Lumenate VP: Organic Growth Out, Acquisition-Based Growth In

Almost a month after its merger with Ohio-based DPSciences, Lumenate said that the union seems to be a good move for the technical consulting firm as it continues to generate momentum in its managed service portfolio growth.

The key to success for Dallas-based Lumenate, Vice President of Business Development David DeYoung said, is to pursue a strategy of strategic acquisitions rather than organic growth practiced by other companies.

"Instead of trying to build it internally, we found it is better to buy," DeYoung said. "We have a couple core beliefs, and one of those is that we don't want to suffer cold start-up costs."

[Related: Lumenate, ICI Join To Build Organization Poised For Future Growth ]

Lumenate, No. 122 on CRN's Solution Provider 500 list, acquired DPSciences on Aug 13, adding 10 offices across the Midwest, additional managed services and a Cisco Gold certification. The company jumped up from 298 on the Solution Provider 500 list the year before. The additions were predicted to exponentially grow the company's networking and security solutions.

"We like the idea of being able to partner in these relationships, ... strengthening the relationships [to give partners] a fuller arsenal to sell, remove any handicaps in the marketplace to succeed financially and [allow partners to] more fully leverage the operational model that we have and point them in a direction that we think the company would benefit from," DeYoung said.

DeYoung said the demographics of the area combined with DPSciences' offering of a Cisco Gold partnership, one of Lumenate's goals for the year, made the merger a good fit.

"For us to be relevant to the customer base, we have to have the port of services that matter and you have to be part of a regional play that makes sense," DeYoung said. "You have to be large enough to matter, both in certifications and buying power, but also to have a seat at the vendor table."

Although DeYoung advocated for an acquisition strategy over an organic growth model, he said the process presented challenges. Acquisitions, he said, placed a lot of stress on both organizations.

"I can tell you that every acquisition in this space is somewhat disruptive for a period of time. Our goal as a company is to limit that disruption and consider acquiring competency," said DeYoung, who added that this is his 16th acquisition with which he's been involved.

NEXT: Lumenate's Customer-First, Acquisitions-Second Strategy

Lumenate's DeYoung said that while he believed that acquisition was the best strategy to grow in the channel, he said that it has to be done in a careful and well-thought-out way. He said that Lumenate always works backwards, by first assessing a customer's needs and then looking at how the company can best meet those needs through acquisitions.

"It kind of goes back to the motivation of the ownership or the entity itself. I've had the opportunity to be in the channel for a long time and in the managed services for a long time, and in the channel, you have people who want to buy up companies with the idea of selling. ... That's not our motivation. Our motivation is to service the client and operate in the space. We believe the space is getting stronger for a certain type of partner," DeYoung said.

Because Lumenate is a private company, DeYoung said, it gives it a measure of business model flexibility to either acquire or take time to develop as necessary. He said that, with a public company, there is not necessarily the same luxury, because shareholders expect a certain amount of growth within a fixed time frame.

"We have no pressure to have to grow, which is great," DeYoung said.

PUBLISHED SEPT. 11, 2013