Trace3 Income Soars After Pivot From VAR to ‘Emerging Technologies’ Advisor
The numbers speak for themselves.
Irvine, Calif.-based Trace3 grew revenue more than 20 percent last year, generating upwards of $500 million in revenue, and increasing net income by 300 percent from 2014.
In business since 2002, Trace3 has spun a combination of deep technical reserves and marketing sophistication into a high-end, consultative reseller.
The model calls for representing major vendors, while forging rich relationships with clients, aimed at growing the success and trust of today’s CIOs, CTOs and other technology decision makers.
So profound has been the evolution, that industry observers disagree on precisely how to describe Trace3.
“The industry has kind of put us in that VAR box or that system integration (SI) thing,” said Chad Cardenas, president of Trace3. “Gartner refers to us as a digital business transformation partner.”
Trace3 officials prefer the term “emerging technologies” firm.
Regardless of which label one applies, the company’s path from pure-play reseller serves as a case study of the strategic pivot many channel companies are making to remain relevant amid changing market conditions.
The role of the CIO has changed dramatically during the past 15 years.
Where once the CIO’s job was about the back-office technology function – keeping the lights on – today’s CIOs are called upon to provide innovative ideas that positively affect business outcomes.
“The CIO is much more involved in the strategic process,” Cardenas said. “They’re bringing CIOs not just to have a voice at the table, but in many ways, they are the voice at the table.”
A Head Start on Disruptive Technologies
Trace3 set out to build a business around supporting that new IT leader.
To that end, the company has put a premium on offering compelling technical and strategic business advice, while reselling products and services from its vast network of partner vendors, including Cisco, VMware, Palo Alto Networks and others.
Step one in the transformation called for launching a research team, charged with “aggregating the challenges and the needs of our clients,” and leveraging the Trace3 partner ecosystem, Cardenas said.
Next, the company headed north to Silicon Valley and started building relationships with some of the world’s top venture capital firms.
“The original idea was basically to get earlier access to the next wave of disruptive technologies,” Cardenas said. “If we were plugged into the VC community, we probably would find those technologies six, nine months; or a year or two ahead.”
Through those relationships, Trace3 officials were privy to early presentations from some of the hottest new firms.
“We were getting very unusual and very unique access to what we believe to be the future of technology infrastructure entrepreneurship,” Cardenas said. “We could invest accordingly in these relationships.”
That access allowed Trace3 to offer their customers the most innovative solutions available.
Then they came up with a way to make the program better.
“What if we had a small subset of our clients … and we started bringing clients up to Silicon Valley with us and started customizing the specific presentations to the client?” Cardenas recalled of the thinking.
The first Trace3 client to fly in for the VC briefings was DirecTV.
“We curated an agenda that was 100 percent customized to DirecTV’s needs,” Cardenas said.
Trace3 generates no direct revenue from the three-year-old program, which has briefed numerous CIOs, CTOs and other enterprise IT decision makers.
“We make a very conscious decision not to charge for this,” Cardenas said. “It is a totally transaction-free engagement.”
Navigating Internal Business Environments
A huge part of its value calls for Trace3 experts to carefully study the clients.
“We spend a lot of time really analyzing what these companies and people really need to be successful,” Cardenas said.
A common client need involves CIOs who came up through technology and now find themselves with influence beyond their traditional roles.
“They’re struggling with internally marketing what IT is doing for the business,” Cardenas said as an example. “What we do is take that feedback to the innovation team and we develop executive services to help that CIO navigate the business environment.”
Cardenas says it’s all part of Trace3’s approach to adding value in the new paradigm, where a premium is increasingly placed on IT firms that demonstrate an ability to serve as “trusted advisors” and “virtual CIOs.”
“This is one of the ways that we are trying to prove to our clients and our partners that Trace 3 is invested in value-based, long term relationships,” he said.
The company’s strategy, Cardenas insists, is based on an even broader-reaching philosophy.
“We believe that IT leaders are the real business leaders of tomorrow and we need to do as much as we can to remain relevant to them,” he said. “We believe that we provide very high-value executive services to these tech executives that they will leverage going forward for more of this expertise.”
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