CEO Manak Ahluwalia On Aqueduct Technologies’ Secret Sauce, Acquisitions And The ‘Huge Advantage’ Over Private-Equity-Backed Competitors

Aqueduct Technologies President and CEO Manak Ahluwalia says the elite engineering-oriented solution provider, which is eyeing potential acquisitions, has a ‘huge’ advantage over competitors backed by private equity.

Aqueduct Eyeing ‘Tuck-In’ Acquisitions

Aqueduct Technologies is looking at potential acquisitions, including a cybersecurity deal, even as it plans for organic growth of as much as 20 percent over the next three years, said Aqueduct Technologies President and CEO Manak Ahluwalia.

“As much as we forecast and budget for the organic growth—and we have got the team here to do that —you are going to probably see us do some tuck-in acquisitions, adding new capabilities,” said Ahluwalia, who founded the company 12 years ago and has built it into one of the top technology service providers in the country. “We are looking weekly at acquisitions.”

Ahluwalia said he sees the potential deals as a way to “round out the portfolio” now that the Canton, Mass.-based company, No. 268 on the CRN 2023 Solution Provider 500, has built out the systems and leadership team to add to its core portfolio of enterprise networking, advanced security, data center, cloud-native, collaboration and carrier services.

“Now that we are at a point where cybersecurity is taking off and we really want to be ahead of this virtual CISO opportunity, it makes sense to go buy a company of five to 10 people that specializes in that as opposed to train those people organically,” he said.

The market dynamics are also favorable for an acquisition, said Ahluwalia. “We think there are a lot of organizations that are not going to be able to compete in the new world but have some tremendous talent and account bases that are well aligned with us,” he said. “We also have a scenario where we do work with a couple of niche partners today that, with the size and influence that we have working with them today, it may make sense for them to become a part of our organization as opposed to an outside piece of our organization. So we have almost cultivated our own farm system.”

Ahluwalia said the company’s core tenets of learn, teach, care and impact have paid off with numerous Best Place to Work awards that continue to attract the best and brightest engineers in the Northeast. “The fact that we have so many engineers in-region allows us to attract the best engineers because they want to work with the best engineers,” he said.

The company’s culture of caring for customers and making an impact has resulted in a number of cases where Aqueduct engineers have stepped up to save the day for customers hit with crisis situations. That includes a call center customer hit with burst pipes that Aqueduct had up and running remotely in just 15 minutes and a health-care organization grappling with a disaster that destroyed its facility being brought back online by quick-thinking Aqueduct engineers who set up a satellite solution.

“That is where true partnership comes in,” said Ahluwalia. “You have got to have the resources, and you have got to have the care. Our guys are out there at 3 a.m. and 4 a.m., helping get service back up and running. They volunteer for that. When I am talking about care and impact, that is what they do for the customer. You don’t get that from a lot of VARs.”

Here is an edited transcript of the conversation with Ahluwalia.

What is the secret sauce of Aqueduct?

It has evolved over time. If you went back seven or eight years ago, we had a ‘good to great’ mantra. We said, ‘You are going to ultimately need highly competent individuals with their technical skill set but you are also going to have to require them to have a desire to really make a positive impact and care about what you want to do.’ If you can combine those two elements into one, both culturally and from an education perspective, as an organization you are going to be great. We viewed that as our ‘good to great’ mantra. There are a lot of people out there that have really smart people but don’t really care about an organization’s success. It is more of a transaction for them.

On the flip side, you may have an organization that cares tremendously for you but just doesn’t have the right level of skills and resources to really deliver for you. We think we have always had that. I think the fact that we have been able to scale that is one of our big differentiators.

If you look at most of the organizations and competitors we have in this region, their technical resources and talents are not in-depth in-region. They are bringing them in remotely from different regions across the country. They are air-lifting them in or they are a product resale or catalog company that has some ancillary services. Their desire is often to get you to buy a box and hope you don’t ask them for services.

Our world is more about being business-outcome-driven. For you to deliver a business outcome, you have got to have the technical talent and you have got to have the services capability. We feel that we have that now at scale.

So the fact that we have so many engineers in-region allows us to attract the best engineers because they want to work with the best engineers. The fact that we have been a Best Place to Work every year, whether it be in the [Boston Business Journal], Inc. Magazine or Boston Globe means that we have got the cultural DNA and a team that people want to be a part of. We are at the upper echelon with our [OEM] partners, so as new technologies come out our guys are on their advisory boards. We are on their steering committees. We get to see that technology before it comes to market.

How have customers helped push the company in new directions?

Our customers guide us forward. We are very customer-driven in how we evolve as an organization. We are talking to customers every day. We get to live, eat and breathe what they are trying to accomplish. I think that builds upon itself. … People want to come work here. You bring in good talent, and more good talent follows. Customers see and hear the success stories. We do a lot of good things for our customers and in the community, and that has resonated and driven our growth trajectory.

We are debt-free. We are well-capitalized. We are looking at inorganic acquisitions to come in and continue to fuel that growth. Our competitors have all been consolidated in-region. Many of them are private-equity-backed. They have their debt loads and are going through an optimization effort. They are trying to figure out what their futures look like, and they are getting themselves geared up for sale. We are in none of those situations. That’s why we have deep relationships and a deep level of intimacy with our customers. That also gives us long-term staying power for our brand.

Do you think you have an advantage because you don’t have private equity money?

It’s a huge advantage. I think customers are savvy and smart. I think they know that the second a private equity firm makes an investment in an organization, it is not about what that company wants to accomplish in the next three years. It is about what the exit is that the private equity firm wants in three years. I think organizations just naturally then start falling into that mold.

So if you are looking for a long-term partner that is evolving and doing the things they need to because of the way their customers are evolving and technology is evolving and you want to see passionate people just doing the right thing day in and day out, we are a great organization to work with. There’s a difference between working with us and somebody that has been newly acquired and has ingested a ton of capital. Private equity does not give you a check. They give you a little check and then they leverage the debt. That is an acquisition-fueled strategy with a cost reduction model, only being done for a size multiple so they can flip it to the next buyer or private equity firm in three years. There is no private equity firm that hasn’t done that in our space with any company they have invested in.

In three to four years down the road there is another merger or acquisition with one PE firm selling to another PE firm, or they IPO the company and then they are privatized. It is the same model happening over and over again.

How big is Aqueduct in the New England market?

We are now the third-largest minority-owned business in Massachusetts. I think by engineering services head count we are No. 1 in New England. We do serve multinational and global organizations. We have a great dispatch capability internationally. So we are servicing national projects.

The majority of organizations we work with have a very heavy realm of IT influence in the Northeast or are [based] in the Northeast. But our target demographic is multinationals doing business all over the country and, in many cases, around the globe.

What are you seeing with regard to Aqueduct’s Northeast market share versus competitors?

I think we are starting to dominate the Northeast. We can dominate more. I think you are going to continue to see that.

People here have been around long enough to see what the landscape of the channel looks like. And they have seen really good organizations get bought and merged and watched them disintegrate culturally. I think that has given people an understanding of why Aqueduct is such a valuable place to be because they probably lived through one or two of those experiences.

Some of our people have worked at the very large resellers that have really been focused around pushing a box. They have seen what it’s like where it hasn’t been about the business outcome and the services capability. They see that Aqueduct is different, and they are evangelical about it.

We feel that we don’t have employees; we feel that we have ambassadors. Our people love bringing other employees to us. The amount of people we hire because somebody here has recommended them to us is the mainstay of how we are hiring people.

When we talk to prospects, they tell us, ‘We don’t do business with you, but we have heard of your brand. We know of you. We are intrigued. We would like to see where you may be able to help us.’ That is a good element of why we are successful. And then success just delivers more success. Once you prove you can deliver, customers tend to reward you with their wallets. They don’t want to find new solution providers. In fact, they want to consolidate. They want to get down to their one, two or three primary solution providers. We want to get an opportunity to be one of those three and then become their No. 1. That is the way we have always looked at it.

What kind of growth are you planning for in the market for the future?

Organically we’ll grow at least 15 [percent] to 20 percent year over year for 2024, 2025 and 2026. Our services will be faster growing. What we are realizing is top-line measurement is probably not the best measurement of the organization because of the marketplace right now. But gross profit from the services side of the business is obviously what is growing.

Listen, revenue is great but it is all about delivering for the customer and getting that gross profit. Revenue is great for articles and for stack rankings from a revenue perspective, but at the end of the day the gross margin, the gross profit, the net income, that is what we are focused on for our organization. All of those are growing really well. And they have really given us a strong opportunity here to have a platform to start adding in growth in an inorganic way as well. So as much as we forecast and budget for the organic growth and we have got the team here to do that, you are going to probably see us do some tuck-in acquisitions, adding new capabilities. We are looking weekly at acquisitions.
What is key to driving those acquisitions?

From an acquisition perspective, we are not a private-equity-owned organization that has taken on a ton of debt with the necessity to grow as fast as possible to try to get to a multiple size to then pay off the debt. With debt going from 2 percent to 8 percent, it is probably a very different dynamic there now. We never set out with that mindset. Growth for the sake of growth isn’t great, especially when you are trying to preserve a culture.

We have looked at it from the perspective of, No. 1, could we acquire an organization and have them fit in with the way we do business and be brand ambassadors for us?

No. 2 is do we have the systems and the leadership in place to be able to make that easily absorbable or would it become a heavy burden to do that? So we have spent a lot of the last two years on really optimizing those platforms for growth, whether it is organic or inorganic growth. So whether it is the enhancements in Salesforce, Paragon, CaptivateIQ, Clarity, ScopeStack, CPQ and NetSuite and all these different tools that fit into an ecosystem or even on the managed services side with the LogicMonitors, BrightGauges and ConnectWises, we have a platform now. So the absorption ability for us to do an acquisition has gotten a lot better.

The other thing is if we are going to spend the same amount of money on hiring five or 10 people for a specific department, does it make more sense to allocate that money for a tuck-in acquisition? Before, when we were growing and adding one or two people, you could control that and hire the right people and wait for them to develop.

Now that we are at a point where cybersecurity is taking off, and we really want to be ahead of this virtual CISO opportunity, it makes sense to go buy a company of five to 10 people that specializes in that as opposed to train those people organically. … The ability to ramp that type of a team up where you want to do six or seven things parallel to that doesn’t make a lot of sense.

There are a lot of companies that don’t share our portfolio. They are really well known for one or two things. If they have the ability to be highly committed to a customer and work on life-cycle selling and expand their portfolio to include all these other elements, it makes a lot of sense for them and us. That is the way we are looking at acquisition opportunities.

What does it mean that you are now looking at tuck-in acquisitions?

I think we are going to be able to continue to bring in talent into our account base by doing that. I also see us being able to continue to round out the portfolio with these niche capabilities as our customers drive demand for these services.

We are excited about it. You are going to continue to see significant growth from us.

I wouldn’t say we were not looking at acquisitions prior to this. I would say we were opportunistically looking at acquisitions.

We think there are a lot of organizations that are not going to be able to compete in the new world but have some tremendous talent and account bases that are well aligned with us.

We also have a scenario where we do work with a couple of niche partners today that, with the size and influence that we have working with them today, it may make sense for them to become a part of our organization as opposed to an outside piece of our organization. So we have almost cultivated our own farm system. These are companies that could be really good add-ons for us. If we had the focus on them, we could actually accelerate their growth as opposed to linearly grow them.

What are the cultural values of Aqueduct?

We have four core values: learn, teach, care and impact. Those are the four things we center the organization around.

We actually started with core virtues when we started as an organization. We had about 12 or 14 elements that we used from a hiring perspective, what we expect of an employee that works here, like trust, integrity and honesty.

Then we turned it back to our employees almost 10 years ago, asking them to redefine the core values of the organization. We told them we didn’t want adjectives. We wanted stories. We want them to tell us about the day you came to work and loved working here or how about the day you went home and told your wife what happened at work. We wanted to hear about the excitement of working here, where it comes from and what gravitates and resonates. We wanted employees to tell us a story.

We looked at that and really honed in on those four themes: learn, teach, care and impact. We also have a ‘five and five’ mantra, where we say every day you come to work you should learn five things and teach five things. If you can do that, the power of how much you will learn by the end of the year is exponential, and the amount of impact you will have on people around by teaching five things each day is exponential. We have always had this mentality that we want to have people here that want to learn and better themselves and then want to share that wisdom with everybody else. So you have got a very close community here of individuals that love learning and teaching everybody else.

Over the years, the camaraderie and trust you have between the team members to do that is huge. When one person goes out to be trained and then comes back and shares that with the rest of the team, that is huge. So we have that core element of individual development, which leads to organizational development, which leads to people just getting better and the consistency of those people.

We always talk about happy employees provide good services, which leads to happy customers. We have always been mindful of that. Then there is the caring element of it. We have to believe in our customers’ visions. Our employees need to believe in what we are trying to accomplish and the transparency we have as an organization and see how it benefits them and our customers.

We have to be aware of the fact that our employees are more responsible for what they do at home than what they do in the office. So we have a pretty good balance for them. So we have the ability for them to do personal and meaningful things at work and have their families involved in some of that work/life balance with the company supporting their charities and personal giving initiatives.

Then there is the impact. We are a pretty flat organization. We have got some management hierarchy but we have an open-door policy. We open up our state of the union. Anybody can ask a question regardless of where they are in the organization. They need to see that they have the ability to influence and impact what we do here: that their job matters and that what we are doing for customers matter.

The employees are responsible for preserving and maintaining that culture. Organizations can’t do it. Organizations have a desired outcome, but culture defines itself. The people define the culture. That has really been a lot of our secret sauce. We don’t have a marketing firm coming in telling us how to rebrand. We don’t have a private equity firm that says, ‘It is great that you all like working with each other but 15 percent of the employees have to go.’

You do it year over year over year and you watch your competitors falter and you watch your customers go through challenges and you watch your vendors go through their changes and we have been status quo, just building upon what we do. There are not a lot of companies you can point to and say that is going on.

We have had a number of crisis situations where our engineers immediately started thinking out of the box to get customers back up and running. That is where true partnership comes in. You have got to have the resources and you have got to have the care. Our guys are out there at 3 a.m. and 4 a.m., helping get service back up and running. They volunteer for that. When I am talking about care and impact, that is what they do for the customer. You don’t get that from a lot of VARs.

I think ultimately when you can understand what your customer is trying to accomplish and then you can be with them for that journey day in and day out it makes everything else kind of easy. You have got to have that symbiotic relationship with your customers.

What is your customer retention rate?

We are 98 percent customer retention rate for the top 100 customers year over year. So retention has been really, really strong.

If you look at our customer base as it evolves year over year, we do a really good job of showcasing value so if anyone from those organizations goes somewhere else that is usually where we are getting leads from. They usually bring us into the new company they go to. We are tried and true. Boston is still a small market as much as it is a big market. The CIOs all know each other. They are all connected. Referral selling is huge for us.

What are the biggest investments you are making and your vision for the company?

We made a lot of investments over the last two years in really rounding out our overall portfolio. We really believe a service provider cannot provide optimum value to their customers unless they can really handle the data flow from start to finish and then ensure that remains secure and remains high performing.

So whether it is networking or security or data center or cloud or collaboration or carrier services, they are all part of an ecosystem that needs to work flawlessly.

At the end of the day if you cannot provide that real view of data from creation to usage it becomes very difficult to move digital transformation initiatives forward. And God forbid if in the process of leveraging that vital data resource it breaks or gets stolen. Then the value of it goes right out the door. So we have really focused in on making sure we have the right portfolio, business partners and services.

As we looked at services, we wanted to ensure we had the full life-cycle capabilities that customers need. So whether it is architecture, design, implementation, 24x7 support, full outsourcing, or full as a service, we wanted to provide all those specific capabilities. We wanted to be able to layer on a NOC [Network Operations Center] if customers needed it, or a help desk if their end users needed that support or a SOC [Security Operations Center] if they needed security capabilities.

We also brought on and built out a talent delivery organization. So for our customers that were short on resources and just wanted bodies we have the ability to bring them staffing. That has been pretty beneficial for customers.

The talent delivery organization has been a pretty strong growth story for us but I think more than anything else it has helped the customers identify the best way they want to do their job. So if they have a very specific outcome that is needed and they need to bring in experts and do it as a project they know we can do that for them. But if they are just absent head count or just need bodies for a specific program or project, we can provide that capability to them for three, six or 12 months.

We have become a real big extension of a lot of our customers over their IT environment. In some cases, customers need someone on-site five days a week but their employees are only coming in two days a week. So they now need someone that can provide that local presence for them.

Some customers have started to view parts of infrastructure to be transformative and in other cases to be a utility. As customers decide where that fits for them, we can provide both of those options for them. So we have made a lot of significant investments in the portfolio with service enablement and service capabilities.

What kind of hiring are you doing throughout the company?

The company head count is up 30 percent over the last 18 months. On the sales side it has been at least 100 percent growth. We have more than doubled that organization. It is not just the account managers. It is the leadership, technical solutions group that provides pre-sales engineering capabilities, there is the inside sales and support and marketing that supports that group. We also have the customer success organization, a renewals organization and a talent delivery organization. All those organizations have just grown and grown. That sales team is probably at least 50 people now in-region. About two-thirds of the organization is still technical. They are engineering-oriented. They are related to service delivery, talent deliver or NOC operational support.

We have had customers move from project-oriented work to software and subscription and life-cycle services with us. Our touchpoints with our customers are not quarterly. They are daily and weekly. That has provided us with an overarching view of how we could be better from a continuous performance improvement perspective.

It has also allowed us to understand our customers’ changing dynamics and their measurement for success. Our solutions and services are aligned to that. I think our customer advisory board has been really good at guiding us to the way they want to consume with things like marketplaces and buying behavior and the types of services they need or off-shoring versus near-shoring in their overall strategy. And also what their view of the manufacturers are: Do they want to buy a single manufacturer that provides an architecture or a platform or do they want to buy point solutions that fit very specific needs?

We’ve seen a lot of shifts and we have been able to keep up with that pace. We are going to continue to scale and grow. We still feel we have a lot of market share that we can capture here. We have really been able to go upmarket over the last couple of years. We are really resonating with enterprise customers. We are going to continue to do that.

We have built out a lot of capabilities that those enterprise customers need: global logistics, warehousing, staging, being the upper echelon for certification from a partner perspective. Customers really like the approach we are bringing to them. I think we are large enough to provide them all the capabilities they need but also the right size to still be heavily invested in their actual success as opposed to just viewing them as a revenue stream.

What is the Aqueduct strategy with AI and machine learning?

AI and machine learning is becoming an element of every manufacturer, every service and every solution that is out there. So I think everybody is pivoting to be able to embrace and leverage these new AI and machine learning technologies for their own efficiencies and capabilities. So every customer is getting the benefit of AI and machine learning in whatever they are doing already.

Those organizations trying to purposely build how they create and build their own machine learning platforms are a whole different beast. They are trying to figure that out themselves. We have been staying laser-focused where we currently play today. Those areas will all benefit and mature from AI and machine learning, which are becoming more prevalent. But we are not quick to jump out and say, ‘Here is the next big growth story.’

If a customer dictates that and wants us to play in AI and machine learning, we will. But we are not seeing that overarching demand right now. They are more worried about different things like the hybrid work model.

What is the difference between when you started the company and today?

It is night and day. Twelve years ago I was licking envelopes and mailing out invoices on Fridays and there were four of us. The company has gone through its evolution.

What has been unique is six or seven years ago there was a flurry of innovation with new technologies that customers could not grasp, including new consumption models. They really needed help to demystify it. So there was this demystification of IT.

Today we are seeing companies coming off of COVID and they have already invested in digital transformation and they are building upon the successes they have had. I don’t think they have to get crazy experimenting with a bunch of new-age technologies.

Manufacturers, meanwhile, have pivoted more toward selective innovation and more toward consumption model evolution as opposed to actual technology evolution. So I don’t think we have seen a massive major redefining of technology out there. Hyperconvergence was probably the last big one we saw as a major wave.

When you say what’s the next big thing out there, I see robotics, AI, machine learning. We have been hearing about 5G forever. We have been hearing about AR and VR.

We are not seeing these technologies at scale. We are seeing some of it at the consumer level. But we are not seeing these things transform organizations. People have been talking about holograms for the last three years. We are not seeing that. The reality of it is customers need well-performing, available and secure networks. They need their data protected, readily available and free of ransomware. They need a security program that is a legitimate program that provides intelligence, advisory and education for users to stay as secure as possible.

Service providers are playing a factor in their overall strategies, whether it is as a traditional carrier or as-a-service models. And then they need resources. They need a service to be delivered and they need talent delivery. I think they can scale off that platform. I don’t think we need to be something new and something inventive. We haven’t looked at needing a name change or a relaunch of anything. We think we have a really good structure and we think it is what customers need. We also understand that as things change, we have got to evolve with them.

Do you think there has been a lot of hype on generative AI?

I look at my day to day on how I consume technologies and how I advise on technologies for my customers and how I see them getting a benefit from it. And then I see the way that my kids consume technology. The value that they get out of their interactions and how they leverage technologies is significantly different. I think those are definitely going to build upon each other.

Think about education and how kids used to use a calculator. Now kids have a robot that will basically do advanced calculus for them. They are not going to have to understand derivatives and integrals. They can just ask the question. So you start looking at the value you derive from data with AI. I think it will push us forward in different ways. I think ultimately it will be keeping up with the Joneses.

I think the challenge you are going to find with AI is how are you going to monetize it? I think if you go out and say, ‘Our security platform is best of breed not only because we are getting threat feeds but we have the intelligence built into the platform to make real-time decisions on your behalf,’ that is a great value differentiator. But that is not going to be a great value differentiator for long because if you are doing it, so are others. So it is going to become the evolution of how this technology just gets better. On the flip side hackers are going to be using AI against you.

So I see the value in it but is it the next GDP mover? I don’t know. All I know is technology is advancing at a rapid, rapid pace.

How do you feel about the future of Aqueduct?

We are excited about the future. We see that where we play and what we do is needed. We have been pretty recession-proof. We have been able to work with really amazing customers. Boston, in general, has been an amazing innovation zone for so many years with new companies coming into the market with higher education and biopharma. We are in a really good market and we see New England continuing to resonate. We are excited about the future. We are executing. The team is getting stronger and the results and the dialogues that are happening with our customers is great.