Market turmoil brings mission-critical back in vogue

Ask Matt Roberts to share the contract length for the most recent deals closed at SAS IT and the response was, “3, 3, 5 and 5” – all completed within the last few months.

Those are large and long-term agreements, chunky and complex.

“We’re working on the type of mission-critical projects that if those core systems go down, we’ll end up on the front page of the newspaper,” said Roberts, speaking in his capacity as Group CEO of SAS IT.

“Our core play is keeping the lights on and systems up and running – feeding and watering – with incredibly complex systems that are the life blood of these businesses.”

The Auckland-based technology provider is set to turn 50 next year and was founded by Doug Brooker in 1974. This is a privately-held Kiwi business that has built a reputation for being dependable, reliable and local.

But at some point since the emergence and acceleration of cloud, the ‘traditional’ tag has been rebranded and used as a stick by vendors to beat consistent performers into submission.

The ‘change or die’ mob vilify players who refuse to be swayed by market hype or industry hyperbole – or directly translated, won’t blindly embrace new products for the sake of it.

“We are not viewed as the silver bullet or the shiny new toy, we are tried and true,” Roberts said. “During economic storms such as this, the market comes to us because they can trust us.”

Leveraging a long-standing partnership with IBM spanning almost five decades, SAS IT’s focus has remained deep-rooted in the core systems and applications powering organisations.

Through offerings such as IBM Power Systems, the bulk of systems supported run in on-premises environments (or hosted) despite the relatively high levels of cloud maturity in New Zealand.

“The disruption of change doesn’t provide a compelling enough reason for businesses,” Roberts cautioned. “Unless it’s backed by a core strategy change within the business, then in most cases the systems can be adapted to provide that competitive advantage.

“It’s not failing and if customers can rely on a core system offering predicability in usage that is viewed as much more cost effective. Organisations want confidence in supply and confidence in pricing, hence why we’re receiving sign-ups for 36 and 60 months.”

In a sense, such systems don’t innovate or change and that’s the point – mission-critical is mission-critical.

“Customers just want it to run without any problems so that they can carry out transformative work around the peripheral,” Roberts added.

“Collaboration, customer experience and employee experience absolutely run in the cloud but rarely systems of record and importance. COVID-19 and the natural disasters, such as the flooding in Auckland, strengthened those expectations.”

Expectations continue to evolve however due to the rise in adoption of public cloud services, primarily through leading hyperscalers such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP).

“Customers previously paid for high-availability and disaster recovery but they just now expect that as part of the service because of the hyperscalers,” Roberts added.

“During the flooding, we were updating customers and keeping the situation under control and systems running but that was just viewed as table stakes and nothing special. Services continued with no disruption but that was expected, we’re in an ‘always on’ market.”

Roberts remained coy when quizzed on the impact of hyperscalers – chiefly AWS and Microsoft – on investment priorities in New Zealand, especially given such public investment declarations by both market leaders during the past few years.

“We are not viewed as the silver bullet or the shiny new toy, we are tried and true”

Instead, he referenced that up to 40% of all technology investments in the country are spent by the public sector. This is the same public sector that has been building a $300 million data centre at an air force base in Auckland since early 2022, designed to house its most important information.

“The government requires data to be local and the hyperscalers have moved to address that in New Zealand,” Roberts explained. “But secure government data is now directed towards this new data centre, so what does that mean for the hyperscalers?

“Most businesses are misguided in believing that adopting public cloud absolves them of any responsibility in the event of a cyber attack, for example. That conversation doesn’t always come up in the market.”

Roberts also accepted that SAS IT’s commitment to mission-critical at all costs comes with a downside. When the market is buoyant, organisations are potentially more willing to take risks and test the water with competitors to expand beyond core capabilities.

“We’ve been put in a corner in that sense but either way, we want to be viewed as a trusted partner with a seat at the table,” Roberts shared. “We want to help influence decisions that benefit our customers whether they benefit us or not. That’s the basis of trusted relationships.”

In truth, SAS IT’s biggest losses come to insourcing rather than industry competitors.

“New CIOs sometimes like to take work in-house because they want more control and IP sitting within the organisation and not a third-party,” Roberts said. “But our model is to have the IP sitting with the customer, we just take care of all the lights on work.”

From COO to CEO

Before assuming the CEO reins in April 2019, Roberts held the position of COO for more than 12 years. He made the decision to not replace himself at the time of his appointment to the top job and instead split up the COO position across five senior leadership team members.

“Hindsight is a wonderful thing but at the time I didn’t feel the COO role was tenable,” Roberts acknowledged. “Who would want to report to the former COO? How would that person validate themselves when you’ve literally just done the role?

“It was a tough decision and one that I wrestled with but shared responsibility simply doesn’t work, you need one COO as a leader.”

With a healthy gap of a few years created, Roberts has since recruited a COO in the form of Zach Porath who joined in May. Porath comes armed with a financial background and a strong sense of business acumen and structure, a welcome addition to an expanding team.

“Being promoted from within an organisation is the hardest path you can take,” Roberts noted. “I appreciate the thoughtful perspective, as it reflects the board’s cautious approach to risk management and their commitment to safeguarding their interests.”

While navigating the new role, Roberts recalled the most rewarding aspect so far – watching the team progress.

“We’ve got employees moving from being in operations for 15 years to leading customer accounts and I love that,” he said. “We have a very low attrition rate for employees and customers, both of which have been with the company for more than 30 years in some cases.”

Motivated by the ability to make change and influence, Roberts accepted that the role of CEO also comes with the additional remit of friend and counsellor depending on the situation.

“Nothing can prepare you to take on a CEO role, it’s so fluid,” Roberts said. “The role has changed into a more servant leadership model which is centred on enabling and empowering – creating a safe environment for people to succeed and make mistakes.”

No self-respecting CEO or leader would argue that supporting employees, improving culture and creating safe environments for collaboration and innovation isn’t important.

That said, the extreme end of the servant leadership model fails to understand the machinery of business and the need for decisive and effective decision-making at the C-level.

Whether male or female, CEOs that demonstrate authority are now criticised as arrogant and viewed as dictators – lazy observations perhaps but dangerous nonetheless.

“Having a commander-in-chief during times of crisis is essential as they provide strong leadership and strategic direction to efficiently accomplish a specific purpose,” Roberts highlighted. “In such situations, decisions are made decisively to ensure success, prioritising effectiveness over democratic processes.

“That approach does create change but naturally, it’s a very short-term play in business and isn’t a forward-looking or sustainable model. You need to make decisions but bring your team on the journey with you.”

Experience shows that inclusivity is fundamental but equally, leading by consensus seldom yields results. A balanced approach has to be tolerated for leaders to truly deliver on what’s best for the business, a business they alone are primarily tasked to lead.

“From a decision making and autonomy perspective, it’s about access to information,” Roberts explained. “An employee in one business unit will struggle to make a decision impacting the entire company given they lack a holistic view of all the information.

“CEOs have to make decisions across the whole business and manage the entire community but we can’t always share the reason why or the rationale because of sensitivity or confidentially.”

Which is why trust is crucial, added Roberts.

“And respect,” he said. “They might not always understand or agree with a decision but hopefully, they can say, ‘he’s got our back’ and that’s so important for a CEO.”

Automating to reduce costs

After an early baptism of fire battling through COVID-19 and natural disasters, Roberts has moved from one market crisis to another, now helping the business weather the economic storm ahead.

“We’re dissociating the business from the cost of labour,” Roberts explained.

Roberts is following the path of many technology providers in New Zealand, protecting profitability and rightsizing the business in response to increased economic strife and inflated labour costs.

“We have a very low attrition rate for employees and customers, both of which have been with the company for more than 30 years in some cases”

For example, 95% of Kiwi organisations – up from 88% and 67% in 2022 and 2021 respectively – will increase salaries during the next review period.

Billed as the “the great ask”, 72% of employees plan to ask for a pay rise during the next 12 months, up from 58% last year and 45% the year previously. More than two thirds (68%) admit the skills shortage has made them “more confident” to ask for a pay rise with over half (53%) believing they’d benefit financially from changing jobs.

“As our revenue increases our labour costs go up so we’re focusing on automating a lot of business as usual tasks,” Roberts added.

SAS IT defines those tasks as anything carried out more than once and includes the operations and maintenance work, notably during the on-boarding of customers. To meet aggressive automation goals, the business has heavily invested in Ansible, an automation solution built by Red Hat.

“Our approach is ground up where we are continually up-skilling our tier-1 team that work on rostered shifts 24 x7, so they can take on more out of hours system requirements and minimise the need for tier-2 and tier-3 workers to be up all night,” Roberts added.

“We want to remove the human element as much as possible so our team can focus on the cognitive aspect of the job – forward-looking work and ways we can differentiate. We don’t want to transactionalise the roles of our people and have them ticking boxes all day.”

This is a tight labour market and even in the rare instance that talent oversupply exists, it seldom addresses the most pressing need for SAS IT.

“We need very specialised skills and given the shortage of supply, it’s simple economics that the cost of recruiting those skills will command a higher price,” Roberts said. “We’re also navigating increases in ACC levies and additional sick leave which has reduced staffing availability.”

Piling on the pressure is the administrative overhead and middle management layer now required to simply connect the employee dots from a remote working perspective.

At the start of COVID-19, SAS IT had 39 staff, today headcount is at 80 – employees have doubled and dispersed within three years.

“Sales general admin costs are going up because you have to stay connected to all your staff that are now remote,” Roberts added. “Some staff don’t want to live in cities anymore because it’s too expensive but how do you build a strong culture with such a distributed workforce?”

With zero debt and a self-funding model, SAS IT is a leading example of how to build a technology practice capable of surviving five decades – crisis after crisis, boom after boom.

Through an ongoing commitment to mission-critical in all forms, few would bet against another 50 years of market success.

“There’s lots of great Kiwi businesses that don’t try to force multi-national thinking on a small regional industry,” Roberts said. “Like us, they are authentic, genuine and understand the customer dynamics – the buck stops with all of us.”