VSS backs Centroid Systems as cloud adoption, Oracle ecosystem see growth

Managed service providers typically have high levels of recurring revenue, well-above-average growth and attractive margins, Trent Hickman, managing director at VSS, told PE Hub.

VSS Capital Partners invested $20 million to $40 million in Centroid Systems, a managed cloud-services provider, according to people familiar with the matter.

Centroid Systems, based in Troy, Michigan, provides Oracle enterprise workload consulting and managed services across all major public cloud providers, including Azure, Amazon, Google, IBM, and Oracle, as well as private cloud technology, serving US companies across different industries.

Managed service providers typically have high levels of recurring revenue, well above-average growth and attractive margins, Trent Hickman, managing director at VSS, told PE Hub. Centroid is similar in that regard, but focuses on Oracle workloads with enterprise clients, the investor explained.

The Oracle enterprise resource planning (ERP) services market is highly fragmented, high-growth and complex. Companies are increasingly seeking specialized expertise to successfully implement next-generation digital transformation strategies as cloud computing continues to evolve, Hickman said.

For VSS, that fragmentation presents an attractive opportunity for inorganic growth, he said: “We believe the company will grow nicely on its own, but we also see an abundance of add-on acquisition opportunities,” Hickman said.

“The add-on acquisitions will generally be focused in three main areas: first, adding clients and depth in our current areas of expertise within the Oracle ecosystem; second, gaining further expertise with other public cloud ecosystems, such as AWS, Azure and Google; and third, developing credentials within the application layer with SaaS applications such as Salesforce and Snowflake,” he said.

The pandemic era has increased customer focus on the importance of the cloud, the investor said. With Centroid’s offering encompassing three key parts: planning, moving, and managing, the company’s clients will be able to receive support “at each step of their journey to the cloud,” Hickman said.

“A key part of the opportunity for Centroid… is to manage all of this on an ongoing basis,” he said.

VSS Capital, based in New York City, is a private investment firm that invests in the business services, healthcare, education and information industries. VSS makes privately negotiated investments across the capital structure and invests in situations requiring control or non-control equity, mezzanine securities and structured equity securities.  The firm has managed nearly $3.5 billion in aggregate committed capital across seven funds.