Summary: ServerCentral, a Chicago-based colocation and managed hosting provider, made an investment in cloud consultancy Turing Group. We had a chance to speak with management to get more details.
Details: Turing Group, also based in Chicago, is a cloud consultancy with expertise in migration, management and application re-architecting. It generates most of its revenue from AWS, but also supports Azure and Google. Turing has about 15 employees and most of them are engineers with certifications in AWS managed services, AWS consulting and AWS public sector. Most of the work Turing does is around lifting and shifting applications to cloud with a significant re-architecting/re-writing component versus coming in to a customer that is on the cloud already and wants to hand over management (but it is also seeing these latter scenarios with a bit more frequency) to a third party.
Partnership details: The investment from ServerCentral kicks off a formal working relationship that will see both sides team up on on customer engagements with each side focusing on their specific areas of expertise. ServerCentral is coming in and handling colocation and managed hosting requirements and Turing will deal with public cloud. The approach will be highly consultative with an initial assessment setting the groundwork for recommending what infrastructure fits with the respective workloads in question. Turing is equipped to handle the entire on-boarding process from evaluation and assessment o migration and ongoing management and optimization. Both companies tend to work on higher-touch mid-market to enterprise level customers and that is what led ServerCentral to make the investment. It felt supporting managed third party cloud was crucial given the frequency of conversations that were bringing up public cloud. That shouldn’t be surprising. We noted in recent commentary that some providers – similar in scope to ServerCentral – had seen similar changes in their customer engagements. ServerCentral brought in Turing as the subject matter expert in these conversations and that has now expanded into a more formal working relationship.
ServerCentral: ServerCentral shared some growth metrics. It grew at over 30% y/y coming out of 2016 and a significant contributor was the increase in deal sizes that it typically handles. ServerCentral still generates the majority of its revenue from colocation (around 75%), with most of the rest coming from managed services and hosting. The latter bucket is growing faster than colocation and the managed third party cloud capabilities are meant to accelerate that, while also supporting the tendency among its customers to both ask for and buy multiple types of infrastructure services. As a result, colocation as a percentage of revenue is already trending down and management’s goal is to get this down to about 50%.
Angle: ServerCentral has taken the middle ground between partnership and acquisition, but the thinking behind the move is the same. It wants to build out this capability in concert with a company that it can trust and has a degree of exclusivity with. Building organically is exceedingly difficult and it is no coincidence other pureplay hosters are using M&A to jumpstart this new service line. The move is also a snapshot of how multi-tenant public clouds with service providers continue to be phased out. ServerCentral is still going to run its VMware-based multi-tenant cloud but made it clear that it will not actively push it. New customers and engagements will all start their conversations around the public cloud.
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