Infinigate CEO on shifting focus to managed services

Klaus Schlichtherle tells CPI that rolling out the VAD's acquired MSP arm has taken longer than expected because of vendor wariness around monthly billings

Infinigate has had to work hard to convince some vendors about why they should embrace its MSP cloud business model, according to its CEO Klaus Schlichtherle.

The €527m-revenue firm bought a German cloud and MSP tools distributor, Acmeo, last October, and has spent the past thirteen months rolling out the business in the UK and France.

However, it has taken longer than expected.

"The MSP cloud business model is so different to, let's say, the on-premise license business. It took a while to have a mutual understanding on what is the opportunity and risk in that business model," he said.

"It takes a while until what I call getting the snowball rolling, because you have monthly invoicing, rather than a three year license where you invoice in one shot," he said.

"It means that it takes in theory three years for the same effort and investment to get the same revenue and margin in comparison to a traditional licensed business.

"So in order to have that business model appropriately reflected in a contract agreement; it was, let's say, quite time consuming to discuss this with vendors."

However, Acmeo is already proving to be a lucrative investment for Infinigate.

Three months ago, Schlichtherle told CPI that its MSP arm had already delivered 25 per cent of its top-line growth.

And he's forecast that this will rise to 30-35 per cent over the next five years.

It currently has "a couple of new vendors" signed on with Acmeo in each the UK and France, with Schlichtherle having set a two year target to reach "a real sizeable, big business" in both markets.

"A consumption-based pricing model requires quite a long investment cycle on customer journeys.

"It probably takes one and a half to two and a half years to get that business really off the ground. Acmeo Germany has done that perfectly, but it's a step-by-step approach."

Its MSP arm has a headcount of roughly 120 out of 550. However, Schlichtherle is looking to grow that, and the Benelux and the Nordics are the next planned roll outs starting in April - the start of Infinigate's financial year.

"After then we will have covered all our countries with the MSP cloud model and we're seeing very promising and very good growth rates."

The distributor currently operates across 11 countries in EMEA.

"With Acmeo [Germany] we are still growing 20 per cent plus year over year. And we will be growing much more so in the UK and France, obviously because the basis we have started on was so low," Schlichtherle added.

"You need to explain and train customers, and it's more midsized customers we're talking about. You need to raise the awareness of those MSP cloud products.

"So it is very time consuming and intensive. That's the business model. But the business model works and it pays off in the long run."