ServiceSource and General Atlantic: Building to Scale in a Fast-Evolving Environment

06.11.10

In 2007, General Atlantic invested in ServiceSource, a global cloud computing and managed services provider, focused exclusively on increasing support and maintenance revenue for hardware, software, healthcare and life sciences companies. The investment helped the company expand its worldwide presence beyond its current U.S. and EMEA operations, to significantly increase its market share in the hardware and software segments and to continue to advance its technology solution.  ServiceSource assists companies such as Adobe, AT&T, GE Healthcare, Hitachi Data Systems and Verizon to improve the financial performance of their worldwide maintenance, support or subscription renewals business. The company is privately held, profitable and boasts a blue-chip client list that includes more than 85 client engagements and over $5 billion in service revenue under management. 

Since GA's investment, ServiceSource has significantly expanded its management team and board of directors, and has opened regional offices in high growth markets such as APAC, based in Singapore, now staffed with over 100 employees after one short year. 

In April, General Atlantic sat down with Mike Smerklo, CEO of ServiceSource, to discuss his experience with GA as an investor and strategic partner.

GA:  What were some of the main factors that brought you to the decision to partner with General Atlantic?

Mike Smerklo:   At the time we were really just beginning to grow our business at scale, looking at what we had to do to grow rapidly, to build out our global delivery, build out our hybrid technology and managed services solution, hire proper-grade executives etcetera; all normal elements for a rapidly growing but early stage company. 

As you can imagine, we were being approached by a lot of firms at the time.  But we stepped back and thought, where can we get a global partner who really is inspired by great management teams and what they are trying to do?   We wanted a partner who would help us continue to build a great company, one that would enable our growth rather than micro-manage us or restructure our financial statements. So that's what we liked about GA--the fact that they were a world-class group of people who were willing to help as strategic team members.

GA:  GA invested in ServiceSource in 2007; what are some of the more immediate steps that took place after the investment?

Mike Smerklo:  Three things really come to mind.  The first is that GA helped us to think about building out a first-class management team who could properly focus on building ServiceSource out to scale. We have since added Jeff Bizzack as President, and Tony Zingale and Steve Cakebread as board members.

GA also helped us focus on our global expansion of services, planning the buildup of our European operations, headquartered in Ireland, and looking into China and India as new areas of growth.  And lastly, the development of technology innovation in our sector has occurred very rapidly over the last few years, and GA has been extremely helpful in helping us build a roadmap for our technology platform, cloud applications and managed services to optimize service revenue performance for our client base.

GA:  Would you talk more about the process of expanding your management team?

Mike Smerklo:  Yes, it has been terrific for ServiceSource to recruit such exceptional talent as the organization began to scale.  Our operations were becoming naturally more and more complex, so I sat down with GA to map out the path from prospecting to marketing to implementation and delivery.   We realized at that point that we needed a best in class executive with a tremendous amount of experience who could manage the entire operational process, who could create and operationalize a process from awareness marketing and lead generation, all the way through to the last step of retaining that client after delivery.  [GA Managing Director] Marc McMorris and the GA team worked to put me in touch with Jeff Bizzack, who previously served as CEO of Accenture BPO Services, and we were able to add Jeff as President in May of 2009.  He very quickly made significant improvements to our sales organization and performance.

We also wanted to add some operational depth to our Board of Directors, so when we launched a search, and GA helped again to put us in touch with some great candidates. This time they introduced us to Tony Zingale, a three-time CEO with a great reputation for his deep knowledge in the evolution of business technology, and Steve Cakebread, former CFO of Salesforce.com, who have both been essential additions to our Board.   

GA:  And what sort of technology build-out has ServiceSource undergone since the investment?

Mike Smerklo:  Well, we quickly undertook the initiative on the technology side to transform our internal processes to a more efficient system, which is always a large but necessary undertaking.  But just as important was that we had seen our client base grow by as much as 40% in a year's time, so we had to address these processes externally as well.  That has been a real challenge, and GA has helped us specifically in areas of strategy, management structure, capital needs and more as we looked to implement a more streamlined service delivery and payment model. 

Hybrid business models are becoming more common, especially in the Silicon Valley.  ServiceSource reached a point, however, where we needed a laser focus on cloud computing as our main mode of service delivery and revenue stream. At the same time, we needed to move forward with something that would address the rapid shift of consumer behavior toward more of a pay-per-performance model without doubling-down.   With GA's help, we are now literally in the heart of helping clients make the shift over to cloud computing for services delivery.

GA:  As ServiceSource goes through such bold changes, how do you make sure your organization is well-aligned with management's goals and the opportunities in the market?

Mike Smerklo:  One area where GA has been especially helpful is helping us to not only focus on near-term executions, but balancing them with long-term strategy.  Marc and the rest of the team really serve as a great sounding board for me as CEO, and having people I can really trust, who can provide me with very accurate detail and feedback, is essential.

Internally, what I've found to be most successful is making sure we rotate the function of our team meetings regularly, so that one week will focus on financial management, ensuring that we are on track with goals, the next week on operations, the next on strategy, and so on.  It's actually a very simple and effective approach, so that our teams don't get overwhelmingly burdened by what's happening in our business at any given time.  Therefore, while we work to make sure near-term goals are met, we also keep our eye on where the business is going and needs to go.

GA:  Where do you see the main opportunities for ServiceSource in 2010 and beyond?

Mike Smerklo:  About two years ago, ServiceSource expanded focus to include the Healthcare and Life Sciences industry, and that business has grown about 300% for us over the last two years.  Today, we have clients in this space including GE Healthcare, Roche, Siemens and Affymetrix. We believe this segment will continue to be an area of growth for us.  In addition, global expansion has been a major area of focus.  We just opened up our Singapore location, which was a big step for us.  Our Singapore office currently accounts for about 10% of our revenue and looks to grow from that. We now have three centers in North America:  San Francisco, Denver and Nashville; two in Europe:  Ireland and the U.K., which we opened about four years ago, and now Singapore, our sixth office.  Again, GA has been very helpful in guiding us through the analysis of global environments, so as I addressed issues regarding Singapore, I knew I could call up the GA team and work through it with them.

GA:  If you were to advise another CEO in looking for an equity investor and partner, what would you say?

Mike Smerklo:  I would say that if you are an organization in scale, you want an incredibly powerful partner who is going to be committed to your success, a partner who will open the proper doors for you.  When I think of GA, I think of a firm who is global in nature and who understands micro and macro environments.  They are always going to be both firm and fair as partners in helping their portfolio companies set and execute their operating plans.