Stratagem continues acquisition spree

Stratagem continues acquisition spree
Menomonee Falls company now buying Brookfield firm on heels of Axel-Lloyd purchase

By Steve Jagler, of SBT

When Wisconsin’s economy rebounds and its companies finally reinvest in their technology, Gary Krieger wants to be there, with critical mass in hand.
That’s why Krieger, chief executive officer of Stratagem Inc., is in the midst of a buying spree that will not soon end.
Menomonee Falls-based Stratagem, an information technology consulting firm, plans to soon acquire Software Configuration Solutions, a Brookfield company that is awaiting final receivership hearings in Waukesha County Circuit Court later this month.
The purchase of Software Configuration Solutions’ assets and client list will come on the heels of Stratagem’s June acquisition of Axel-Lloyd & Associates, formerly of Milwaukee.
By the end of the summer, Stratagem will have acquired six companies as it continues to grow its IT consulting capabilities.
The additions of Axel-Lloyd and Software Configuration Solutions will boost Stratagem’s annual revenues by about $1.4 million, Krieger said.
Stratagem posted 2002 annual revenues of $22 million, which was down from the $30 million it received in 1999 at the height of the tech boom.
However, Krieger believes many Wisconsin companies have a pent-up demand for reinvesting in their technology – something they haven’t done since the Y2k craze.
"We are seeing an up-tick," Krieger said. "The words that we use here are that we are cautiously optimistic."
Some might consider investing in acquisitions at a time when his company’s revenues have been declining to be risky, but Krieger believes the deflated technology sector provides some undervalued buying opportunities.
"We’re going to be starting some strategic planning in August, and I would expect continued acquisitions would be a part of the way we grow," Krieger said. "Over the last two or three years, there’s been a decline in IT spending, and quite honestly, that is (fueling) our acquisition strategy.
"That’s been part of the decision process. We think we can continue to grow by 15% annually by focusing on more middle-market accounts, companies with $100 million to $700 million or $800 million (in annual revenues)," Krieger said.
To date, Stratagem’s clientele is top heavy. The company provides IT consulting for the likes of Northwestern Mutual Financial Network, Marshall & Ilsley Corp., Rockwell Automation, Miller Brewing Co. and GE Medical Systems.
"We help them manage existing IT functions or business applications. We help design, program and install and train the business side," Krieger said.
Axel-Lloyd’s 15 employees, including former president Bob Landgren, have moved to Stratagem’s plush 28,000 square feet of space in the Woodland Prime office park developed by Strong Capital Management.
Landgren is now Stratagem’s operations executive and soon will be named managing director of the Menomonee Falls office.
With Axel-Lloyd came IT consulting contracts with companies such as Johnson Controls, Harley-Davidson and American Airlines.
"They bring clients that, quite honestly, we hadn’t been able to penetrate," Krieger said. "It’s going extremely well. It has to do with the chemistry of both organizations."
Axel-Lloyd had become a licensed provider of Microsoft-centric applications, Microsoft business solutions and Web development services.
The Microsoft capabilities will further diversify the services offered by Stratagem, which also has offices in Madison and Appleton.
Software Configuration Solutions and its seven employees, including principals Dan Blaser and Tim Ottman, also will move to Stratagem’s Menomonee Falls headquarters. Blaser will become Stratagem’s business development manager, and Ottman will be the firm’s engagement manager.
"And they both do consulting works. They have a unique service offering. They do quality-management software configurations," Krieger said. "We look primarily at that acquisition as a new service we can take to our existing clients."
Software Configuration’s client list includes Northwestern Mutual, Manpower, Roundy’s and West Bend Mutual Insurance Co.
Meanwhile, Krieger, who founded Stratagem in Milwaukee in 1986, will be busy merging three corporate cultures into one.
"We’re working on the integration of all that," Krieger said. "You’ve got different names, different logos, different Web sites."
One thing that won’t change will be the merged company’s focus on Wisconsin, where 98% of its business is generated.
Like others in the American IT business, he has been approached by business people who believe he should outsource some of his work overseas, where labor costs are less.
Krieger said that would never happen as long as he’s at the helm of Stratagem.
"I don’t think that’s helping our country, our economy," Krieger said. "I philosophically don’t feel that that is the right business decision."
Like other high-tech survivors of the dot-com crash, Krieger operates his business much like any brick-and-mortar firm.
However, unlike many of his IT consulting competitors, Krieger pays most of his 180 employees by salary, rather than on a per-project or hourly basis. That stability encourages more loyalty among his workforce, he said.
"We can be much more selective in our hiring process," Krieger said. "We invest a lot in our people to keep them current. I think, when you invest in your people, you have better retention."

July 25, 2003 Small Business Times, Milwaukee