Web Hosting Interview - Fusepoint Managed Services June 2007

GEORGE KERNS: Fusepoint is a leading provider of advanced managed IT infrastructure services, primarily for mission-critical enterprise applications. As the President and CEO, I am responsible for the strategic direction as well as the business operations of the company, and as a board member, ensure Fusepoint is well positioned to manage the strong demand for selective outsourcing services.

GEORGE KERNS: Fusepoint was founded on the principal that as the IT infrastructure outsourcing market matured, mid-sized organizations would seek a provider that could offer "a higher level" of managed IT services.  We assessed the market and saw that IBM, CGI and EDS were in the high end of traditional outsourcing but that model did not really work for the mid market.  Kind of like having a Ferrari dealership next to a high school, everyone wants one but no one can afford it. So, Fusepoint was created to address this market gap and it has been a very successful business ever since.

GEORGE KERNS: The company was built on the foundation of reliability and performance and we deliver what we promise. A few years ago it was quite popular in the IT infrastructure outsourcing industry to offer 100% availability in a service level agreement, but anyone who knows anything about uptime, knows that this is a mathematical impossibility over any sustained period of time.  We would argue that a 100% availability guarantee is nothing more than a marketing ploy and customers should read the SLA language that starts "when we don't deliver 100% availability we will..."

Fusepoint has over 400 enterprise customers in virtually every vertical and we are very proud to say our clients consistently act as positive references for us. When we say "people who understand uptime, choose Fusepoint", just talk to our clients.  

GEORGE KERNS: Part of Fusepoint's value proposition is to have complete fail-over between facilities, to offer proactive technical support, and as we literally run around the clock, we can never go down.  So, our technical organization is very flat, which allows our Operations Centre to manage, what is widely distributed geographically across Canada, as one environment. This proves to be very efficient from a skill set and support structure perspective because we can have an Oracle database administrator in Vancouver apply a patch to a server in Toronto or Montreal.  We also leverage best of breed technologies that allow us to monitor all of the activity coming and going from all customers at all times, so that in the event of an anomaly, we can identify, contain, escalate and react very quickly, regardless of where the customer is located.

GEORGE KERNS: Great question, we ask ourselves this all the time. Our experience has taught us that it is both, as different sized organizations face pretty much the same business challenge and threats, but each has a unique driver to outsource.  

We have found that smaller organizations typically do not have advanced skill sets in-house and if, for example, their network guy walks out the door, they may have a serious problem on their hands. ASP start-ups, with proper financing behind them, are a sweet spot for us as they derive 100% of their revenue from online applications and they are willing to invest in a premium service that delivers what it promises. They really understand that a highly secure environment can actually be a competitive advantage for them in garnering new clients of their own.

At the other end of the spectrum, large enterprise organizations that have a roster of skill sets already on board are often faced with extensive IT backlogs. A typical scenario that we encounter is the marketing department goes to the IT folks to roll out a new service and hears "no problem, we will have that up and running for you in XX months". They then quickly look for a service provider that has deployed that type of project "on time, and on budget".  As an example, we can have a large complex environment up in a week if it utilizes our standard recommended secure infrastructure.

Large enterprises also look for a service provider with the expertise to help them maximize the performance and security of their mission-critical enterprise applications.   With security breaches reaching epic proportions, they have a need to keep current with stringent security and regulatory demands and they look for a service provider that has completed standard industry audits such as CICA 5970, SAS 70 and PCI to ensure that the best practices deployed provide the necessary controls to ensure that sensitive and confidential data is completely secure.

GEORGE KERNS: Colocation does play an important role in the overall product portfolio, but at Fusepoint, you would be missing out completely if you chose not to leverage the enhanced managed services we embed in our national network. Firewalls, intrusion detection, data back-up with end-to-end monitoring and reporting are essential components of a holistic and secure IT environment. We have found that if a client starts with pure colo, they quickly move up the value chain.

GEORGE KERNS: You are right; there are a lot of great open source solutions currently available for Content Management Solutions (CMS). At Fusepoint, we believe most of those CMS solutions meet the needs of the majority of companies in terms of content control.  However, a website really becomes engaging when it can add value to the end user, which is only possible when unique, rich functionality is added and very often this functionality comes from custom needs, very specific to each organization. In most of the work we do, content management is no more than 50% of the work.  The rest is about adding custom features that are difficult to include or find in an open source solution.  Fusepoint specializes in complex solutions that include a lot of custom development such as connecting an internal legacy system to deliver data on-the-fly through the website.  Between 2000 and 2003, we were building websites with content management capabilities.  Today we integrate existing solutions (commercial or our own CMS) and we customize complex features that truly deliver value to the end user.

In addition, and what makes us stand out, is that Fusepoint will manage the final solution for the client, which makes us a one-stop-shop.  Not only can we manage the infrastructure, but in many cases we can also take care of the entire solution, including the business application and guarantee its performance and availability through an industry leading SLA.

GEORGE KERNS: Two things we would pitch right off the bat.  Number one, the market has matured and stabilized. A few years ago, many CIO's were stung by providers that went bust because they had a "build it, and they will come" mentality, which lead to 100,000 square foot facilities at 2% utilization.  The market has shifted to an on-demand model and facilities are scaled to meet the market's appetite.  Smart clients that want to kick the tires are satisfied when we show them a strong balance sheet, access to large amounts of capital and have been EBITDA positive for two full years.  

Secondly, the trend in Canada is towards what we call "selective outsourcing" where a company hands over a piece, most often the most critical piece, of their IT infrastructure.  More and more companies understand this; they are a retail operation or a bank, not an IT company and they want to get back to what they do best, running their business, and leave the day to day infrastructure and application support demands to the experts.

GEORGE KERNS: Is the glass half empty or half full? We choose to lean to the latter for a few reasons. First, we believe threats will always exist, and the impact of those threats may actually go up over time.  But, based on how immersed we are as a society, and economically reliant on technology, we don't think we will see a slow down in the adoption, rather an up-tick in demand.  But, what we think you will see are far fewer b2c or b2b operations trying to deliver secure services on their own.  Rather, they will turn to specialized, focused, and agile providers who are very good at what they do and guarantee an "always available, always secure" environment.

GEORGE KERNS: We think we can safely say we are in for a lot more legislation, regulation and centralization on a global scale to deliver a sense of stability in managing and processing private data online. Ten years from now, it will be inconceivable to allow a doctor to download 10,000 records from a centralized system onto a lap top, which is later stolen from his car.  Rather, that same doctor would securely log into an encrypted data base, access only select authorized records; view them remotely, but with restricted access.  In addition, we believe people will put a great deal of emphasis on accountability of key executives.  If a consumer gives their private data to a company, they are going to hold that company and its executives financially liable for any breach that may take place and the consequences will be severe.  We think Fusepoint can play an important role in assisting organizations meet compliance and legislation requirements as we have, and will continue, to invest heavily in external auditing that test and retest our services to ensure we are one step ahead.