BDO Digital Key to Industrial Services Startup Launching in 6 Months

On January 31, 2020, a private equity (PE) group acquired a carved-out business unit in the energy services industry and set goals of at least tripling the company’s size by year 5. The PE group faced an aggressive deadline to stand up the newly formed company, Industrial Specialty Services (ISS), from scratch while generating $40 million in annual revenue and supporting more than 200 employees. Operating out of Deer Park, Texas, and now with six locations, ISS was created to provide technical maintenance and repair services and solutions to the refining, petrochemical, gas, power, pulp & paper, offshore and subsea markets throughout North America.
 
The  CEO, James Craig, needed to form his management team, hire personnel and establish new company departments for Operations, Sales, Marketing, HR, Engineering, Safety, Accounting and IT. Additionally, Craig needed to establish data and voice networks and related infrastructure and enterprise systems for office locations in the USA and Canada.
 
To assist with the process, Craig brought on an adept team of industry and technology experts consisting of BDO Digital,  and NexTec Group, to help establish internal departments, systems, processes and controls, all while working through the COVID-19 pandemic and Hurricane Hanna. Together, this team completed implementations in 6 months and cut down the transition period and related costs by half.
 

Challenges

Craig knew carving out an asset entangled with its parent company posed a different level of complexity than merely acquiring a company outright. (A carve-out is the divestiture of a business unit that the parent company sells, partially or wholly). As he moved through the due diligence process, he already had a team and technology platform in mind to help him with the process. Craig had previously worked with BDO Digital during an IT Due Diligence engagement conducted for the Equity Group’s purchase of ISS and he decided to ask BDO Digital for their recommendations for this transition.

The BDO team provided recommendations and cost estimates to stand-up an IT department and implement enterprise systems within the transition period that addressed three critical client needs:

1. Scalability: The client needed IT solutions to run their business from the beginning and scale for rapid growth.
2. Low TCO (Total Cost of Ownership) and high ROI (return on investment): The delivery of solution needed to be cost-effective and efficient to enable dedication of resources to grow the business.
3. Strategic focus: The company’s growth strategy had set a goal to double in size by the end of year 1 through the acquisition of 2 companies. As a start-up, the company was interested in leveraging technology and partner relationships as enablers for rapid control, growth, and business optimization.

 

BDO Digital Strategy

Craig was on board with BDO Digital’s recommendations as his vision was a company built with the operational efficiencies of the 21st century, taking advantage of cloud solutions and fully automated processes. From the very beginning, he understood the value of a cloud solution for ISS. Having worked with BDO Digital previously, Craig was confident in their ability to complete an IT transition and ISS Cloud platform implementation.

Leveraging BDO Digital’s footprint and strategic relationships with Microsoft, Acumatica, and NexTec, BDO presented a value proposition to implement a fully integrated cloud-based ERP (Enterprise Resources Planning) system and IT communications framework with minimal internal IT investments and staff that would meet short and long-term company objectives.

“The primary idea was to create a solution that was designed around the cloud,” Craig says. “It was a critical element because we wanted to get away from maintaining servers or being responsible for them. We wanted to limit as much network infrastructure as possible, so we can stay focused on what we do best, which is servicing businesses in their plants and not running an overdone IT show. We needed a solution we could trust, and that we knew would work with the services we provide,” he says.
 

Solution

 Start-ups or carve-out companies usually do not have the negotiating power, knowledge, or even credit standing to negotiate favorable terms with vendors, and they frequently miss strategic opportunities to optimize contracts and pricing. BDO Digital was able to help solve this problem.
 
BDO Digital architected and implemented ISS’ IT network infrastructure and IT department support services by securing Microsoft licenses, brokering deals with IT vendors, and negotiating to optimize costs while ensuring continuity of services. BDO also leveraged its enterprise level relationships and procured all necessary office and employee hardware, such as laptops, cell phones, copiers, scanners and other office equipment for all ISS locations and employees.
 

IT Infrastructure and Challenges

With BDO Digital collaborating with NexTec Group to implement Acumatica and Microsoft, ISS was well-positioned to meet the company’s critical transition deadline -- and then worldwide oil prices tanked to sub-zero, Covid-19 struck the U.S., and Mother Nature unleashed Hurricane Hanna over Texas and the Gulf Coast.

Even with these challenges, Craig said, “implementation went surprisingly well. The only real hiccup was a little hitch in the training and interaction with people. We couldn’t meet face-to-face and not being in-person was a little restrictive.”

BDO Digital along with Acumatica and Microsoft 365 allowed ISS to concentrate on what they do best – servicing businesses in the plants. The team easily shifted to virtual meetings using Microsoft Teams and Microsoft 365, which BDO Digital had earlier deployed for ISS and they had everything up and running in just 6 months, which was half the time from the final cutoff deadline.

“Our experience on Teams was outstanding and a big win for ISS,” Craig says. “Teams allowed us to transition to work from home for some and we were able to continue with training and implementation activities. We had to change our approach since we couldn’t be in-person, but it worked out well.”
 

Benefits

Critical Data Available Instantly

Before the carve-out, the old business unit used multiple, cobbled together systems designed for a different industry and it took a significant amount of time and effort to obtain a past view of their operations. BDO Digital, along with NexTec, architected the data process flow and controls in Acumatica for ISS to manage their business in real time. During the first full month in business, ISS accrued revenue for the month and invoiced two months of billings for its first closing. Previously, the business unit carried a month’s worth of unbilled revenue.

“Putting a month’s worth of AR on the books in the first month helped our liquidity and BDO Digital and Acumatica provided that for us,” Craig explained.
 

Key Results

ISS saw many benefits from the new implementation including:

• Gaining timely control and visibility of business performance through a centralized ERP and collaboration platform
• Gaining operational efficiencies through the user adoption of end-to-end automated processes
• Minimizing IT infrastructure investments by leveraging the cloud for voice, data, and business application services
• Outsourcing IT to BDO Digital, enabling access to subject matter expertise and sustainable support services 
• Acquiring a scalable IT platform supporting rapid growth
• Lowering overall salaries and wages costs by eliminating the need to hire IT resources
• Reducing the total cost of ownership while achieving high ROI

 

Positioning for Growth

IT Industry benchmark studies show that well-run, mature enterprises have IT departments that cost 1 to 3 percent of revenue. ISS is in year one and is already projecting to be at less than 1 percent of TOC for IT. This achievement typically takes much longer to get to that number, and this is a huge win for ISS.
 
Going forward, ISS and its investors have an aggressive strategy to triple in five years or less. The plan includes acquisitions and organic growth, and the ability to scale using the platform that BDO Digital architected for them with Acumatica and Microsoft. As ISS continues to grow, BDO Digital is providing fractional CIO services to ensure alignment between ISS’s technology and business strategy.

“If I add 230 employees, I want to get off their systems and have one combined business solution as quick as possible. Having that flexibility is critical,” Craig says. “BDO Digital, together with Microsoft and Acumatica are a huge part of the strategy we’ve set for the business.”

“BDO Digital was a one-stop-shop to bring in all the necessary resources, from architecting the technology footprint to engaging with a tight network of partners and solution providers, such as Acumatica, Microsoft and NexTec, to deliver the technology my company needed.” - James Craig, CEO, ISS