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Friday, Mar 29, 2024

Invest to Get Ahead in the Cloud

One thing Tony Safoian has learned in the 10 years that his technology company has worked in the cloud is that he always needs to put money back into the operation. So it’s no surprise that Sada Systems Inc. has embarked on an ambitious program investing $11 million into employees, technology and new products and services. “We cannot win this game long term without a heavy amount of reinvestment,” Safoian said. North Hollywood-based Sada, founded in 2000, has 176 employees handling managed information technology services, mobile application development and migration to cloud services. It partners with Google Inc., Microsoft Corp. and Facebook Inc. on each of their respective cloud service platforms. Revenue last year was $70 million, a 49 percent increase from the previous year. And Safoian projects it will reach $100 million this year. Safoian isn’t looking for outside investors to fuel this growth. For years the company has reinvested profits back into the business, and he’s banking on the same system now. Much of the company’s growth has been tied to the work it does in cloud computing, a system of public or private internet-accessed data centers that allows for shared use and cuts down on equipment overhead by companies big and small. The company has already taken over half of the seventh floor of the North Hollywood office building where Sada already occupied half the sixth floor. In late January, it had 25 open positions and announced partnering with a Chicago engineering firm on a new service to manage regional transportation assets. Fast-moving cloud If technology is one of the fastest-moving industry sectors, then cloud services is the fastest part of technology, Safoian said. “We are in the fastest part of the fastest part of any sector in the world,” he added. Gartner Inc., the information technology research company in Stamford, Conn., defines the cloud by five characteristics – it is service based, scalable and elastic, allows for shared use, keeps track of users and is accessible through standard internet technology. Google, Microsoft and Amazon.com Inc. are the dominant players in the cloud computing market. “Nobody can spend $10 billion a year on building infrastructure for cloud services like those three can,” Safoian said. The market for supplying services that have any connection to the cloud is a huge one. Gartner estimated last summer that over the next five years, $1 trillion in IT spending will be directly or indirectly affected by the shift to the cloud. Ed Anderson, a research vice president with Gartner, said that about 60 percent of companies are now using the cloud for some aspect of their business. The number of companies, however, that have moved completely from traditional IT infrastructure of having servers on site to the cloud is probably about 5 percent or less. There is a lot of opportunity for companies such as Sada that are doing consulting and implementation work, Anderson said. “As people are making the move, they are looking for third-party experts to come in and help them do that work,” he added. Ask Safoian to describe what Sada Systems does and he boils it down to two directives – move people over to the cloud and get them to do great things once there. “This is the democratization of technology,” Safoian said. “That is why the biggest consumers of the cloud are not the biggest companies.” Sada is not the same company that was started by his parents, Hovig and Annie, some 17 years ago, to provide on-site and remote IT support. Both elder Safoians are still with Sada Systems – Hovig as chief technology officer and Annie as chief financial officer. There may be no better representation of how far Sada Systems has come than in its office space. Ten years ago, the company was in a former recording studio on Vineland Avenue. Tony Safoian’s office was the control room. Today, Sada occupies two half-floors of a high-rise a few blocks away on Lankershim Boulevard, smack in the middle of the NoHo Arts District. The Microsoft practice is on the sixth floor; the Google practice on the seventh. The evolution of Sada taking a lead in the cloud computing market began 10 years ago, when it was contacted by Google about doing some work related to its apps. That connection led Sada to become a partner in selling Google apps and create a tool to allow for transferring e-mail over to Google’s cloud service. Microsoft saw what Sada was doing and contacted it to be a partner when it was launching its Office 365 suite of services that included Office, e-mail and social media functions. A former Microsoft employee who went to Facebook was the connection to get Sada in early on Workplace, the collaborative platform that allows users to communicate in groups as well as through social media. Workplace launched in October. “We were the very first partner to sign the paperwork with Facebook for Workplace in the world because we helped them draft their agreement,” Safoian said. Anderson, of Gartner, said that vendors becoming partners to Google and Microsoft was extremely important as it brought with it a badge of credibility. “If you are not actively engaged with those leading vendors, you are really on the fringe,” Anderson said. Client roster In his tech industry keynote addresses, Safoian likes to say that one cannot drive a half block in any major city or watch television for more than 30 minutes without seeing a Sada client. PepsiCo Inc., Coffee Bean & Tea Leaf, 24 Hour Fitness, FedEx Corp., Virgin America, True Religion, FirstTeam Real Estate and the city of Chicago are just a few of the names on the list. Sada’s Google Maps business alone has 668 customers who use location data in their applications and pay a licensing fee to Google, Safoian said. While the company takes business from very large corporations, it is the middle market – organizations with 500 employees to 10,000 employees – that keeps Sada busy and growing. Safoian called it an underserved market that gets left behind by small business software providers such as Intuit Inc. with QuickBooks and the massive consultancy and tech firms such as Accenture PLC, Oracle Corp. and IBM Corp. catering to big corporations. As a firm with national clients, Sada finds itself in a position to be profitable where larger firms would not, Safoian said. “The small players are not sophisticated enough; the big players cannot make money in that segment,” he explained. “It’s a complete vacuum of service companies that know how to help that segment and we are happy to step in.” Gartner’s Anderson said mid-market companies come with a special set of challenges. “Somebody who can come in and take over a lot of the (technology) burden while at the same time can do skills transfer and training can help bring that mid-size organization along,” Anderson said. Digtial Domain started using Sada Systems about five years ago, when the Playa Vista visual effects company was switching its e-mail system. Andrew Pavell, director of systems technology at Digital Domain, said he liked how Sada managed the switch, provided training and communicated with the employees. “They provided a team of people to walk us through the process and allowed us not to get distracted from our day-to-day operations,” he added. Grow or die The $11 million investment is meant to position the company for continued growth as more businesses need its services. “The market demands more of us now than 10 years ago when we were a simple IT shop,” Safoian said. Employees will be a big component of that investment. There are plans to add 50 over the coming year in engineering, customer service, sales and marketing positions. The one long-term competitive advantage that Sada has is attracting the best employees and keeping them with the company, Safoian said, adding, “A service company needs more people than a product company.” One crucial addition to the management staff was made in October with the hiring of Gary Gangi as head of talent acquisition. Gangi previously worked for Live Nation Entertainment Inc. and at Sada spends time with the hiring manager to look for future employees. Another part of the investment will go to develop new products and services. The first of those was unveiled last month – Atom, a cloud-based app for city and state transportation departments that monitors assets such as bridges, signs, walkways, speed bumps and bike racks and provides analytics. Hiring and new products are part of a strategy to see opportunities ahead where others don’t. The moment the company stops reinvesting, and growth lulls below 30 percent a year, it will stop getting a share of the fast-moving cloud market, Safoian said. “To me that is the scariest moment,” he added. “That is when you begin to die.”

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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