Mahesh Sharma | August 19, 2008
world according to | Peter Mavridis
PETER Mavridis walked away from a job on Wall Street, where he worked on acquisitions for a $US20 billion business, to jump-start a local IT services firm. But he doesn't miss the bright lights of New York City.
'I have very strong finance people on S Central's advisory board,' says Pete Mavridis
With an estimated fortune of $74 million, Mavridis was ranked 21st on the list. He got there thanks to major growth at S Central, which he started in 1999.
While questioning the methodology BRW used to calculate his fortune, he says the fact that there aren't too many other IT executives on the list raises questions about the local industry.
"Some very good IT companies have been established," Mavridis says. "But once they get to a certain size they get a lot of interest from multinationals.
"Australia is not the easiest market. There have been times when fast-growing Australian IT companies had to let go of some of their equity and bring in venture capitalists, so individual stakes got diluted."
What were the key elements in you getting where you are today?I have very strong finance people on S Central's advisory board who have been instrumental in assisting with acquisitions and structuring, such as former National Australia Bank executive David Heaney and Shane Breheny, formerly chief executive of electricity distributors Powercor and Citipower.
In a way, we were punching above our weight, and there was a time when we were buying organisations that were bigger than us.
Solution 6 founder Terry Ashman is also on the board and provides a different perspective, as he was instrumental in setting up what was one of the first internet service providers in the country. He knows what it's like to build a business where it hasn't existed before.
How many local tech companies have not been built on those business principles?There and hundreds of them that are sitting between $7 million and $15 million of revenue a year - the market is littered with them.
A lot of them are started by terrific technology specialists, but they really can't get past a certain size because they haven't applied the basic business principles, procedures and processes.
You tend to find they don't understand finance, which also makes it more difficult to be entrepreneurial and make acquisitions, take some risks on certain contracts and have the financial power and capacity to execute.
So, there isn't a problem with the technology they're selling?Well, people who are selling technology aren't going to be able to participate in large projects.
If you only know how to develop a specific code, you're only going to be part of a consortium - you're not going to be leading any projects.
Unless they are specialists in a particular technology and have specialist skill sets, they're all struggling and going to continue to struggle.
How long can the smaller guys struggle before they go under?In the past you had the big guys, the likes of IBM, CSC and EDS, and they were riding the wave of large outsourcing contracts and a lot of the very small guys were generating most of their revenue by sub-contracting to them.
As organisations break these down into multi-sourcing contracts, the small guys are really struggling, because they're too small to bid for the $20 million contracts and they no longer have the revenue they used to get by subcontracting to CSC or EDS.
They have to reinvent themselves or they won't survive. They really need to specialise or look at some of the new trends going on in the space and ride some of those waves.
Where is this happening?It's most visible in Canberra, because the larger outsourcing deals are there, but it has occurred in other parts of Australia as well.
If those guys fell over tomorrow, it sounds like you're in a perfect position to swoop in and pick up the scraps. Is that your plan?I know a number of them have put themselves up for sale, but their expectations are they'll be priced at the valuations that were consistent with the old model.
Over the Past few years, of the ones we've looked at, we certainly wouldn't be interested.
Our view is that we'd rather focus on our own business internally and just keep an eye on what's happening with some other companies out there.
If opportunities present themselves, yes we'll look at them and we always do, but we're not banking on that to be our growth path in the next year or so.
Surely it wasn't all smooth sailing for S Central. What were some of the hurdles?There are always hiccups. The dotcom bust happened very soon after we set up the company, which meant we spent a couple of years being profitable and delivering well to clients, but not aggressively pursuing a growth strategy.
That set us back in our business planning.
Which competitors do you have your eye on and respect for the way they go about business?There are companies like Data#3 and Datacom, that stepped in to take up a lot of Commander's position. They're still doing quite well and delivering a good service to clients. ASG is the same, with managing director Geoff Lewis.
They're obviously major beneficiaries of some of these outsourcing break-ups going on at the moment. It's good to see Australian companies picking up some of these proceeds.
If ASG is picking up this work from the shift to single sourcing, are you getting in on the act?This is where we see the industry heading. We set up our business to be a mid-tier player that could also deliver on a national scale. The contracts have been broken down into $10 million to $20 million bundles, and it's players like us who will win those.
We've primed ourselves to be able to take on some of those smaller broken-down outsourcing arrangements that are more specific to our core competencies.
What are those?The word has been bandied around: cloud computing. I like to call it infrastructure as a service business. It is the traditional model of procuring, and provisioning generally has a long completion cycle.
From the time finance managers approve the expenditure to the time it's ready and live is often months, and then sometimes years. When you're talking about activities such as a marketing department wanting to put up a new website or program for a campaign, they can't wait nine months for the IT department to get all that ready.
The organisation doesn't need to know where it's housed or what type of equipment it's sitting on. All the marketing department will do is provide it online.
They'll get their campaign up and pay by credit card. Where it sits on the internet is really nothing they're concerned with.