Big Bizz: Ottawa's HostedBizz says merger with U.S. firm will accelerate growth

HostedBizz co-founders
HostedBizz co-founders Jim Stechyson (left) and Paul Butcher launched the company in 2012. File photo

Nothing seems to be slowing HostedBizz’s momentum – not even one of the fiercest storms to ever hit the National Capital Region.

While the Ottawa-based data backup and cloud infrastructure provider’s power did get knocked out by last Saturday’s devastating winds, battery backups at the firm’s local data storage facility instantly took over before the diesel-powered generator kicked in and kept the lights on.

“Even though the data centre lost power, not a single customer noticed,” HostedBizz co-founder Paul Butcher said. “It reminds you of why people moved to the cloud.”

That level of reliability has led 2,300 customers and counting to trust their data to the decade-old Ottawa company, which provides server space and cloud backup and recovery services to small and medium-sized businesses that can’t afford to buy or don’t want to maintain such infrastructure themselves.

Earlier this week, HostedBizz announced it has merged with New York-based managed cloud services provider Opti9 Technologies in a deal that saw the U.S. firm acquire a majority stake in the Ottawa company. Financial terms were not disclosed.

Equity investment

HostedBizz will remain based in Ottawa as a subsidiary of Opti9, which has offices in four U.S. states and operates data centres in the U.S., Europe and the Asia-Pacific region. 

Denver-based private equity firm Crest Rock Partners made a “strategic growth investment” in Opti9 before the merger, which closed last week. Butcher, who launched HostedBizz with business partner Jim Stechyson in 2012, said the additional capital will give the combined enterprise the financial leverage to land bigger clients on both sides of the border.

“If you’re a cloud provider, ultimately being bigger becomes important,” he said. “You have to have that economy of scale. You have to be credible with larger customers, and you’re not credible unless you’re bigger.”

Butcher said the merger makes sense for both companies.

While HostedBizz generates 90 per cent of its revenues in Canada and has few clients in the U.S., the opposite is true for Opti9. In contrast to the New York-based firm, which deals extensively with larger enterprise-level customers, HostedBizz’s bread and butter is serving SMEs.

“It’s a very elegant fit,” said Butcher, a veteran of the Ottawa tech scene who moved to the nation’s capital from London in 1999 and spent more than a decade as Mitel’s president and chief operating officer.

HostedBizz has been a juggernaut almost right from its inception, grabbing the No. 2 spot on OBJ’s list of Ottawa’s fastest-growing companies in 2016. The firm has continued to post enviable revenue growth of 40 to 50 per cent every year since, while consistently turning a profit. 

Butcher said he expects HostedBizz – which currently has 42 employees and expects to hire at least another dozen before the year is out – to take another significant step forward as a result of the merger.

"Obviously, their financial resources are far greater than ours. I think you’re going to see the business really accelerate."

“Obviously, their financial resources are far greater than ours,” he said of Opti9. “I think you’re going to see the business really accelerate.”

Butcher said HostedBizz will continue to maintain its own data centres in Ottawa and Airdrie, Alta., north of Calgary, adding it’s important for customers’ peace of mind to know their information will remain safely stored within the country’s borders.

As for him and Stechyson, Butcher said they have no plans to step away from the company they hatched after hitting on the concept over beers in Manotick’s Black Dog Bistro a decade ago.

“We’re not going anywhere,” he said. “We like the space, and there’s lots to do. It’s a high-growth market.”

Butcher does foresee one slight change in their jobs, however.

“We’ll be busier,” he said with a chuckle. “That’s my prediction.”

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