When Perth-headquartered MSP Empired released its most recent annual report to the ASX, it demonstrated that it had remained resilient in the face of the COVID-19 pandemic and adapted quickly to some pretty unique circumstances.
The news also represented a bit of a bounce back from its prior year. In 2019 Empired reported losses of $15 million, due to a major write-down of its software assets. It also revealed the loss of a major client. But the company had steady revenue and touted a healthy pipeline.
Returning to profitability and reducing net debt while copping less than 10 percent in revenue reductions for 2020 was a welcome result for the IT provider on what managing director Russell Baskerville said was a backdrop of “ongoing economic uncertainty and a very distressing period for all the communities in which we operate”.
Empired’s senior leadership had to make big decisions quickly when it came to navigating COVID, including an overnight remote work mandate, putting the brakes on certain investment areas, some difficult staff reductions and launching new products in record time to support customers.
CRN sat down with Baskerville for a deeper dive into how the past 12 months had been for the company and its customers, and his expectations around future workplaces.
CRN: Tell us about what the company has been through in recent history and what’s led up to becoming profitable again?
Russell Baskerville: If I map back the last 24 months, in the middle of last year we were notified that we had lost that Main Roads contract, there was a bit of CRN news around that.
Main Roads was our second-largest customer and it was a real hit to us but we’d had a strategy for some time around building our annuity revenues and particularly chasing larger modern managed services deals.
While the financial results were pretty solid last year I actually think the standout for us was the Western Power contract that we’ve won. Main Roads was our second-largest client, Western Power is materially bigger than Main Roads and today is our largest client coming into this financial year.
So I think the fact that we saw this strategy bear out and we were able to spend 12 months rebuilding ourselves on the back of losing Main Roads, then to win a deal the size and complexity of Western Power, not only financially does that position the business very, very well for growth in the current year but I think it also adds a lot of credibility to that offering.
In those larger strategic managed services deals we’ve never had a pipeline at the size it is today, so we’re excited about that strategy and how it places us for growth this financial year and ongoing.
CRN: How are your customers, like Western Power, responding to challenges brought about by COVID-19?
Russell Baskerville: All of our customers are increasing the prioritisation of digital projects without a doubt. While many people think that it’s all about remote work and work-from-home, that’s only a very small part of it.
There’s a bigger piece where customers ask, “How do we take our products and services online? How do we use digital channels to distribute those products and services? How do we change the way that we’re interacting with our customers?”
I think there are a lot of organisations that are increasing the priority of initiatives around the services that will help them achieve that. That’s what we’re seeing.
CRN: How about internally? Talk us through some of the challenges Empired has faced.
Russell Baskerville: There have been lots of challenges. Though I think given the environment we've managed reasonably well. From a financial perspective, we were very cautious around the level of investments we were making. Where we could reduce costs without impacting the longer-term horizon of the business, we were doing that. We took a pretty strong stance on that. We also really focused on cash earnings, how we collect cash faster and ensure the liquidity of our business, in fact, we ran a program around how we delivered to that.
The other thing that we did, and related to customers’ buying behaviours through this period, a lot of customers were faced with many challenges they needed help with, so we launched a COVID response page on our website and a range of service offerings around that, that we thought would be highly relevant through that period.
It was amazing how quickly we were mobilising and delivering new products or new services that we could go and implement on. It would take us months normally to have launched those products and here we literally launched them within a week. While we knew we would see softness in some part of our business, and we absolutely did, we knew that there would be more demand in others.
We really wanted to capture that kind of demand in those areas, which I think we successfully did. We also did a lot of work in the background around upskilling and cross-training of staff in areas where we saw softness in demand so that we could redeploy some of those people into good quality work and retain them through a pretty difficult time.
So we sort of had an approach that saw what I would call offensive actions, which were actions we took to generate demand in new areas and make sure we were skilling up people appropriately; and then there were more defensive actions around making sure we were liquid and that we were not over-investing in our business at a pretty uncertain time.
CRN: How did staff respond to going remote?
Russell Baskerville: One of the things that I was pretty concerned with... we’re a business of 1000 people and we had to make a decision - like many businesses around the world - to suddenly be a completely remote business out of an office overnight, literally. I remember having a conversation on a Sunday with our senior team and that night we were communicating that everyone would work from home, and on Monday morning no one went to work.
When you're a business that really earns money based on teams working together to deliver projects for clients, we were pretty worried about that. But I was absolutely humbled by the way all of our staff stood up and took that challenge on and found a way to work and achieve outcomes together. I was super proud of our team throughout that period.
Fast forward three or four months and we still have a large remote workforce, not everyone’s come back to work, and our productivity is at 12-month highs. I do think that leveraging those digital capabilities can be really productive for organisations and we’re proving that ourselves.
CRN: Australia is in a recession, what hard impacts has that reality had on you and staff?
Russell Baskerville: We were very conservative around how we managed our business in the six months come through to June 30. And that was tough on some people. You know, we did have to let some people go - as many organisations did - we didn’t let a lot of people go but we made tough decisions. That meant that we came through this with a really good balance sheet.
We communicated to all of our staff, in fact, I remember sitting on one of these Teams calls with nearly 1000 people dialling in, sitting there like a newsreader, engaging all of our organisation to talk to them about the fact that we were going to make some tough decisions but that we were going to be open and honest early.
I also talked about positioning the business to see through what may be a really tough couple of years. I think that the fact that we have a balance sheet we’ve publicly stated will go net cash by Christmas and that we’ve had very strong cash flow can provide some confidence to our staff that the company is in good financial shape.
CRN: In WA, everyone is able to return to the office but it sounds like you’re not in a rush to make sure everyone comes back in?
Russell Baskerville: Emerging from the pandemic we’ve been through will be new ways of working. Everyone will adopt new ways of working, we see ourselves as leaders of that and we wanted to ensure that we were embracing that, not putting it back on our staff that we would just go back to a very traditional way of working.
There’s a balance to strike. We will never be a completely remote workforce, however, we think that through providing significant flexibility to our people. It hopefully opens up opportunities particularly in terms of inclusiveness and diversity, we should have a broader appeal to a broader set of people that would want to come and work for our organisation.
We employ lots of young people, and for people with young families to have that flexibility is really important to them. We want to be able to retain those benefits and offer them to our people.
We also have to retain that team culture. I think if all of our people worked from home all the time, you can lose a bit of that spark and what makes your culture special. So we’ve done a lot of work around how teams collaborate when they get together face-to-face, and the tools they use to ensure we can retain that underpinning culture and keep the camaraderie.
That’s why we have embraced it. We’ll always have a core group of staff in the office and that will depend on their role and rotate, and it can also change based on what our customers are asking us to do. We’re learning like everyone but I think it’s working pretty well for us.
CRN: What would be your advice to other organisational leaders steering their teams through times like this?
Russell Baskerville: You’ve got to embrace change. I think those that resist it and try to go back to the old way of working are going to really struggle and put a lot of unnecessary pressure on their staff and their team.
I certainly think embracing that change [with respect to flexible working] but also being very careful around what that means for different people. It’s really incumbent on the organisation to make sure that people are safe and are included in a team and feel a part of a team.
Parts of our business are the same, Victoria being a good example. Those guys are going through a tough, tough time, right? So you need to stay connected. Get your leaders to be checking in with your people, with junior staff particularly, give them a call, have a chat and make sure they’re OK.
That whole connected piece, in terms of managing through the current environment, is really important and means a heck of a lot to your staff.