Update: We had a chance to chat with TierPoint management to get some additional insight into its recent acquisition of Xand.
Details: Both providers grew through a combination of organic growth and acquisition. Unsurprisingly, they have had to expend resources on integration efforts. We confirmed that at the time of the deal, both firms were effectively integrated. The bottom line is that another integration is forthcoming and a number of decisions on products, branding, management, etc. have not yet been made. But management was able to confirm that the Xand cloud platform will be the one built on going forward. TierPoint described Xand’s platform as being ahead of its own by a few years. The good news it that there are a number of common building blocks. Both are using Cisco UCS, VMware, NetApp and Fortinet. The main point of differentiation is the orchestration capabilities Xand built in-house on top of the VMware stack and already integrated with the customer portal. We do not have full details but given the background of Xand CEO and CTO Yatish Mitra and Denoid Tucker at RagingWire (see this article on the IP they helped build at RagingWire), it is likely this is not just a cloud infrastructure platform but one that can handle bare metal as well and will eventually (if not already have) extend to hybrid. Speculation on our point but we will inquire about these details. Another angle to note: Xand has some attractive managed cloud capabilities. The TierPoint cloud was mostly self-managed. In short, there will be a transition to one infrastructure platform and there is reason to believe customers might not be averse to moving from TierPoint to Xand. Those looking for more management will also be inclined to look at the Xand platform.
Deal logic: No surprises here. The combined entity will add geographic scope and that should fuel at least some growth with DR or footprint expansion. TierPoint should see impact mostly from existing customers but clearly there is benefit when pursuing new opportunities. While scale is obviously a primary driver perhaps the most important driver he is the Xand platform. It provides the requisite scalability and repeatability that will be crucial to success in hosting, cloud and hybrid. As TierPoint continues its trending away from pureplay colocation this is something it simply can’t get away from. It needs to scale efficiently and getting a platform is key. It is worth mentioning that is it not just about the IP. Xand brings technical and operational resources that have experience with the platform and the repeated trials provide something that is much more mature.
Data points: The newly combined organization will have about 300 people with Xand contributing about 170. Right now these are still colocation-centric organizations. Xand’s revenue mix is about 66% colocation and 33% managed hosting and cloud. TierPoint is a bit more slanted to colocation with a revenue mix of roughly 85-90% colocation and 10-15% in managed hosting and cloud. Putting the two organizations together and the combined firm will have a mix of about 80% colocation and 20% managed hosting and cloud. Our sense was that managed hosting outweighs cloud but clearly cloud is trending more aggressively (20% growth at Xand and 30-40% growth at TierPoint but from a smaller base). Management is projecting the revenue mix to get to 60% colocation and 40% hosting and cloud at some point in future (perhaps something like 2-4 years).
Customer count: There are going to be about 2,500 ‘core’ customers with the combined operation and 3,700 in total. The number goes up due to some legacy customers on both sides. Xand brings just less than 1k customers into the fold but the customers have higher MRR on average due to the upside in managed hosting and cloud that it has been capitalizing on. Both firms are squarely focused on the mid-market with some overlap into the enterprise.
*The original post can be found here.
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