The Doyle Report: Cloudnexa, The Maverick Among Us

What makes a winner? What sets a company apart? What defines a market maverick?

We’re glad you ask.

At our inaugural Channel Directions Live conference, Penton Technology singled out one innovator for its bold steps in helping to define the cloud services market. For its outstanding achievements, Penton Technology recognizes Cloudnexa as the “2015 Maverick Award” winner. The company is the first Penton Technology Maverick Award winner and has a story worth sharing. It reveals volumes about what can happen when an organization identifies a hot market, makes bold if not controversial decisions to embrace it, and then stays the course despite challenges that arise.

If you’re not familiar, Cloudnexa is a managed service provider (MSP) that helps clients realize the full utility of cloud computing on Amazon Web Services (AWS). The Philadelphia-based company specializes in providing managed services, provisioning and migration assistance around the AWS cloud platform to midmarket businesses and government organizations. The company is both AWS Premier Consulting Partner and an AWS Managed Service Partner.

Cloudnexa’s roots date back to 2008 when the company was spun out of Freedom OSS, a solutions integration provider that was the brain’s behind the vNOC Management Platform that Cloudnexa relies on today. At the time, Cloudnexa decided to focus its energies around the new AWS cloud platform and managed services that could be developed around it. Though it picked what would ultimately become the market’s hottest platform, Cloudnexa hardly became an overnight success for its foresight. In fact, some thought its decision to align with AWS to be downright crazy.

“I can remember going to a Red Hat partner summit in 2009 where the leadership team laughed at me because I wasn’t doing more open source work at the time,” says Cloudnexa founder and CEO Joel Davne. “I thought that was so funny because Red Hat had this whole ‘challenge the incumbent’ campaign then.”

Davne recalls that Red Hat’s message to the industry was be bold, think outside the box and leverage innovation that challenged the status quo—precisely what Cloudnexa was positioning itself to do, not just to Microsoft, which was Red Hat’s gambit, but to all companies provided that solutions to help customers fortify their data centers.

In retrospect, Davne recognized that Red Hat and others were making many of the same mistakes that previous market leaders made before losing significant market share to disruptive innovators. This includes clinging to ongoing revenue streams, refusing to prioritize disruptive business models and delaying a move to modernize their workforces.

Recognizing that it needed to do something bold to avoid a similar fate, Cloudnexa decided to embrace a controversial strategy when it rebranded and repositioned itself in 2012. The company adopted the Cloudnexa name and discontinued traditional IT services in favor of going all-in on cloud technology. To Davne, the move was akin to changing the style of underwear he wore. At first it felt odd, he says, but then he got used to it.

“We had to take a lot of bold steps [then],” he says. “We had to get rid of some customers. We lost some staff because they didn’t accept the new business model. We did all the things we needed to do to reinvent ourselves.”

While it seems like a no-brainer now, decisions made then were difficult to reach. The company had, for example, a significant number of well-paying customers who turned to it for traditional professional services. Over the course of six weeks in early 2013, the company’s leaders argued bitterly over what to do about them and key vendor partners as it transitioned to the cloud. One faction within the company wanted to pivot and become a product company. Another wanted to stay the course and continue to be a system integrator. Still another wanted to go bold and define what a cloud managed services provider could be.

In the end, the “Maverick” faction within the company won out, and Cloudnexa went all cloud, all the time. One of its toughest tasks in the aftermath was telling loyal customers that it would no longer serve their traditional needs. Many, of course, went away, which put a financial strain on the company. Amid the turmoil, employees turned to Davne with dismay. “This is not what I signed up for,” some said. Others burrowed into their offices when they realized that the company’s new direction would not support their job roles.

As if these challenges weren’t enough, the company faced daunting go-to-market difficulties. Early on, Cloudnexa thought the market would embrace tired pricing models, which reduced the company’s financial exposure. But the market recoiled against Cloudnexa’s monthly minimum payments. The terms were simply out of sync in the new “pay-only-for-what-you-use” world shaped by Amazon and others.

“We did terrible for the first three months. I think we got maybe five new customers,” Davne recalls. “We were anticipating 10-15 new ones a month.”

After re-huddling in May 2013, the company realized that it was asking too much from its customers. So it decided to keep things simple and embrace Amazon’s pricing model—a decision that greatly reduced customers’ financial risk. When Cloudnexa made the switch, customers flocked to it. Today, the company is adding dozens of customers per month. Over the past three years, its sales have grown by 750 percent. And it’s headcount is approaching three dozen.

While momentum continues to build, Cloudnexa continues to experience certain growing pains. Its customer onboarding process is not working as fast as Davne would like. Delays have cost it clients who have signed up but then backed out before their services could be provisioned. Cloudnexa has also struggled to find new talent and has turned to education provider Grovo for help onboarding new employees. With a proven training methodology, Cloudnexa is hoping that Grovo can turn new recruits into capable employees who can provide customers with a predictable and consistent experience every time.

In addition to growing pains, the company has also faced some difficult business decisions, including how many cloud platforms to support. Although a committed AWS partner, Cloudnexa realizes that specializing in one public cloud limits its total addressable market. It also leaves it vulnerable to Amazon’s growing ambitions in the cloud space. Cloudnexa is now looking at opportunities around other cloud platforms from Microsoft and Alibaba.

While he believes his company’s success boils down to several bold decisions, Davne is quick to concede that growing customer interest in cloud technology has accelerated the company’s growth. With each passing month, he says, customer resistance to putting data, applications and faith in the cloud falls. CIOs are letting go of the notion that they have to maintain their own data centers to protect their employers, and fundamentally changing their approach to technology acquisition.

What surprises Davne is the number of fellow solutions companies that are not taking advantage of these recent shifts. Culture, he believes, is a big reason why. Successful business owners get stymied when pressed to change their business model and adopt new technology platforms simultaneously.

Speaking of culture, he hastens to add, his company’s own culture has changed as it has evolved. When it was in the throes of transition, the culture was edgier than today. Davne says his own brash tendencies have challenged AWS channel managers to see partners in a new light.

“It’s been a really great relationship. And I don’t have regrets; we are passionate about our mission. I just hope that together I can get another 250 percent [of growth] under our belt in 2016,” he says.

While that might sound ambitious, the company has laid the groundwork for another breakout year. In October 2015, for example, Cloudnexa unveiled its “White Label Managed Service Program (MSP),” which allows existing AWS partners to expand their businesses by offering Cloudnexa managed services to their customers. This development followed news in July when the company introduced automated provisioning for AWS customers that simplified and enhanced cloud adoption.

Also in 2015, the company made progress expanding its geographic footprint, selling more into Australia, Singapore and elsewhere than before.

Looking ahead, the company has high hopes for a new containerized options that will make it easier for customers wanting to deploying WordPress content management solutions on AWS and, in the future, Magenta ecommerce solutions.

“We ask customers ‘what if you could confidently provision and manage resources, security, budgets and policies across your AWS environments—from a single, simple user interface?’ It’s a simple message that is resonating,” says Davne.

Simple? No question, and maverick, too.

Editor's Note: The headline on this story was updated on Nov. 30, 2015 from "The Doyle Report: The Maverick Among Us". Also Cloudnexa is the Maverick Award winner for 2015.