ANS bosses on what they wished they'd known before they began cloud reinvention

ANS CEO and CTO admit they 'massively underestimated' impact turning off hardware business would have on staff culture and working capital

The CEO and CTO of ANS admitted they encountered multiple "unknown" challenges during their breakneck reinvention as a public cloud consultancy.

The Manchester-based firm was at one time the world's largest Flexpod reseller, with a global market share of seven to eight per cent, Paul Shannon and Andy Barrow told CRN' s Channel Conference MSP this morning.

But having seen that its core business was beginning to plateau, several years ago ANS took the radical decision to switch off its hardware business, the duo said.

Today it draws 100 per cent of its revenues from public cloud, they explained.

But in their morning keynote, Shannon (pictured left, with Barrow) admitted that ANS encountered several unforeseen stumbling blocks on its journey.

Although ANS anticipated that reskilling staff in AWS and Azure would lead to huge training costs and salary pressures, Shannon conceded that management "massively underestimated" the level of cultural change required.

"We massively underestimated the impact on the VMware tattoos, the NetApp tattoos and particularly the Cisco tattoos that techies had," he said.

"They were fiercely loyal. And that's fine, until it becomes toxic.

"I'd encourage anyone to read the Netflix Culture Guide - it's got some incredible nuggets in there about how to build a business for change. It says don't tolerate brilliant jerks. If you've got them, no matter how valuable you think they are, the damage they do when you're not looking is so toxic that they have to go. We knew we could not make this transition if we had people in everyone else's ear saying ‘I'm not sure we're doing the right thing'."

The same applies to top management, Shannon added.

"If you've got anyone at the very, very top of your business who hasn't bought into this, they've got to go and they need to be first out the door," he said.

Before its reinvention, ANS was doing £22m to £23m of Cisco hardware revenues annually, and Shannon admitted he and his team also "massively underestimated" the impact on working capital moving to annuity revenues would precipitate.

If he and Barrow had their time again, they would hire an outside expert to help with this side of the transition, he revealed.

"We were in Andy's kitchen 18 months into it going ‘wow, this is really hard'. We were getting lots of pressure from shareholders and banks. When you turn off the tap on hardware, pretty much overnight, it has a massive impact on working capital from a few fronts. One is that [the vendors] don't give you rebates anymore.

"Also, the hardware and software vendors are incredibly generous when it comes to marketing funding. We had it nailed. We got loads of money from them. And we were selling equipment to customers on 30-day payment terms and had an agreement with Cisco where we were paying after 90 days - so we constantly had 60 days where we had a lot of our customers' cash just sitting there for working capital - and that is pretty much done overnight."

Shannon admitted there was a moment when he and Barrow contemplated reigniting ANS' hardware business, before concluding that such a move would fly completely in the face of its philosophy of "burning the boats".

"We said, ‘the easy thing to do now is to go to sales and tell them they're going to have to sell some kit - get back in the boat - we need to fix this working capital.' But actually, we felt the damage that would do to a sales team where we've spent the last 18 months educating them that this is a bad thing to do - but just do this cheeky thing over here to rescue it - we can't do that; we have to ride it out. So we just stood firm and told our shareholders you'll have to bear with us."

Shannon added: "If you're going to go through this journey, I cannot stress enough that you either have to have a really close eye on this yourself, or go and get someone who does this for a living to do it for you."

The duo ended their keynote by flagging up their 2019 numbers, which showed gross profit and EBITDA rebounding after tumbling in 2018.

"We won't get revenue back. That's gone down two years in a row and will go down again," Shannon said, adding that the top line is neither here nor there for ANS.