03 Nov Berbee story: Shain had strategic vision, was engaged in customer relationships
Madison, Wis. – For most businesses, strong management pays off in various ways, especially in the ability to attract financing.
In the case of the former Berbee Information Networks, which has been integrated into CDW Corp., strong management was not only critical to financing, but to visionary strategy and lasting customer relationships.
Much of the credit goes to Paul Shain, who helped Berbee grow as other technology-focused companies failed in the aftermath of the dotcom bust, several colleagues said this week. Shain, who more recently served as senior vice president of Advanced Technology, the former CDW Berbee, has retired from that post and intends to be a chief executive again.
In this look at Shain’s role in growing Berbee into a regional IT player, WTN spokes to several colleagues who said his combination of skills provide a unique model for the technology industry executive.
Evolution of a tech company
Started in 1993 by Shain’s friend Jim Berbee, the company’s annual revenue was pegged at $2 million in 1996, but soared to nearly $400 million at the time of its acquisition by CDW a decade later. At one point, Berbee was growing by 25 percent per year in terms of head count, mostly outside Madison due to geographic expansion throughout the Midwest.
Perhaps there is no one thing that makes any company stand out, but much of Berbee’s growth can be attributed to a key strategic decision in the late 1990s that Shain, then an adviser to Berbee, had a hand in.
Berbee decided to explore the data center business. Shain has acknowledged that it was a risky decision because millions of dollars already had been invested – and lost – in the industry, and it meant that Berbee would take a profitable company and put it in the red for two years. Berbee’s business blueprint projected profitability in two years after the launch of its data center operation, and it was going to need outside investors and would have to be restructured with a board of directors.
In March of 2000, Berbee completed its first round of venture capital funding, securing $17.5 million in equity funding in a round led by Baird Capital Partners. Strong management and solid track records plays a huge role in how Baird Capital Partners evaluates investment opportunities, according to David Pelisek, a partner in the firm. Before teaming up with Jim Berbee, Shain had been at R.W. Baird for about 10 years, running equity research for the Milwaukee-based company and covering technology stocks as a research analyst.
“We felt very good about his leadership capabilities, his financial acumen, his knowledge of technology, and really felt he was the right person to go in and give Berbee a boost,” said David Pelisek, a partner at Baird Capital Partners.
Baird Capital Partners, an affiliate of the investment banking firm Robert W. Baird & Co., also felt that Berbee well positioned in a fast-growth industry and did an exceptional job of serving its customers. Berbee, which had just built a customer data center in Madison, used those proceeds to advance its Application Service Provider business, and to open additional data centers and offices.
Berbee also made a few strategic acquisitions that expanded its geographic footprint in Midwest, but the data center model was the key to growth in a sluggish economy. “When Jim [Berbee] started the business, it was primarily as an equipment reseller, and a very good one,” Pelisek said. “But in order to enhance the potential profitabliity and optimize the growth that Berbee could and eventually did achieve, the shift in model was necessary.”
The new model was built off some fundamental principles: always attract and retain the best people; treat your customer as you want to be treated yourself; and align yourself with large, successful technology companies like IBM, Cisco, and Microsoft. While the business model change was important, Pelisek said it went hand-in-hand with the fundamental business principles that Berbee executed.
Even prior to its acquisition by CDW, Berbee’s principles and culture were well chronicled. Shain, who acknowledged that Berbee needed to be in “the advice business,” once said he preferred to see the company’s parking lot empty when he arrived in the morning because that meant all of its engineers were out at customer sites making sure employees understood how Berbee wanted them to conduct themselves at customer locations, how it wants them to make decisions, and how it wants them to support customers.
The company’s training program was designed to teach recent hires how to make good decisions and work through ethical and moral dilemmas, and to ensure that Berbee’s customers were comfortable with its protocol and have a consistent experience with every transaction.
Mike Sanders, senior director of sales for CDW, first got to know Shain while with Cisco, a Berbee business partner. Sanders credited Shain with embracing customer goals and trusting the judgment of individuals. For Shain, he added, business is about relationships.
“He’s very passionate about trusting individuals, and you could see that all the way through his tenure at Berbee,” Sanders said. “He wanted to hire very good talent, and remove all the obstacles he could to help those folks serve customers. You can take that as an internal statement – trusting individuals – but I think Paul really worked hard to make it an external statement.”
Shain, himself, often became very engaged with customers, which Sanders found unique.
‘He could go into a board room and meet with directors and CEOs and have a very engaging conversation, and he’d go into meetings and be just as engaged and listening to the technical challenges that engineers and consultants were having,” Sanders recalled. “He really brought a broad pespective in trying to solve problems with customers. He was engaged in many different ways, at many different levels.”
Shain believed in hiring good sales people, but Berbee was small enough, and some of its relationships significant enough, for Jim Berbee and Shain to lend a hand in making sure people continued to buy from Berbee, Pelisek said. He described Jim Berbee as highly ethical and personable, and Shain as deeply knowledeable about technology solutions. “Once you met Jim and Paul, I’m sure they were an asset to closing sales for Berbee,” he said.
Brent Kiedrowski, manager of CDW’s Madison branch, met Shain while he was the owner of Network Engineeer Associates in Wausau, a company acquired by Berbee in 2004. It was through that acquisition process that he first became familiar with Shain.
“One of the things Paul does really well with customers is that he illustrates how the solutions we provide really help them deal with current business issues or challenges that are facing IT organizations,” he said. “He’s probably more knowledgeable on the actual technology, and the business benefits of technologies, than I would expect for somebody in his position.”
On the horizon
Shain’s colleagues said his next employer would get a chief executive with a unique combination of skills. They include a strong financial and technology background, intellectual curiosity, the ability to build a quality, streamlined organization and culture, and a very high, infectious energy level.
Pelisek noted that Shain is an outstanding board member for a Baird Capital Partners portfolio company called Campbell Alliance, a North Carolina pharmaceutical consulting firm that’s taking some of the same growth steps that Berbee did.
“I don’t think you can spend time in a meeting with Paul Shain and not come out of it feeling invigorated because he has that impact and influence on the people he’s around,” Pelisek said.