Dataflex reborn under new owners

Managed service provider VTS IT Group has acquired the assets of failed Canberra-based reseller Dataflex for an undisclosed sum.

The transaction includes the trading name, customer list and some staff. The deal is being led by VTS IT Group founder Glenn Kennedy and partners John Henderson and Ian Hurley.

Kennedy told CRN that he considered buying Dataflex as a going concern. "We looked at a number of different options on how to purchase the company but the administrator and banks decided that the best option was to liquidate."

Dataflex carried debts exceeding $10 million to trade creditors and related parties.

Dataflex employed 25 staff when it appointed administrator Frank Lo Pilato of RSM Bird Cameron Partners on 25 February.

The company has been running a skeleton staff of 12 since the collapse and Kennedy said he was currently negotiating with the employees among this trimmed-back headcount, and has taken on Dataflex founder Brian Evans.

The new owner will also look at re-interviewing and potentially re-hiring employees from Dataflex's Sydney, Brisbane and Melbourne operations who were let go when the company went under.

Kennedy said VTS IT would also keep the Dataflex name and had negotiated with Dataflex's client base of major government agencies to maintain its place on supplier panels.

Kennedy said public sector clients had "agreed in principle" to this novation of Dataflex's panel arrangements.

New MSP powerhouse

The buyout marks a huge growth trajectory for VTS IT, following last October's takeover of regional Queensland reseller Downs Microsystems.

VTS IT founder Glenn Kennedy told CRN that bringing the company together with Dataflex and Down Microsystems could grow its turnover tenfold.

He said that before the acquisition spree, VTS IT was turning over around $2.5 million. After growing to $12 million though the Downs buyout, "we believe in the next financial year, we will looking at $30 million", said Kennedy.

VTS has grown from a headcount of about 13 before the Downs buyout to more than 60 after the Dataflex deal.

The double whammy of two buyouts is no small challenge, but Kennedy was confident in VTS IT's fixed-cost managed services model, which offers a 92 percent win rate with prospects, he said.

In October, Kennedy told CRN: '"We walk into a company and say we can run this whole operation for you for at a fixed cost for three, four, even five years... There will be no other charges. If you have any other problems, we pay the bill. There are no caveats to that."

Negotiations start with a free audit of a prospective customer, after which VTS IT quotes a fixed monthly fee.

"Say the cost per customer is $10,000 per month. In the first few months, we might pay $15,000 or whatever we need to pay to solve 99 percent of the problems we saw in the audit," said Kennedy.

Following the Dataflex buyout, Kennedy offered some more insight into the model.

"I spent five years modelling that [fixed-cost model]. I picked up a 1200-user site, a 180-user site and a couple of small companies, five- and 10-man sites, one in media, the other in travel insurance.

"I wanted to prove it is possible to build a model that will do it whether it is one desktop or 30,000 desktops. We haven't tested on 30,000 desktop but we have tried 1500 and it works well," he added.

The addition of Dataflex will let Kennedy's team road test the managed services model with major accounts.

"One of the attractions of Dataflex is I believe that the with the change of government, the federal government will look to streamline their costs and our model fits perfectly," said Kennedy.

"Do I believe a large Federal government agency will buy our system tomorrow? No. My plan is to start with some small government depts and expand from there."