Konica Minolta Acquires IT Weapons To Jump-Start Canadian MSP Push

IT Weapons is set to supercharge its sales organization and gain entree to thousands of potential new clients after being acquired Thursday by Konica Minolta Business Solutions Canada.

Brampton, Ontario-based IT Weapons -- No. 495 on the 2015 CRN Solution Provider 500 -- has the potential to grow its managed services client base (which includes 65 fully managed customers, plus about 300 project-based clients) dramatically, with exposure to Konica Minolta's 18,000 Canadian customers, said IT Weapons CEO Ted Garner.

"If we were to get 1 percent of those clients over the next five years, our business would be four to five times bigger, and I think 1 percent is very conservative," Garner said.

[Related: IT Weapons Makes First Ever Acquisition, Bolsters SMB Chops]

IT Weapons has spent much of the past five years building itself up as a top-notch services provider, but lacked the sales heft needed to really get the word out, Garner said. That changes with the acquisition, which will expose the solution provider's services offerings to hundreds of Konica Minolta sales reps, he said.

"The most important thing for us and our team is we get to leverage what we've built over the past five years to become a really good services engine, really honing our skills on delivery of IT services. The missing part then was a sales engine," Garner said. "[Konica Minolta] is a very mature and strong sales team -- product-oriented -- and now they're looking for a services team to deliver IT services to their very large client base."

The deal marks the first foray into the Canadian managed IT services market for Konica Minolta, which started down that path in the U.S. in 2011 with its acquisition of Redwood City, Calif.-based MSP All Covered.

Konica Minolta, which has traditionally focused on selling printers and managed print services, started looking for a Canadian solution provider to add to its portfolio at the beginning of 2014, and had been in talks with IT Weapons since March, said Todd Croteau, president of All Covered, Konica Minolta's U.S. IT services division. Croteau said he will provide advice and counsel in his role as "Ted's new boss."

Two things that set IT Weapons apart are its passionate focus on the customer and its commitment to developing elite technical skills, Croteau said.

"One of the things that jumped out to me the very first time we were here is there's a big wall, probably 100 feet long, that's just covered with certifications … probably 500 certifications up there," Croteau said, describing the culture at IT Weapons as an "esprit de corps that just pops right out at you."

One of the key factors in moving ahead with the deal was IT Weapons' ability to operate as a subsidiary, keeping its name, management team and unique culture intact, Garner said, describing that culture as a cross between a hockey locker room, a military-like "I'd take a bullet for you" mentality and an unwavering alignment of common goals.

This is, after all, a company where employees frequently celebrate their five-year employment anniversaries by getting company tattoos.

Not surprisingly, the word of the deal shocked many IT Weapons employees and customers, who were notified of the acquisition Wednesday, Garner said. During a company briefing to reveal the deal, Garner and President Jason MacBean interrupted a presentation by Croteau and Chris Dewart, CEO of Konica Minolta Business Solutions Canada, by cutting off their ties with scissors.

"That was Todd and Chris' indoctrination to our culture. It got a big laugh and took a lot of pressure off, and everyone was very comfortable then that this is a trusting relationship between Konica Minolta, All Covered and IT Weapons," Garner said.

Konica Minolta derives 10 percent of its revenue in the U.S. from managed services, Croteau said. Similarly, Garner said IT Weapons will help Konica Minolta Canada transition from selling hardware and managed print services to selling a broader portfolio of managed IT services.

Adding managed IT services to the equation helps Konica Minolta deepen its relationship with clients, Croteau said, with U.S. customers spending five times as much on All Covered's services as they do on Konica Minolta printer products and services.

Terms of the deal, which is already completed, were not disclosed. All 86 IT Weapons employees -- more than 80 percent of whom work on the technical side of the business -- are being retained, and the company will fill 10-plus open positions as well, Garner said, with the expectation that IT Weapons will grow its workforce exponentially in the coming years.

IT Weapons has annual sales of more than $20 million, operating three data centers across Canada to manage client data and applications, Garner said. The company appeared on CRN's Tech Elite 250 and the Elite 150 of CRN's Managed Service Provider 500 list this year.

Though IT Weapons will collaborate with All Covered around service delivery, training, key performance indicators (KPI) and best go-to-market practices, Garner said, IT Weapons will retain its existing leadership team and distinct brand identity. That's in contrast to the 20 U.S. MSPs acquired in recent years by All Covered, Croteau said, all of which were fully integrated and adopted the All Covered brand.

IT Weapons' clients, though, tend to be far larger than those of a typical U.S. MSP, typically employing more than 500 people across multiple locations. Most IT Weapons clients do more than $10,000 of business each month with the MSP, Croteau said, while customers of a typical MSP are normally doing just $1,000 to $3,000 of business each month.

Konica Minolta's Canadian clients span the gamut from small business to enterprise, with many located in IT Weapons' midsize business sweet spot, Croteau said.

The vendor's massive sales force -- which Croteau said is the single largest source of leads for All Covered -- will accelerate the rate of new customer acquisition for IT Weapons.

The solution provider plans to take its time in setting up the relationship with Konica Minolta's sales force to make sure they make the best possible first impression, Garner said.

Garner said his company will, in the long-run, handle presales support and train Konica Minolta's sales force on IT Weapons' offerings and solutions, while Konica Minolta's team will take the lead in landing new customers.

Croteau expects both IT Weapons and All Covered to eventually get absorbed into the Konica Minolta brand once the company becomes better known for IT services, an inevitability Garner says he will support when "the [Konica Minolta] brand is ready."

But in the short term, Garner is happy to keep the IT Weapons brand alive, particularly because of all of those tattooed employees, some of whom showed off their IT Weapons ink during the due diligence process.

"The 50 people in the room were a little bit shocked; they'd never seen that in due diligence, but it was important to us so they understood why at that point a brand change would literally be physically painful," Garner said.

As for new hires, what tattoo will they get? "TBD," Garner said.

Jennifer Follett contributed to this story.

PUBLISHED SEPT. 24, 2015