Consulting in the Cloud: Fast-growing firm finds that starting small leads to bigger things

Arne Kainu, president and CEO of Centerstance, must be doing something right—because his firm keeps hiring: consultants, project managers, software developers, a business development director, a senior sales executive. Founded in 2004, the firm now has more than 70 employees on its roster. Inc. ranked Centerstance number 737 on the magazine’s 2008 list of the 5,000 fastest-growing private companies. The Portland Business Journal listed the firm number 12 in its compilation of the fastest-growing privately held companies in the state. Centerstance’s revenues have grown more than 200 percent for each the past three years, reaching $13 million in 2008.
 

A new type of consulting firm

Although Kainu had a running start in the form of 15 years of IT consulting—including a position with Accenture—he understood that as a new entrepreneur he was playing under a different set of rules. “At the beginning, we didn’t have revenue, margin, or startup capital,” he recalls. “We capitalized the company through staff augmentation—the hourly contracting of technical resources. That was about 90 percent of our portfolio, versus just 10 percent for professional services. Now that ratio is almost the reverse.”
 

Cloud computing was a natural fit with Kainu’s business plan. “Salesforce.com enabled us to offer a wide-ranging CRM solution without having to put any infrastructure in place—and without having to support that infrastructure down the road,” Kainu says. “That cut out a lot of overhead. We could bring a professional team with a project leader, a business requirements analyst, and a configuration specialist, without having to pay someone to provision the environment then sit around for the rest of the time.”
 

However, Kainu did have some initial concerns. Centerstance launched in the early days of cloud computing: the technology was relatively untested in the market and few analysts had validated it. “Cloud computing projects are smaller and are completed more quickly, which is not necessarily good news for the service firm,” Kainu says. “Clients expect that you will deliver a project for $10,000, and that project will be complete. At the beginning, we wondered whether a business model built in the cloud was in fact sustainable.”
 

Growing a successful business in the cloud

But the wisdom of Kainu’s decision soon became evident. The deals got larger, ranging up to $ 7 million. Some of the smaller ones led to follow-on training engagements and expansion into other departments across the company. “We learned that with cloud computing especially, clients are often more comfortable with a pilot project. The dollars and risk are much smaller, enabling projects to get done that wouldn’t otherwise have seen the light of day. That’s when clients get excited, which leads to more engagements. We’ve learned to anticipate that clients will often start small, but upon seeing success will iterate from there.”
 

For example, the Papa Murphy take-and bake pizza chain engaged Centerstance to implement Salesforce CRM Sales for the franchise sales group. “Not only were the users thrilled, but we came in ahead of the delivery date and within the budget,” Kainu says. Word of mouth within the company led to a second engagement using Force.com to build a franchise management system spanning 25 states and 900 stores—phasing out spreadsheets that were slow to be updated. Papa Murphy’s field operations then approached Centerstance about developing a mobile solution. “Papa Murphy’s was looking at 13 months. With salesforce.com, we did it in about 7 weeks from design to deployment, leveraging some of the account and contact data already in the system.”
 

Kainu credits the fast turnaround time on a variety of salesforce.com projects to the use of custom objects specific to the client’s departmental needs. “We used a standard salesforce.com configuration and customized it using clicks, not code. Now in nearly every engagement, we build custom objects that are unique to our clients’ business. The practice is completely integrated into our methodology, even during the scoping phase of the project.”
 

Building a portfolio a project at a time

Kainu has found that a client’s size does not necessarily indicate its portfolio value: large companies don’t always lead to large engagements, while smaller companies can surprise. He recalls, “We were approached by Traeger in Mt. Angel, Oregon. They are a wonderfully entrepreneurial company that makes wood pellet grills, with roots going back to a blacksmith shop in 1939—but I admit I had never heard of them. Yet they have turned into a valued client and an ongoing relationship with lots of arms and legs. That’s true with countless other mid-size companies: they are willing to invest in what it takes to improve the way they serve their customers. CRM opens a lot of doors.”
 

In concert with its salesforce.com development work, Centerstance also provides business consulting—looking at client objectives, how those objectives are measured, and how salesforce.com can help. “This three-legged stool allows us to build a relationship, better understand a client’s needs, and cross-sell additional services—including custom development. We work onsite a lot—during the business process review, walking through prototypes, through training and hand-off.”
 

Centerstance has also identified some key SaaS solution providers working in areas not served by salesforce.com. “For example, we’ve partnered with Intacct, which offers what we consider the most fully featured accounting package available in the cloud. For one client, we’re implementing salesforce.com for customer service and support system and integrating it with Amazon Web Services, and we are committed to the Google Apps stack. As the number of platforms increases, clients are seeing larger roles for cloud computing and are asking bigger questions. They want to know about moving basic office functions to the cloud. They’re interested in alternatives to storing legacy data in an aging, expensive infrastructure. Clients are also starting to look at salesforce.com as an alternative way to distribute content now being stored on in-house servers. We are increasingly getting involved in those conversations.”
 

Wisdom for the cloud

Other prospects are attracted to cloud computing’s cool factor with no game plan in place. “We’ve encountered prospects that would love it if we could demo for the next five months. But as a services firm, we don’t waste our time with tire kickers. We qualify them quickly; get to know them as quick as we can. We do it by asking some fundamental questions: ‘Where are you going?’ ‘What’s your intention?’ ‘What’s your business case?’ The point is that if a company creates a groundswell of expectation over cloud computing, but aren’t authorized to do a project, they will make their own lives miserable.”
 

Kainu’s advice to prospects in the early stages of evaluation is to start with the basics. He tells them to think about the ROI and how that will be by viewed by senior management and the board. “Can you talk about total cost of ownership? Can you say with confidence that you’ve evaluated alternatives? Dealing with these questions up front will better serve everyone, including us.”
 

Looking ahead, Kainu sees Centerstance’s formula for success further broadening. “We’ve now got tremendous credibility and experience with our clients’ sales, marketing and customer services teams. Increasingly, we are gaining that trust with the IT team. And we are starting to find ways to better serve the finance team, including the CFO and the controller. That means making long-term investments on our side to make sure that we are several steps ahead in terms of the knowledge we bring to the table. We are making bets about what will be relevant over the next six to 12 months.”

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