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How Octo’s B3 Group acquisition drives its ‘at scale’ ambitions

How Octo's B3 Group acquisition drives its 'at scale' ambitions
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Octo presents itself as a mid-tier provider of technology upgrades, but it is quickly climbing the ranks with the support of private equity firm Arlington Capital Partners.

The final step to move forward faster and move into the new client territory is Octo’s acquisition of B3 Group, a government IT and digital transformation associate that has established a franchise position in the Department of Veterans Affairs.

No terms were revealed on Wednesday, but the deal adds nearly 350 tech to bring Octo to about 1,500 people and annual revenue of at least $500 million. Arlington Capital has supported two other acquisitions by Octo, the most recent of which was the purchase of Sevatec prior to the purchase of B3.

The term “widespread” has a special meaning for CEO Mehul Sanghani because of the type of business B3 focuses on and the technology solutions it offers.

Reston, who is headquartered in Virginia, Octo saw B3 as an attractive company due to its presence in VA, a client that “was out of reach for us,” he said.

B3 also focuses heavily on low-code/no-code platforms, or software licensed on a subscription basis and centrally hosted in a cloud infrastructure.

Its Salesforce and ServiceNow offerings are two high-profile examples of the types of platforms that B3 supports for VA. Such capabilities, Sanghani said, “were also a little out of reach for us to reach at scale.”

“We certainly support these technologies, but if we wanted to differentiate by being a provider of modernization at scale, we felt the inorganic pathway would be the best path.”

The B3 path began in 2008 when the small, veteran and down-to-earth company was founded by Managing Director Brad Palmer. Three years later, the company brought in CEO Dwight Hunt.

Three more years later, B3 went to work on pursuing VA’s flagship T4NG contract for technology transformation support services.

B3 won one of 21 spots on the potential $22.4 billion car in 2016. That result “puts us on the map,” Palmer said. The company based its 2018 edition of the Fast 50 Small Business Ratings primarily on its success in T4NG.

“When we introduced that, we only had seven employees,” Palmer told me. “When we won it, we were 25 employees.”

Fast forward to today, the B3 has been committed to $390 million in task orders from that vehicle, according to Deltek data.

B3 had a few things going for it when it sought T4NG: Hunt’s knowledge of the government acquisition environment gained during two decades of service in the Army, along with Palmer’s customer contacts and experience of the proposal.

“From that, as we continued to win business at VA, we not only focused on a particular technology or ability, but tried to expand across the organization,” Hunt said.

The Herndon-based company is doing just that with this potential $686 million mission order booked in 2019 for incremental upgrades to its Virginia IT environment. B3 focus area for this application: SaaS and PaaS offerings centered around cloud infrastructure.

Ballmer said low-code/no-code platforms like Salesforce are how VA has sought to move away from its old technology systems and repurpose or replace them entirely.

Palmer added: “This is a story that translates so well to other agencies, we know our clients have been bugged in the shoulders of other federal agencies asking ‘Hey: how did you do this’.”

But when any talk of technology trends occurs, the conversation includes whether any of those trends are showing up in purchases.

Sanghani said he believes this because he sees the requests focus not only on the results that agencies want to achieve, but also on more flexibility to acquire and consume IT as if it were a utility. Compare it to how citizens pay for electric energy on a kilowatt-hour basis.

“We are seeing a huge tidal wave of not only demand, but changes in terms of how the government consumes information technology,” Sanghani said. “They’re not just asking people who can stick to this kind of acquisition model, they’re asking people who have the credentials to offer these kinds of platforms and solutions.”

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