Home Daily Brief The Billionaires Behind The Secret Tech Mecca In America’s Heartland

The Billionaires Behind The Secret Tech Mecca In America’s Heartland

The Billionaires Behind The Secret Tech Mecca In America’s Heartland
0

Jim Kavanaugh climbs into a sleek, black-leather-interior Mercedes bus that whisks him away from his company’s new headquarters in St. Louis to a squat, one-story outpost nearby. Kavanaugh is retracing the route he has traveled many times with executives from hundreds of America’s largest companies, including Citigroup, Verizon and Lowe’s. Each of those delegations represented a business that was completely at a loss—baffled by the maze of choices required to outfit multibillion-dollar corporations with the correct IT products. They make the pilgrimage to Kavanaugh’s tech Mecca to figure out what in the world they should buy.

Get started on your cybersecurity degree at American Military University.

Kavanaugh swipes his badge and enters the so-called Advanced Technology Center. Here his company, World Wide Technology, has assembled thousands of hardware and software offerings from Microsoft, Cisco, Dell and more than 100 other tech firms in one place. An army of engineers (3,000 strong) are on hand to run demos, conduct bake-offs and make recommendations. Since 2011, World Wide Technology has plowed roughly $1 billion (between equipment and staffing). Companies come in because they’re looking to update wireless networks, put data on the cloud, improve cybersecurity practices or beef up data analytics. They are greeted by this Geek Squad on steroids. “Customers want us to be their independent, trusted advisor and to tell them which products work—and which ones don’t,” says Kavanaugh, 56, the company’s CEO.

Kavanaugh is one half of World Wide Technology. The other is its chairman, David Steward, 68, the salesman to Kavanaugh’s wonk. Together, the pair have hit on one of the surest ways to profit from technology and its ever-shifting nature. They make virtually nothing themselves, but they take a cut on every item sold, plus charge a fee for add-on services like consulting, testing and installation. The company serves not only corporate America but also federal, state, local governments, which send their baffled bureaucrats to Kavanaugh and Steward to equip courthouses, military bases, prisons and schools. All those groups beating a path to St. Louis resulted in $11.2 billion in revenue last year and an estimated profit of $700 million. Kavanaugh owns 36% of the company, a $2.1 billion stake, and Steward has 59%, $3.4 billion. For some perspective, Steward’s $3 billion stake in World Wide Tech makes him the second-wealthiest African-American in America, richer than Oprah ($2.6 billion) and Michael Jordan ($1.9 billion).

“It’s something to celebrate, but gosh, there’s still a lot more to do,” Steward says. “I hope what this represents is that all things are possible. We still live in the greatest country in the world and God blesses persons of color too.”

Kavanaugh and Steward, who both grew up in Missouri and attended college on athletic scholarships, took circuitous routes to the tech scene. Steward grew up on his family’s small farm in rural Clinton, Missouri. It lacked indoor plumbing for much of his childhood, and every day before school he milked the cows and slopped the hogs. His father held several jobs—mechanic, trash collector, janitor—to make ends meet. Steward and his seven older siblings were some of the first black children to integrate into the community’s schools, public swimming pools, movie theaters and restaurants. He says their Christian faith helped them through tough times: “If you think about the challenges and hardships we were facing, church and music were the centerpieces of where we found peace and joy.”

When Steward left for Central Missouri University in 1969, his father’s work ethic stuck with him, and even though the six-foot-five freshman didn’t make the basketball team that year, he showed up to watch practice every day. The next year the coach put him on the team and gave him an athletic scholarship. After graduating in 1973, Steward worked as a substitute teacher and for the Boy Scouts of America. He wasn’t making much money, though, so he continued to apply for jobs, sending out some 400 résumés in three years before connecting at the Missouri Pacific Railroad—his “dream job,” he says—where Steward was one of the first African-American sales reps. He went on to work in sales and marketing for Union Pacific and then FedEx, where he was inducted into the sales department’s hall of fame.

In 1983, Steward struck out on his own. He acquired a company called Transportation Business Specialists, which audited shipping invoices for companies like Ford, Pfizer and Campbell’s Soup and uncovered overcharges. In 1987 he started a sister company, Transport Administrative Services, which helped shipping companies evaluate discounts offered to customers. His first big client: former employer Union Pacific. It asked him to sift through $15 billion worth of bills from a three-year stretch. To do so, Steward had to build a local area network from scratch, essentially connecting dozens of computers so that they could talk to one another. He figures it was the largest such network in St. Louis at the time. “I knew then that tech was changing the way we do business,” Steward says.

As for Kavanaugh, he grew up in St. Louis, where his father worked as a bricklayer and his mother stayed at home with the three children. In 1981, he left home to play soccer for St. Louis University: “If I didn’t get a scholarship, there’s probably a good chance I would have gone into construction.” He earned a spot on the 1984 Olympic team and the Pan-American team, traveling to more than two dozen countries. In 1986 he was drafted by the Los Angeles Lazers and moved across the country with $25 in his pocket. The next year he was traded to the St. Louis Steamers. That team was in obvious financial straits, and seeing the writing on the locker-room wall, Kavanaugh decided to hang up his cleats.

He responded to a newspaper ad from Future Electronics, an electronics distributor, and was hired to sell chips and other circuit-board components. A year later, in 1989, he and his boss began to discuss starting their own electronics distributor. And this is where Steward came into the picture—Kavanaugh’s boss knew Steward and talked him into joining them. Steward not only agreed to come on board but also contributed all-important startup money, some $250,000. In 1990, World Wide Technology was born, a humble reseller of printers, computers and telephonic equipment.

Kavanaugh, then 28, had zero cash to put up and received no equity. It wasn’t until 1995, after he had proved his worth, that he got his first 15% slice. “I wouldn’t recommend this route, but it all worked out. I earned my equity over time and have no regrets,” he says. (The third cofounder departed in 1993.)

The first several years were rocky. While Kavanaugh and Steward brought along a few former clients, including AT&T and Southwestern Bell, they weren’t getting a ton of other business. Eventually, they fell behind in their payments for a $1 million line of credit. Kavanaugh scrambled to seal the deal on several contracts. Heating and trash bills went unpaid. In 1993, a collection company repossessed Steward’s two-year-old Lincoln Continental sedan from the office parking lot, forcing him to run after it. His briefcase was in the trunk.

Things began to pick up after World Wide Technology won certain government contracts as a minority-owned small business. The orders started rolling in from big-budgeted federal customers like the departments of Defense, Transportation and Agriculture. Its private-sector business also heated up, as companies rushed to install computers, printers and other telecom equipment. (World Wide Technology even pursued an IPO of its telecom division but pulled the plug when the dot-com bubble burst.) Revenue climbed from $8 million in 1992 to $135 million in 1997 to $924 million in 2001, when the company became too large to qualify for its special government status any longer.

Over the years, Kavanaugh has built out the company’s sales catalog in both hardware (servers and networking equipment) and software (managing projects on the cloud or authenticating user logins). Kavanaugh has also made World Wide Technology famous for its ability to package a lot of disparate tech into a single system. For instance, when asked with overhaul one bank’s cybersecurity program, it selected products from more than dozen companies like Microsoft, Cisco and Red Hat, creating a comprehensive new program from scratch. “It’s similar to how a car manufacturer will take a bunch of different car parts and turn them into a car,” says Lawrence Walsh, CEO and chief analyst of the 2112 Group, a technology research firm. In other words, customers come to a dealership to buy a car that will take them from Point A to Point B. They are not equipped to assemble the components themselves. This has helped differentiate World Wide Technology in an industry in which competitors like SHI International (run by billionaire Thai Lee) and publicly traded CDW have similar sales catalogs.

Kavanaugh’s biggest priority now is to expand his list of add-on services. For instance, World Wide Technology will come in during the brainstorming period, consulting with a company on the cloud, analytics, artificial intelligence or cybersecurity. (By doing so, it hopes to chip away at the Big 4’s grip on the consulting business.) It also charges companies to execute on a plan, whether that involves running tests, configuring wires or installing IT equipment.

Another big part of Kavanaugh’s services push: creating software like apps and websites for companies. World Wide Technology recently revamped the mobile ordering platform for Jersey Mike’s, the New Jersey-based sandwich chain. “They knew they needed to transform digital, but they didn’t know where to start. The goal was to drive revenue, additional trips and create a better customer experience,” says Josh Hogan, World Wide Technology’s managing director of digital. The company has also worked on Panera’s mobile app, created a ride-share app for Enterprise Rent-A-Car and developed a curbside-pickup feature on Lowe’s app.

The services business is still small—10% of the company’s revenue—but Kavanaugh is gunning for it to be half his business. Fatter profits beckon. The services business boasts margins of 35% to 50%, whereas World Wide Technology makes just 5% to 15% by reselling products.

Steward stepped away from the day-to-day operations of the business over a decade ago but still serves as chairman and prides himself on maintaining close friendships with bigwigs like Michael Dell and AT&T CEO Randall Stephenson (both Stephenson and Steward served on the Boy Scouts board). “We talk about family, our faith and the challenges they face in their businesses and where we can be there to serve them,” says Steward. All of it works to funnel the latest tech into World Wide Technology—and to cultivate new clients eager to buy those goods.

Kavanaugh spends more time in the trenches. Every Friday he joins hundreds of engineers on a four-hour briefing call and is known to fire away with tough questions. “I always joke that he’s the senior CTO and I’m the CTO,” says Mike Taylor, the company’s chief technology officer. “He’s as invested as I am in understanding how the tech works for the purposes of investing in the right areas.” Kavanaugh devours books on innovation in his free time, and he has adorned conference rooms with quotes from Richard Branson, Elon Musk and other famous entrepreneurs.

“The speed of new technology being introduced is at an all-time high,” Kavanaugh says. “And isn’t going to slow.”

Get Forbes’ daily top headlines straight to your inbox for news on the world’s most important entrepreneurs and superstars, expert career advice, and success secrets.

 

This article was written by Lauren Debter from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Get started on your cybersecurity degree at American Military University.

Comments

comments