TOP 100: Red River uses acquisitions to drive its business transformation

Red River’s acquisition of California IT company Natoma is about more than just a deal to pick up an important geography.

It’s another critical step in the transformation Red River has been undergoing in recent years.

Once primarily a value-added reseller, Reston, Va.-based Red River has used acquisitions and a new strategic focus to shift its business model from one of leading with products and adding services to a model that leads with services enabled with products and technology, CEO Jeff Sessions told Washington Technology.

Red River is ranked No. 63 on the 2017 Washington Technology Top 100 list of the largest government contractors with $330.7 million in prime contracts.

The Natoma deal brings to Red River a major presence in California but also adds new capabilities and particularly in the applications development area, he said.

“This was the next logical step for us,” Sessions said.

About two years ago, the company launched its transformation strategy because it saw customer needs changing.

“They face daunting challenges and buying more products just isn’t the answer for them,” Sessions said.

For example, there is a need for devices and products that can be upgraded via software rather than replacing the hardware, he said.

“Natoma brings us that rigor of how to implement software and get the most out of it for our customers,” he said.

With Natoma, Red River will create a development center in Sacramento, Calif., that will serve that state market but will also be a place where Red River can bring any of its customer and tap the software development expertise that Natoma brings, he said.

Natoma has become Red River’s Enterprise Application Division and it will be run by Natoma CEO Marty McGartland, who has become president of the division.

“We saw demand coming from our customers that they wanted a complete solution,” he said. “As part of Red River, we’ll be able to do that.”

The acquisition of Natoma follows Red River’s 2016 pickup of Accunet Solutions. Accunet brought capabilities in systems integration and IT consulting focused on the enterprise. This includes helping customers optimize business processes, leverage cloud computing and getting more value out of technology investments.

With Accunet and Natoma, Red River has put itself into a stronger position to offer government customers X-as-a-service and other cloud offerings, Sessions said.

The company is privately held and is not involved with outside investors such as private equity firms. Terms of the acquisitions have not been disclosed but Sessions said they have been financed internally.

“We have a strong balance sheet,” he said.

Overall revenue stands at about $500 million and the company has 300 employees. About 10 percent of its work is with commercial customers, which it picked up with the acquisition of Accunet. The other 90 percent is government customers at the federal , state and local levels.

Red River embarked on its transformation, Sessions said, because what customers needed was changing and because change was critical for the company to remain successful.

“It wasn’t about reselling them a product, it was about solving a problem,” he said. “We had to change if we wanted to stay relevant to our customers.”

Red River still sells a lot of products but increasingly they are there to enhance the services the company offers such as analytics, cloud, collaboration, data center services, networking, security, enterprise applications and mobility.

It lists technology vendors such as Dell EMC, HP, Cisco, NetApp and Splunk as strategic partners, but Sessions said how it works with other services companies has changed as well.

“The large SI’s see us as more of a partner, not just someone to get products through,” he said. “We can go in with them now and solve a customer problem.”

The company plans to make more acquisitions in the future as opportunities present themselves. They continue to be focused on geography, technical capabilities and customer diversity, he said.

A cultural fit also is critical, Sessions said.

Natoma and Red River had similar philosophies about how to treat employees, customers and community involvement.

“None of this would have happened without culture,” he said.