'This gives us great scale' - IT Lab and Content and Code CEOs discuss union

MSP IT Lab acquired Microsoft Sharepoint and Office 365 specialist Content and Code last week to form a £60m-revenue powerhouse. Their respective CEOs, Peter Sweetbaum and Tim Wallis, explain the logic of the deal

Peter, we've heard you're gunning to build a £100m-revenue business under your new private equity owner [ECI Partners]. Last week's acquisition of Content and Code takes you to a £60m run rate, but just how ambitious is IT Lab?

PS: As an organisation that is private equity-backed we are looking to build to a scale. Those sort of numbers you are talking about are the right sort of target, but frankly the financial performance and scale of the business comes second to delivering what clients need.

Tim, you founded Content and Code in 2001. Why did you feel it was the right time to sell up?

TW: Customers wanted us to digitally transform them - which is where we are very strong - but they also wanted someone who can run the solution for them after it has been transformed. That's where we said ‘we need to invest in this, and either buy a company or join one'. And the best company we found by far was IT Lab.

It's a natural evolution for Content and Code. We've always been strong in the enterprise space and typically compete against Capgemini, Fujitsu, Atos, and all the outsourcers. We're a relatively small company of only 100 people, but what this gives us is great scale to give the customers what they really want.

And what was the rationale for IT Lab?

PS: Content and Code is a business with exceptional depth of capability within the Microsoft stack, particularly around Office 365 and Sharepoint capabilities. It's extremely well regarded in the marketplace, but also within Microsoft itself. And when Tim and I first spoke four or five months ago we realised quite quickly that there was a strong cultural fit between the two organisations.

When looking at how much of their estate IT departments are entrusting to MSPs, how is that equation changing?

TW: It's definitely moving in favour of MSPs. The one thing IT departments are typically struggling with is the massive amount of new features and products coming from Microsoft. They used to only have to manage two or three products a year, and now they are managing 40 products every single year and Office 365 and Microsoft 365 have about 200 or 300 new feature enhancements every year. So the skills are changing from patching servers to actually doing change management and user adoption, and those are the things where IT departments are typically weak.

PS: I would echo that, and that's where the depth of understanding - particularly of Office 365 and Microsoft 365 - Content and Code has is valuable to internal IT.

You've been made chief digital officer of IT Lab, but how long do you plan to say on for, Tim?

I'm 100 per cent committed. I completely believe in what we've done. I completely believe in IT Lab and love their culture and ethos around service obsession. We originally went out to look to acquire a company that had the managed services capabilities we wanted, and we couldn't find anyone good. IT Lab is a great fit for us. I talked to a lot of people at Microsoft about the deal and they are really excited about it.

The last accounts you published on Companies House, for the year to 31 March 2017 show revenues of £34.4m, but you're now billing the company as having a £60m-revenue run rate. You have obviously grown a lot since then...

PS: Our accounts to March 2018 showed £40.2m revenue, so yes, we grew significantly, both organically and through an acquisition of a cybersecurity business called Perspective Risk in May 2017, which was a circa £1.2m-revenue business.

Can you comment on the terms of the deal?

PS: Unfortunately I can't comment on that.

Are we likely to see further acquisitions from IT Lab?

PS: Yes, but we want to identify businesses with excellent capability that will extend the breadth and depth of what we do.