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Datalink Corporation’s
information storage architectures protect against planned and unplanned downtime and
provide fast, 24/7 access to information
Technology
Software
(DTLK-NASDAQ)
Datalink Corp.
8170 Upland Circle
Chanhassen, MN 55317
Phone: 952-944-3462
Greg Meland
Chief Executive Officer
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
April 7, 2005
BIO:
Greg Meland
Chief Executive Officer
Datalink
As chief executive officer, Greg oversees all company and board functions and is
responsible for the development and execution of current and long-range plans and
objectives. He represents the company at customer, investor, and partner
relations activities.
Greg joined Datalink in 1991 as its vice president of sales and engineering and became
chief executive officer in 1993. Between 1979 and 1991, Greg served in various sales and
marketing positions with the Imprimis disk drive subsidiary of Control Data Corporation
(which was sold to Seagate in 1989), most recently as the North Central U.S. director of
sales. Greg earned a Bachelor of Arts degree in physiology from the University of Minnesota.
Company Profile:
Datalink is an information storage architect. The company analyzes, designs, implements,
and supports information storage infrastructures that store, protect, and provide
continuous access to information. Areas of focus include data availability, data
recovery, and storage management.
Datalink's specialized capabilities and solutions span storage area networks, network
attached storage, direct attached storage, and IP based storage, using industry leading
hardware, software, and technical services.
CEOCFOinterviews:
Mr. Meland, you have been CEO of Datalink for over ten years at. What was your vision when
you started and how has it changed?
Mr. Meland: “Over the years, we have evolved as a
company in size and range of services, but one thing has remained the same—our
commitment to becoming our customer’s trusted advisor. Our independence is
foundational to our vision. As an independent information storage architect, we are not
tied to one suite of products. We have the flexibility to choose the latest software and
hardware technologies from the industry’s leading innovators, assuring our customers
get a solution tailored to their business needs. Our independence, along with the
expertise of our professional services organization, are key to building long-term
relationships with our customers and to becoming their trusted advisor."
CEOCFOinterviews:
Will you describe your typical customer and explain why they are coming to you?
Mr. Meland: “About 60% of our annual revenue comes from
companies that have over a billion dollars in revenue and over a thousand employees. We
have a horizontal focus, with customers spanning every industry. Customers come to us
because they value our independence, ability to help them solve their data storage
challenges, and the expertise we offer. We have a track record of excellence.”
CEOCFOinterviews: What
are the biggest storage solution problems today and why is Datalink the right answer?
Mr. Meland: “Companies are under tremendous pressure to
keep up with rapidly growing data volumes and maintain around-the-clock availability.
Increasingly, the vitality of many companies is tied to their information assets. As a
result, many companies are in search of robust solutions that will provide them with more
rapid data recovery in the event of an unplanned disruption or disaster. At the same time,
new regulatory compliance and litigation support requirements are placing additional
demands on many organizations, resulting in the need for information life cycle management
solutions.
Exponential data growth further exacerbates these
problems. Averaging 50% per year, data volume growth far exceeds IT staff growth,
resulting in a storage management productivity gap. As such, many organizations are
turning to companies like Datalink to help them simplify storage management and optimize
their storage technologies and staff productivity.
As the data storage market continues to evolve,
Datalink data availability, data recovery, and storage management expertise and solutions
will be key areas of investment.”
CEOCFOinterviews:
What are you physically providing for your customers?
Mr. Meland: “After our professional services teams
assess our customer’s business and data storage needs, we design and deploy storage
architectures that span three fronts: data availability, data recovery, and storage
management. Datalink solutions are made up of hardware and software from the industry’s
leading innovators. Since we are not tied to one innovator, we have the flexibility to
design and deploy solutions that best align with our customer’s needs.”
CEOCFOinterviews:
You mentioned that you start small and then increase your services; how do you get new
business?
Mr. Meland: “We get new business in all the classic
ways. We execute innovative marketing campaigns to secure new accounts. And, through our
account management programs, our sales teams map out opportunities to go deeper and wider
into existing accounts. Oftentimes, we are introduced to new accounts by contacts that we
have worked with that have moved from one company to another. References are important in
our business. Our customers often serve as references to prospects considering doing
business with us. Business development efforts occur throughout the company.”
CEOCFOinterviews:
What is the competitive landscape like and how big a factor is the longevity of Datalink?
Mr. Meland: “In the last three or four years, companies
have been spending an increasing share of their IT budget on data storage infrastructure
and services. The market is somewhere around $34 billion and growing at about seven and a
half percent compound annual growth rate. This hasn’t gone unnoticed by competitors.
We complete with manufacturers
of storage hardware and software. However, all the manufacturers in the industry have
concluded that in order for them to grow their businesses and to hold their costs down,
they must drive a large amount of growth come through the channel. As a result,
manufacturers are adopting channel neutral kinds of practices that prevent many of the
conflicts generally associated with direct and indirect sales organizations.
Customers have a lot a choices
when it comes to who their storage infrastructure and services partners. It comes down to
choosing a data storage provider can they count on to help maximize the business value
they receive from their IT investments. Datalink’s longevity and track record of
excellence are foundational to attracting and retaining customers.”
CEOCFOinterviews:
Will you tell us about the revenue model?
Mr. Meland: “Our revenue is derived from our data
availability, data recovery, and storage management solutions. Datalink solutions are made
up of hardware, software, professional services, and support. Professional services span a
number of consulting practices, including assessment and design of storage architectures.
Customer support services include one year or multi-year contract engagements for
technical support services.”
CEOCFOinterviews:
Do you have a high rate of customer retention?
Mr. Meland: “Yes, a very high rate! Historically, about
eighty percent of our revenue has come from repeat business. Our projects vary in scope.
Often, we are invited by a new customer to carry out a project that is smaller in size.
Once we have proven our capabilities and met their needs, customers invite us back to
carry out larger projects. Throughout the company, we’re focused on building
long-term relationships with our customers.”
CEOCFOinterviews:
You had a good fourth quarter; what is working and what is still ahead to accomplish to
make Datalink the best in can be?
Mr. Meland: “2004 was a year of renewal for Datalink.
Our execution improvements enabled us to capitalize on improving market conditions,
resulting in sequential quarter-over-quarter revenue growth throughout the year and
profitability in the fourth quarter. Our progress, along with the solid foundation we have
built, positions us well to take advantage of the large and growing $34 billion data
storage market.
In 2004, we increased productivity through best
practices and efficiency tools. Year-over-year improvements included a 14 percent increase
in revenues per employee and a 12 percent increase in gross profit per employee.
We also capitalized on key market opportunities:
Enhanced Data Recovery - Reducing data recovery
times, meeting stringent service level agreements and assuring uninterrupted business
operations were at the forefront of many organizations in 2004. Our professional services
teams deployed the latest disk-based recovery innovations, including tape emulation,
disk-to-disk-to-tape, point-in-time copy, and replication-based solutions.
Professional Services - IT organizations increasingly
relied on professional services of companies like Datalink this past year. We increased
the number of consulting service engagements and launched a new suite of professional
services spanning backup optimization and storage utilization audits.
Customer Support - Our investments in customer
support paid dividends in 2004. We increased the number of maintenance contract awards,
raised customer support satisfaction levels, and won new business using our customer
support expertise as the gate of entry.
We also reduced costs
throughout the organization, including the sub-lease of a portion of our corporate office,
resulting in $950,000 savings per year. Overall, we think that we can grow revenues
somewhere in the $130-$140 million dollar range without adding much in the way of
incremental cost to the company.”
CEOCFOinterviews:
Why is this a good time for potential investors to look at Datalink?
Mr. Meland: “While the past few years have been
challenging in the tech sector, we have remained committed to strengthening the company to
lift it to a different level. In 2004, we achieved profitability in the fourth quarter,
demonstrated quarter-over-quarter revenue growth throughout the year, and reduced
expenses. As the $34 data storage market continues to grow, we will focus on capitalizing
on this market growth by increasing employee productivity, capturing greater market share
in key opportunity areas like enhanced data recovery and information life cycle
management, as well as expand our professional services and customer support focus,
execution, and revenue. Ultimately, our top priorities are to achieve sustained
profitability and growth. We are confident that we have the foundation, focus, and
talented team in place to make this happen."
CEOCFOinterviews:
What should potential investors know that they might not realize when they first look at
Datalink?
Mr. Meland: “At first glance, people may be unsure what
an information storage architect company does. I believe that as people do due-diligence,
whether it is with vendors, industry analysts, or others in the storage industry, they
will find that Datalink is highly regarded and has a track record of excellence. I think
Datalink is very well positioned to take advantage of the trends and continue to grow over
time as a company.”
CEOCFOinterviews:
Is reaching investors a focus for you?
Mr. Meland: “Yes! We regularly talk to investors and
take advantage of investor conferences available to us. We currently have two analyst
firms that cover our company.”
CEOCFOinterviews:
In closing, please tell us what the challenges are going forward and how Datalink is
prepared?
Mr. Meland: “The challenge is to continue to stay ahead
of the curve by continually looking for ways to increase market share and identifying
opportunities to add greater value to our customers. Strong execution is key.
Overall, this is a very big market. We are currently located in fifteen locations in the United
States. We are focused on growing critical mass in all of our locations. Once we have
accomplished this, we will focus on organic growth through expansion into new cities.
Beyond organic growth, we will also look at acquiring companies as a means to gain market
share more quickly in targeted locations. In addition, we will focus on continuing to hire
good people and providing foundational training to take advantage of market opportunities.”
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