For 20 years, Birch Communications has delivered a blend of telecommunications and IT services to small and midsized businesses, expanding its market through 28 acquisitions, partnerships with large service providers, and investment in its people and technologies such as cloud and software-defined networks.
In early April, Birch purchased Primus Telecommunications Canada, giving it immediate access to its northern neighbor. More recently, Birch Communications said it had expanded its fiber network footprint to more than 550,000 buildings, part of its goal of reaching 1 million buildings this year.
The New IP recently chatted with Vincent Oddo, Birch president and CEO, who led the company's transformation from a small reseller to a communication service provider to more than 200,000 customers. Oddo, which owns Birch with two partners, discussed the company's acquisitive strategy, future technology plans and partnership.
Alison Diana: Birch has acquired 28 companies over the years, most recently Primus in April and Sage Telecom in October 2015. How do you manage your acquisitions?
Vincent Oddo: We have a very disciplined approach to acquisition that allows us to succeed, which we call the "six C's," being composition, commitment, coverage, contribution, compatibility and consolidation. These are the features that allow us succeed rather quickly. So composition just doesn’t get the customer; it means are they the kind of customer we're interested in. The commitment means contracts. Coverage means geographic patch and contribution means compelling gross margin to synergies, while compatibility we define as quick migration to the customers' active sales data into our own systems. And consolidation means a successful consolidation of their customers into our own systems. So it's very disciplined.
In the case of Primus, it was geographic direction we were looking for and we had been looking at Primus assets for quite some time. It was a well-run company with good assets but they had some financial difficulty. So we stepped in and did this purchase, and this expands us from just being in the US to now being in the US and five provinces of Canada. It's something our customers have been looking for.
Building a Business
Vincent Oddo, president and CEO of Birch Communications, says the company is relaunching its data center products as IaaS solutions.
AD: Are you also looking for expansion outside North America using those six C's?
VO: Yes, we see the outside of North America as something we may need in the future but right now, 2016 and 2017, we're looking to go deeper in the US, deeper in Canada, and to keeping a very keen eye on Mexico. They are in the process of deregulating telco in Mexico. It's been going on for several years so we're keeping a very keen eye on that because we'd very much like to get into the Mexican market. We would probably do that through acquisition and/or we might just do it via network. That's a key thing we're keeping on our radar screen.
AD: You mention culture as one of the six C's. How do you integrate employees and cultures from acquired companies?
VO: We've been doing this for quite some time and have a pretty good track record of experience. There are several aspects to be successful. The first is, whatever staff we're keeping, which typically is sales staff, some of the administrative folks -- we don't typically retain a lot of the senior executive folks -- as we're going through the process we like to be really open and honest with folks in the entire company, just to make sure we're straight shooters and that we do expect there to be reductions after the acquisition but we state that upfront and are clear about it.
People, generally, really appreciate the honesty. If there aren't going to be cuts, that's great. To the folks that we do retain, everything we can like tenure we'll honor, even if it's just assets we acquire. Like in the case of Primus, we just acquired assets. We're paying their tenure. These things are very important. We want to be straight shooters and easy folks to get along with.
AD: Acquisition is only one of your growth strategies. Fiber also plays a big role.
VO: Metro fiber in particular is very important to our customers. We have the rights to use licenses in many, many markets across the country, typically it's a ring that covers a geography or city. In that ring, we provide fiber into an entire building. And so we have about 1,000 of those buildings right now. That's a great strategy but of course it's time-consuming and takes a lot of time to build out in each market and we don't have an unlimited amount of funds. So we've augmented that strategy with reselling metro fiber from AT&T, Verizon, XO and other big players in the industry and that's really worked well. Typically, we augment our general footprint with some of these other carriers so we have access to, today, more than 600,000 buildings, not just the 1,000 of our own.
It's the same strategy we used even going back many years ago when we were much smaller, in terms of building up our own network, so we would resell other services in a certain density. It's the same thing here on the fiber side. When we get to a certain density, we'll take over. It's a good strategy.
AD: Is this also the approach you plan to use for 5G?
VO: Yes, 5G is a little further bit further off for us. It'll be the same strategy in terms of resale. In particular, the cost of the spectrum is too cost-prohibitive.
AD: Do small and midsized businesses make up most of your customers?
VO: Yes, I think you're right. They are the majority. We have a very small minority of consumers -- about 10% or 15% of our business is consumers. We also have another larger group called enterprise customers and retailers which probably makes up 20%. The majority are SMB.
AD: So what in particular are these SMB customers seeking from Birch?
VO: The main things here are three main areas. The first would be footprint, where they're looking for a robust footprint in the market that they're in or markets they operate in. Bandwidth is two and that's where the metro fiber strategy comes in. And then service, which is really two things -- they're looking for a variety of telco and IT services in a unified, customer services approach. And that's the thing we've, for many years, continued to enhance.
Footprint, we started with a few states, then eight or nine, then 20, then 50, and now we're in Canada, so footprint gives us more opportunity for customers because they expand their business and we can provide one-stop service for all of their services. The bandwidth certainly, we can give up to a gig or multi-gig service in lots of different places and it's going to continue to expand this year and in the future.
In the service, we do provide a range of telco service, a range of data center, cloud and IT services that customers love and they can do more things with one player. Customer service has always been a big focus for us. I look at the customer service stats every single day to make sure we answer customers' questions quickly, that we answer their questions on the first call -- all these kinds of things matter.
AD: What investments do you make internally to meet customer expectations in both telecom and IT services?
VO: There are a lot of small things you have to do right, to get that right. There's a lot of investment we have to make. There are two that really stand out. In the area of servicing our customers, the first is training. We do a tremendous amount of training. We have Birch University which is available to all our staff to take courses on their own. You can't be a frontline customer service person and not have some training that's happening in a given month. We're always training and investing heavily in the staff training function. That's training folks on existing technology and that's also training staff on new products and new technology.
And the other big investment in terms of customer service is in technology itself. So we've got very sophisticated [interactive voice response] IVR that allows calls to efficiently go to the right person. We've got a complex set-up. We've got a couple of different call centers in Canada and Kansas, and calls are being routed to the most proficient person, the person with the most knowledge of what the customer is looking for. We want to minimize the number of selections the customer has to make when they call in. All of that stuff is half science and half art, but we do a pretty good job of it. We're constantly tweaking it, constantly investing in technology and getting the right folks in front of the customers for whichever situation they might have.
AD: Are you implementing or researching NFV or SDN?
VO: Actually, we are in the process of relaunching our data center products and they'll be much more in the IaaS format -- infrastructure as a service format -- and will be built completely on VMware and will be run as VMs so that our customers can select, not only bandwidth, but also storage and all of that is being rolled out right now. Our data center up to this point had some of that but it had some older technology; now it's all being centered on VMware and it will have all of the software-defined networks that are leading edge.
AD: What drove Birch's decision to invest in this SDN and cloud approach?
VO: To be honest with you, it was agility and what customers were looking for. We also looked at our costs and those were typically higher priced to run those services. We wanted, to the extent possible, let customers make their own choices and not have to have fairly expensive engineers worrying about that kind of details -- let them run the data center itself but get them out of the mix -- so, to some extent, it's streamlining of costs, as well.
— Alison Diana, Editor, The New IP. Follow her on Twitter @alisoncdiana or @The_New_IP.