What's Top Of Mind For Logicalis' New U.S. CEO?

Logicalis didn't cement its place in the upper echelon of CRN's Solution Provider 500 list by standing still. To keep growing, its new U.S. CEO says the company will need a much bigger services mix as well as a solution-selling mentality that encompasses both traditional and cloud-centric businesses.

"My background has limited experience in the traditional reseller space," Logicalis U.S. CEO Vince DeLuca told CRN. "Most, if not all of my background is in the solutions and services and other integration type of function. In the U.S., Logicalis' business is heavily dominated by the traditional VAR business, and our stated goal is to move toward much more of a solutions and services business."

DeLuca was named the new CEO for Logicalis U.S. in late June and officially succeeded 10-year Logicalis veteran Terry Flood in that role at the beginning of July.

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Logicalis, the $1.2 billion solution provider whose U.S. business is based in Farmington Hills, Mich., this year ranked No. 28 on CRN's Solution Provider 500 list, formerly known as the VAR500.

DeLuca joined Logicalis as COO in 2010 following well-regarded stints at Wipro, Infocrossing, SMS and Marconi. At that time, DeLuca, Flood and Logicalis' U.S. and corporate management teams looked at how to leverage DeLuca's experience with major systems integrators to orient Logicalis' growth around business processes, services and cloud solutions.

DeLuca looks at Logicalis' growth potential in a few different buckets. There's traditional resale and integration around its infrastructure, software, security, unified communications and collaboration practices; there's managed services; and there's a cloud computing strategy centered around IaaS, PaaS and cloud application platforms such as VMware's vFabric framework.

"We don't see [us] necessarily competing with Amazon or the large, more commodity-based IaaS players," DeLuca explained. "But we do see a big opportunity in managed services around infrastructure and managed hosting for the data center."

All of those areas will be important to helping customers address mobility and solve not only bring-your-own-device challenges but, increasingly, the emphasis on applications, De Luca said.

There's also a massive opportunity around IT service management, he said, which will be an increased focus for Logicalis in the coming years.

"It's not necessarily a big-bang transition," he said. "It'll be a journey. It's understanding customer IT management, processes, building a road map."

Logicalis' services business in the U.S., not including maintenance-type services such as Cisco SmartNet contracts, accounts for about 15 percent of its revenue. DeLuca sees a climb to 35 percent happening "pretty quick," and 50 percent feasible within the next two years.

DeLuca said he and Flood spent a lot of time discussing how, systematically, Logicalis could make that transition, and in the past year made a number of moves to achieve it. Those included the addition of more technically oriented staff to assist its field sales people, and the adjustment of Logicalis U.S.' compensation structure to encourage services and more solutions-type selling in its sales ranks.

"We still have what I'd consider a low-base, highly leveraged compensation plan that focuses on traditional routes to market," DeLuca explained. "What we're moving toward is a plan with a higher base that takes into consideration a longer sales cycle. We think it focuses not so much on just componentized gross profit on hardware and software items, but the overall booking and gross profit on the transactions. I think looking around the industry we probably have one of the more lucrative compensation plans for annuity-based services."

The hiring of additional, tech-centric sales employees gives Logicalis an advantage in the types of multifaceted customer engagements more common to large systems integrators and consultancies, DeLuca said.

"It sounds like an overlay salesforce, but these are individuals tasked specifically with helping solutions selling in complex deals," he said. "We have a plan in place that if they are brought into another individual's account, the compensation structure is handled without any type of conflict."

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Channel consolidation has touched Logicalis plenty. Not only do companies looking to acquire it come knocking, DeLuca said, but Logicalis has made 11 acquisitions of its own over the past 13 years, including the $34 million pickup of Netarx in July 2011, and a deal for Network Infrastructure Corp. (NIC) in December 2010.

DeLuca said Logicalis has taken a pause on major M&A activity for the moment but isn't putting it aside.

"We want to get momentum and traction on the assets we have. I wouldn't look for any major acquisitions in the U.S. through this fiscal year, and probably into the next fiscal year's first half," he said. "But we're always keeping an eye out there. The acquisition targets we have have to bring us high degrees of differentiation."

DeLuca and Flood began succession planning immediately after DeLuca's hire in December 2010. Flood will assist the transition for a short time but is ready to move on, DeLuca said.

"Terry and I had planned a set of milestones and my assumption of responsibility was planned in a gradual and purposeful way when I came in," he said. "Terry was with the company for over a decade and masterfully brought it through some of the toughest economic climates we've ever experienced. This is the right time for us to move to solutions and services in a more dominant way."

PUBLISHED JULY 9, 2012