reseller News ICT Industry Awards last year, as the Service Provider of the Year.
New Zealand market
Headquartered on Auckland’s North Shore, Plan B has facilities in Auckland’s Mount Wellington and Albany suburbs, alongside Hamilton, Wellington and Christchurch and is privately owned by New Zealand-domiciled shareholders.
With reinvestment part of the company’s DNA during the past few years, Forrester believes Plan B’s willingness to spend is reflective of the wider market in New Zealand.
“Companies are being forced to buy,” he observes. “Some will ultimately go out of business and we’ve seen that happen as companies try too hard to grow quickly, and struggle to fund that growth.”
In observing the market, Forrester believes the Tier 2 service provider in New Zealand has undergone a “massive transformation” during the past few years.
Looking back to the turn of the century, when then Telecom purchased Gen-i, consolidation has heightened with Spark then acquiring Revera, AppServ and Computer Concepts Limited and Vodafone subsequently acquiring TelstraClear and WorldxChange - to name but a few.
“It’s very clear what’s happening,” Forrester adds. “The days of selling large infrastructure and managed services to implement big projects are gone. While there is consolidation happening it’s getting really hard to grow organically when your business model is changing.
“Instead of getting a million dollars in revenue this year, you’ll get it over three years so how do you change that? It’s becoming really hard to change your business model and your psyche.
“But that’s always been our business model and at present, I’d say we were the biggest Tier 2 provider in the country. Given our size and where we are right now, we’re up there as a top Tier 2 hosted infrastructure provider in New Zealand.
“We have a good handle on the market and constantly conduct local research and we believe there’s more consolidation ahead as the smaller players either get mopped up by the big guys, or merge to create large organisations.”
For Forrester, the future is clear - “you can’t be a niche player in a small market.”
“You have to offer more services,” he claims. “I’m not saying you have to be a big player, but you can’t just for example, be an ISP. You’ve got to have that critical mass and we have it, the ones that don’t are going to struggle and it’s only going to get harder as the market becomes more competitive.
“Our aim is to push even harder to grow our critical infrastructure platform and with that, they’ll be more acquisitions. I’d by lying if I said there wasn’t but for the time being, and during the next six months at least, we’ll work hard on fully bringing ICONZ into the Plan B fold.”
Terms of the acquisition will see both companies operating separately for the coming months, and while the two companies will become one where it makes sense operationally, Forrester says the two brands will remain separate.
At present, Forrester says the key task at hand is ensuring the efficient running of both back-end systems, with ICONZ’s financial systems eventually coming over onto Plan B's.
Another primary focus is to ensure customers - of which Plan B now has over 2,000 - will work with one dedicated account manager and receive on bill, regardless of whether they are a Plan B or ICONZ customer, or both.
“We will provide one account manager to provide access to all services from all companies, and for the common customers we share, we’ll have one touch point,” Forrester adds.
Forrester says a total of 31 staff will come into the Plan B fold, including Jack Talbot who will remain as General Manager for ICONZ.
“Jack is coming over and has committed to us for the transitional period and the foreseeable future,” Forrester adds. “Legally we’ll still be two companies so Jack will continue in his role but will also become a member of Plan B’s senior management team.”
While the deal was confirmed on February 1, 2016, Forrester says talks have been ongoing for the best part of a year, with the company expressing an interest as early as April 2015.
“It’s been on the cards for some time, we’ve just had a few challenges along the way,” adds Forrester, alluding that the barriers were “mostly circumstantial.”
“We’ve put in the hard years to make sure we got what we’re after.”
The acquisition was made complicated by the fact that ICONZ and Free Parking - the domain name registrar purchased by ICONZ in February 2004 - were in essence, divisions of the same company, despite trading as separate brands.
As such, Forrester says the divisions needed to be separated before being sold.
While Plan B initially looked at acquiring the whole business, with the web domain space no doubt providing a sound cash generator, Forrester admits that it simply wasn’t “core business” for the company, and decided against the purchase.
Critically however, ICONZ staff were informed of the acquisition plans as early as December 23, in a bid to ensure all staff remained on board at the time of the deal was closed.
“It would have been a big frustration if staff had left the business during the past few months,” adds Forrester, who acknowledges that January usually represents a month of great job changes within the market.
“It would of course made the deal less attractive because customers enjoy a continuity of services and like to deal with the same people, so we’re delighted to welcome the staff over to Plan B.”
With ICONZ - who dropped Webvisions from the name late last year - currently based in Airedale Street, Auckland CBD, Forrester says there are no plans to uproot the staff and bring them to Plan B’s Albany-based office, which lacks the capacity.
“We have a lease on the city building until 2020 with options to renew beyond that so we don’t envisage any change,” he adds. “We don’t have capacity in our Albany office, unless we built an extension, but we’re conscious that we have staff living on both sides of the bridge so I actually believe in time, staff will swap locations depending on their roles.
“The city location also gives us redundancy across our offices and means we can launch more business continuity services as a result, which will include three standby suites.”
Looking ahead, Forrester predicts “exponential growth” for the company during the next 12-18 months, with plans in place to “grow slowly” and ensure “we take our time.”
As always, future acquisitions remain on the cards for Forrester, but for the time being, the core focus centres on ironing out the ICONZ acquisition and focusing on providing customers with access to a wider breadth of services.
“If something knocks on our door that’s too good to be true we’ll take advantage of that, we have the capacity to do that but it’s not a priority,” he adds.
The DNA of a future Plan B acquisition centres around the hosted infrastructure space, with Forrester unwavering in his outlook for the company in 2016 and beyond.
“We’re not going to be a Jack of all trades,” he adds. “We know what we do, and we know what we don’t do.”