Trace3 Expands Cybersecurity Heft With Set Solutions Acquisition

‘[Trace3] started 20 years ago as an infrastructure-focused company, and we’ve evolved into cybersecurity, cloud computing and data analytics. And what Set Solutions brings is more cybersecurity. We already had a $500-million-plus hybrid security business inside Trace3. We’ll add to that with the addition of Set Solutions,’ says Trace3 CEO Rich Fennessy.

IT solution provider Trace3 Tuesday said it has closed the acquisition of Set Solutions in a move that is aimed at expanding Trace3’s cybersecurity capabilities as well as its geographic reach in the south central U.S.

Trace3, which is tied for No. 36 in CRN’s 2022 Solution Provider 500, had annual revenue of about $2.3 billion before the acquisition of Set Solutions.

Trace3’s business continues to be strong, and the solution provider is evolving to new places, said Rich Fennessy, CEO of the Irvine, Calif.-based company.

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Set Solutions is Trace3’s fourth acquisition since the solution provider was founded. Fennessy described Houston-based Set Solutions as a pure-play cybersecurity solution provider with a key set of customers and about 84 employees, about 32 of whom are engineers.

For Trace3, the acquisition is an opportunity to bulk up its already strong security business with additional cybersecurity skills and customers, Fennessy told CRN.

“This is all about Trace3’s overall strategy to build on a national footprint and expand our capabilities,” he said. “If you look at the history of Trace3, we started 20 years ago as an infrastructure-focused company, and we’ve evolved into cybersecurity, cloud computing and data analytics. And what Set Solutions brings is more cybersecurity. We already had a $500-million-plus hybrid security business inside Trace3. We’ll add to that with the addition of Set Solutions.”

The acquisition of Set Solutions, which has an annual revenue of about $150 million, also gives Trace3 an expanded reach into what Fennessy called the “TOLA” region of the U.S., which includes the states of Texas, Oklahoma, Louisiana and Arkansas.

“That’s a hot market,” he said. “The whole Texas market is tight. We already have a presence there. This allows us to add their business to our business in the Texas market. So it’s a geographic expansion play in addition to a capabilities expansion plan.”

Set Solutions has about 170 unique customers, several of which are Fortune 500 companies involved in the energy sector, Fennessy said.

“One of the things we’re excited about is maintaining and helping them grow the cybersecurity business for those customers,” he said. “But we also want to come in and talk about our cloud computing and data analysis capabilities. So as we integrate the companies over the next, call it 150 days, one of the workstreams will be how Set Solutions’ people go introduce our expanding capability set to their clients, and hopefully find ways to help those clients in some new areas.”

The acquisition of Set Solutions is part of a bigger move in the cybersecurity channel away from solution providers that specialize in the business as cybersecurity becomes entwined with nearly every part of IT, said Fennessy, who in the past ran other pure-play cybersecurity solution providers including Fishnet Security and Kudelski Security.

“The concept of being a pure-play cyber VAR is becoming less relevant in today’s marketplace because the topics of cloud computing, cybersecurity, where my data sits, how do I access and secure my data, are all merging together,” he said. “That’s where companies like Trace3 are very well positioned. Because we also do all those topics, where Set Solutions just does the cyber piece.”

Five or 10 years ago, the cybersecurity topic wasn’t getting as much focus inside many large enterprises, Fennessy said.

“Now the focus is shifting more towards security not being a vertical thing anymore,” he said. “It’s horizontal security in everything. So you have to have capabilities in all these different topics, which is what Trace3 does. So bringing Set Solutions in allows us to leverage their capabilities while looking at it as more of a horizontal skill set that will help fuel our cloud business, our data security business and our infrastructure business.”

Trace3 is a private company owned by American Securities. Fennessy declined to discuss the purchase price for Set Solutions.

Trace3 has known Set Solutions for many years and recently learned that the company was interested in getting acquired, Fennessy said.

Trace3’in April 2022 acquired Lasalle Solutions for its life-cycle management business. In late 2020 Trace3 acquired Groupware as a way to expand into Northern California. Trace3 in August 2018 acquired Data Strategy to build its Midwest market.

“We’re always out there looking for smart companies that have some cool capabilities we think we can bring into Trace3,” Fennessy said. “So as we think of the next couple of years, you’ll continue to see us be pretty aggressive in terms of identifying good companies to bring into Trace3.”

That includes a potential acquisition to come in the second half of 2023, he said.

“It’s all about finding the right company,” Fennessy said. “But we now have an in-house team who every day is out there looking for cool targets that we can go talk to and see if they culturally they would match and if the business brings good value to us, and if we can bring good value to their clients. Our internal strategy is to do a couple per year.”