Jim Abercrombie & Trek10's DoD contract journey! (Podcast Transcript)

[00:07] Richard C. Howard : All right, well, hey, guys. Ricky Howard here with the DoD Contract Academy. And today I'm with Jim Abercrombie. He's president and founder of Trek Ten. And Trek Ten designs build supports highly scalable, cloud based systems. Jim is going to tell us a lot about what that means, but here's another example of a great company that is selling to the government, selling to the DoD. And I think you're going to learn a lot today from Jim and about his company, and maybe there's something there that you can do with them. So hey, Jim, welcome to the podcast today.

[00:40] Jim Abercrombie: Hey, Ricky, great to see you.

[00:42] Richard C. Howard : Yeah, good to talk to you again. I know we had a I say this all the time, but we had a great conversation the other day, and it actually that could have been a podcast in and of itself. I think we talked for over an hour just about all of the different efforts you guys had and kind of the value you're bringing the government. And it was a really interesting conversation. So I think that everyone has a lot to learn from what you can talk about today. So thanks for coming on.

[01:09] Jim Abercrombie: Yeah, absolutely.

[01:10] Richard C. Howard : Great. Well, hey, before we get into Trek Ten and what that does, why don't you tell us a little bit about you because you have an interesting background before getting into the public sector, and it's the first time I heard something like this. And you might even have to explain to me exactly what you were doing there. Yes, I have, like, the Wolf of Wall Street in my mind, but maybe that's not quite accurate.

[01:35] Jim Abercrombie: That's certainly a vivid picture of Wall Street. Right. But I graduated college. I grew up in Indiana. I went to a small liberal arts school. I graduated college in 2002. And after college, I moved to Chicago, and I got a job as a bond trader at the Chicago Board of Trade. And so you mentioned Wolf of Wall Street. You think about some of the classic shows like Trading Places, where they're in the pits on the floor, everyone's yelling and screaming. I was in that building, but I was not down on the floor. We actually traded cash, treasury bonds, so US. Government debt, which ironically, around 2005, there was such a boom and we actually had budget surpluses that folks in my industry were worried that we were going to be out of business. Right. Obviously, financial crisis happened. We've been running deficits for a long time, so that didn't really come to play. But, yeah, I was a volunteer for 13 years, and I was able to use my economic, civil, arts background to really get a keen understanding of what was happening in the world economy and sort of the inputs and outputs of what happened, which is all reflected in prices. And so it was a really fascinating career. It came to kind of a natural conclusion as we were starting up Trek Ten, and as Candidly, the tech advanced so much that guys like me weren't really traders anymore. It was all math PhDs running algorithms and whatnot. But I couldn't imagine a better sort of start to a career as someone that was really interested in kind of how the world worked.

[03:10] Richard C. Howard : I was going to say that while you were there and you were a bond trader and you're talking about US government debt, I would imagine you learned a little bit about how government procurement works, or at least how government debt works and funding. Is that accurate or am I off there?

[03:29] Jim Abercrombie: Not as much as you would have thought. Right. We certainly geopolitical events mattered because US. Interest rates are the benchmark interest rates for the world and everything from US. Economic information to geopolitical challenges. Like, I remember, I wasn't trading in 911. I started in 2002. But there were a number of scares that happened in the early years. I remember the first time it came out over the wire that an envelope with white powder was opened at the capital, and it got that moves the market tremendously. The second time it happens, it moves a little bit. By the time the third time it happens, everyone just sort of yawns and moves on. Right. Markets react heavily to new information, and they tend to discount what they've learned. So I didn't learn as much about procurement. I did gain a little bit more of an appreciation just for the size and scope of the government. Right. As a youth or a college student, I don't think that's something you ever spend any time thinking about. But just the absolute numbers and the reach of the US. Government became a little bit apparent there. But I just want to be clear, there was no point in that career where I said, man, when I'm done with this, I really want to go sell to the government. It was totally when we look back on our lives, it seems like there's this path that's mapped out, but going forward, it was as random as you could get.

[04:45] Richard C. Howard : Sure, yeah. No, I think that seems true for a lot of folks, certainly for me as well, about just the random events happening and kind of easy to look back versus look forward and say, here's the path, here's the plan. So tell me a little bit about Trek Ten, because I think I heard you say that as your career was dying down, trek Ten was scaling up. So what was your idea for Trek Ten, you know, before you actually started the business? And what did it kind of become?

[05:13] Jim Abercrombie: Yeah, the great, great question. So I've got to give all credit to one of my cofounders, Shane. He actually ran a data center at South Bend, and he landed AWS. That's amazon Web Services. So that's a cloud provider we work with as a customer in 2011. And it was one of the early footprints of the mid-west. And, you know, Shane was running this data center. He had a lot of big universities and fortune 500 companies as customers, and he kept saying, man, this this AWS group, they do it different than anyone else. Right. And he's a curious guy. So we dug in, he understood why, and he started to learn about this global network of assets, basically cables, fiber cables and data centers that they were building. And it was an approach and a scale that really no one had ever done before. And so Shane, being interested in that, really dug in, made some contacts at AWS to learn about their plans. And I don't know if I mentioned this at the top, but we're in south bend, Indiana. You know, he ran into someone else who turned into the third co founder in south bend, who was an early practitioner on AWS. This other guy, Andy, had moved some of the business he was running to the cloud in the late two thousand s, and he actually became one of the first thousand people in the world to get an AWS professional certification. So he was a very early practitioner. What I brought to the table really was some of my market acumen, and I felt like I was good at identifying trends. And so I did my research. I can't really didn't know too much about the cloud and what it was, or certainly what it would become, but I came across this case study with a company called viscase, and viscase was the world's largest maker of sausage casings. Right? So think of like, hot dogs, sprotwurst, whatever appropriately. They were based in Germany, but had a big outfit in Chicago. Two things you think about in that industry. And the case study said, hey, this case is moving their SAP back up to AWS. And I read that and I thought to myself, if the sausage casing manufacturing company is a customer of the cloud, there's not a business in the world that this isn't appropriate for.

[07:23] Richard C. Howard : Just before you go on. So the infrastructure that you were talking about so you were talking about chain kind of ran that data center and then AWS, they were talking about all of the fiber networks and the different repositories that they were building out. This was the infrastructure for the cloud, as we call the cloud now.

[07:41] Jim Abercrombie: That's correct. Okay.

[07:44] Richard C. Howard : I'm sure most of my listeners at this point understand cloud, but maybe you could talk a little bit about what it is and why that was different than the way we would maybe store data before.

[07:55] Jim Abercrombie: Absolutely. So if we go back, the very early sort of servers were based in companies data rooms. Right. I'm sure we've seen pictures of these massive IBM machines from the 50s computers that took up rooms two or three times the size of the conference room I'm sitting in right now. Sure. And those got condensed to companies that built these servers that could do pretty intensive processing and compute. Well, these servers were pretty expensive, right. On the order of they had a really long lead time. So if you wanted to, say, start a business that required that you need upfront capital and you need several months to order them, then you need to install and configure them. What the cloud did well, what data centers did is they said or colocation facilities is a term often used, they said, hey, you don't want to run this in some closet in your office building. We'll have a facility that all we do is run servers and you can rent from us. And what data center sell is space, power and connectivity. Right. They sell the basically always on ability of these compute and storage resources. Right. And as you can imagine, think about them. Maybe good analogy would be thinking about all the retail mom and pop stores that existed and then think about Walmart. And they came along and they said, we're going to do everything you did, but we're going to do a lot more, and we're going to do it on a bigger scale, and we're going to do it a lot cheaper. So what the cloud is today is on demand access to that storage and compute. Right. And ultimately, the cloud is a commodity similar to how you buy your power from a commodity provider, like electricity. What's interesting about electricity isn't that what's interesting is the idea that it's ubiquitous, that you can plug something into any outlet anywhere, and you're going to get constant power. And only once that is true can you create things like the radio or the hairdryer or the television. Right. They need that baseline infrastructure to build. On top of what we think is super interesting about the cloud is that when you have this baseline storage network and compute, you then have the ability to build these really interesting things on top of them. And so any digital business you see today, whether it's a Netflix or whether it's maybe not quite a digital business, but think of an app where you can buy cars that ultimately is becoming a digital business, that could not be possible. So that's kind of what the cloud is.

[10:21] Richard C. Howard : Okay, interesting. So you guys identified this kind of early on, it sounds like. So talk about the progression here. So how does Trek Ten play into kind of this new technology or the new way we're dealing with data?

[10:36] Jim Abercrombie: Yeah. So we started the business in 2013. Cloud was in its infancy, I think. AWS. They have an annual conference. It's actually the week after Thanksgiving, so it's coming up here. And the very first one, there were maybe 1500 people at, and the second one, it was 3000. And by the time we started going, maybe it was in the 4000 range. I think the last year before COVID they had between 50 and 60,000 attendees for that. So if attendees for the conference, you can also look at AWS revenue, which they've broken out for many years, and see how that's grown. But we were in the relatively early days, but like I said, looking at the trend, looking at the idea that every business in the world was going to be a customer, we knew there was going to be a long runway to go located here in the Midwest. We said to ourselves, candidly, it might be a few years before a lot of folks in our region are wanting to tap the cloud. But the one thing we do know is that you're not going to go to the person that runs your data center or your It environment today and say, hey, we need you to build us a cloud environment. They're just different skill sets, right. It's similar to in the advent of the automobile. Those early buyers of automobiles weren't going to the person who managed their horses to take care of their new automobile. Even though it's still transportation, still getting you to the same place, it's a different skill set. So we saw this emerging need for cloud specific skill sets in order to help businesses leverage what really is A. We've seen customers get 510, 15 x benefit by moving to the cloud instead of a data center. That's a combination of cost savings or performance improvement. And you don't get those kinds of gains without some specialization in order to help you get there.

[12:20] Richard C. Howard : Okay, awesome. So you identified a need there with Trek Ten. And so your initial push or your initial customer base, from what I understand, was commercial.

[12:31] Jim Abercrombie: Right.

[12:31] Richard C. Howard : So commercial companies building some momentum there. We don't have to get too far into that, but except to say it sounds like you guys are really successful with the services that you provided in your commercial customers. Could we talk a little bit about how did that pivot to the government? Like, what were some of your first interactions with the government? What made you start thinking about it and how did you get into public sector or sales?

[12:58] Jim Abercrombie: Yeah, great question. And I'll tell you the first story about how we tried and failed and then come back a couple of years later and how we found some success. So around 2016, there was an individual here locally that moved to town from DC. He's an attorney, and he had done a bunch of BD, federal BD. And we became friends. And he really laid out the argument of why we should be looking to sell into the government. Right, and it's what we hear on your podcast all the time, right? All the benefits from doing it. But this was 2016. And when you looked at RFIs, they didn't use the word cloud. They used hybrid It infrastructure. And they certainly didn't call it AWS or Microsoft Azure, which are the two big players today. And as we got into it, gosh, there's a whole lot of compliance and paperwork and all sorts of things that need to be true for you to even consider going after a government contract. And frankly, where we were as a company, we were probably 15 people or so. I personally spent a lot of time on it, really trying to figure out a way in and basically realized that, hey, it's not the appropriate time for us to do this. Fast forward a couple of years. We had worked with a couple of large enterprises. We had built really a strong reputation inside the AWS partner ecosystem as a company that could deliver on these kind of really scalable and complex technical challenges.

[14:22] Richard C. Howard : Right.

[14:23] Jim Abercrombie: And that's all well and good, but what really happened in 2018, as you know, is that's when AppWorks started, right? And AppWorks, which I assume your listener base is very familiar with, but if they're not AppWorks took a program that had been around for 40 plus years, the Small Business Innovative Research Program, and its partner STTR Small Business Technology Transfer. It took that and it said, hey, this program traditionally has put out a lot of very specific topics that if you were being candid about it, there really just weren't that many groups across the country that were well equipped to respond to those, not because of the overhead burden, but because of the specificity of the topics. Right. We could be talking something like for a plane at a certain altitude, at a certain speed, the light refracts in a certain way. And what we're looking for is to add something to that so that it protects pilot's eyes, right. Something that hyper specific, like think about the labs that have to be working on refractory technology plus gas or glass or composite materials or just the Venn diagram of folks that can respond intelligently to something like that was really small. What App Works did in my synopsis is it turned the entire process on its head instead of saying, here's these very specific items, like, we're going to come after like a sniper to try to find someone to get we're going to open the aperture and say, hey, if you are a successful commercial company and how do they define success? You actually had to have commercial sales that you could prove, right. So there's businesses out there that are paying to buy your product. So if you meet that criteria and what you sell is something you think the Air Force could benefit from, tell us about it. And by the way, here's how we want you to tell us about it. Put together a 15 page slide deck, right? Put together a five page paper. This wasn't the New York page file documents to go in. This was a lightweight way to get in the door. And we were part of the second cohort, I think 18 three, which is 2018, and the third cycle for that year. So it was around the end of fiscal 2018, and we were successful in our first technology we put in was data ingestion engine. And we took work we had done with a couple of key commercial customers to really ingest and rapidly process data for business purposes. And the example of the enterprise we worked with that we really learned this. They did a lot of automobile sales. And whenever you buy a car, imagine you go to a website, you've got 50, 60, 70 images, right, of that vehicle. Well, this company processed over half a million vehicles a month. Multiply that by 50 to 70 images, and you think about the high volume. They were running all of that stuff in a data center. They were running out of storage room. They were adding hundreds of thousands of dollars of storage arrays every month and came to us through AWS and said, hey, there's got to be a cloud based solution. We put together something that was very successful for their business, and we did similar projects for a couple of different customers, but the overlying theme was this high speed data ingestion and processing. So that's what we put our proposal in for Fworks. And they said, sounds great, you're in, right? And we're like, okay, cool. US and what 60, 70 other companies were in. Well, we kind of learned together, right? They put us in a cohort. They had weekly calls where we learned about finding customers. And the big charge with an African space one is to go find a customer, right? It's all about that contract in itself isn't that notable, except it's that license to hunt, as they say, right? And so we worked with a partner that we had developed that was also pushing people into the government space. And we ended up working with a simulation agency across the Air Force. And so we found them, we took our tech, we adapted it to what they were doing. And really first, since then, we've done a number of other projects, but we're still working on the simulation ecosystem and still bringing kind of innovations, moving these things to the cloud. But, yeah, that was the first kind of story of how we got in.

[18:35] Richard C. Howard : Interesting. So for those listening, typically just to go through kind of the civil process from a, you know, 100,000 foot view, right? So the SBIR and STTR process, for the most part looks like you have phases. You have a phase one, you typically have a phase two, and then you potentially have a follow on from that phase two, depending on what you're doing. And then that phase one that you're talking about. You're on contract with the government and you're getting paid. But it's usually in the big scheme of things, it's not a lot. It's usually somewhere between 50 and 150 grand. It can be less. It could be a little bit more. You might owe and I don't know what you owed at the end, but you might owe something like a feasibility study at the end of that. But you're right. The real reason you're on contract there is the team thought that, hey, your solution has some merit. And what we want to do now is see is there a fit in the government somewhere, and depending on who you did this with, the Air Force, so they probably want you to focus on the Air Force. But is there a fit in the Air Force for your solution? Especially for companies that have never done this before or don't have government relationships or understand where the inner workings are, they might help make introductions, or they might kind of educate you on like, hey, where do you want to go? But that next piece is the reason they're making those introductions is your whole goal is you want to get to a phase two. In a phase two, is that's where there's a little bit more money, right. So if it's developed, usually it's either developing your solution or potentially modifying something that already exists for a government purpose. And there's I think, I think the limits around $1.3 million right now. I thought that was around there. The last one I saw, they typically.

[20:24] Jim Abercrombie: Range from 750 to one and a half million, depending on the proposal cycle. I think there's some statutory limits that are slightly above that. That what could be put on a contract. But yeah, that's generally the range. Right. So if you think about three months and basically enough money to do some trips and business development to twelve to 24 months and enough money to do a substantial project. Right. Like adaptation servers are all about adapting this technology to defense needs. Right. So therefore certainly didn't need the exact technology we developed to serve up these images. Right. But did they need something highly similar to that in order to make the simulations operate better? Yes, they did. And so our project was about adapting that to their specific needs.

[21:09] Richard C. Howard : Okay, interesting. And then just to be even more specific, you're typically going to a phase two and you say get a customer. Usually what you're looking to do is get a Mo. We call it an MOU just to go into but a memorandum of understanding. And this is what's interesting. This is why the civil process is so different from the rest of the acquisitions processes in the government, because typically in the government and this is for our listeners, I realize you understand that, but typically most people in the government can never make a purchase. They could buy office supplies and stuff like that, like the office level, but for any purchase, usually over $10,000 or so. I mean, now you're talking about an acquisitions team putting you on contract, which is what I did while I was in the Air Force at least the last half of my career. So that's a very small percentage of people in the government. Right. And this is what companies mistakenly do in the beginning. Often they'll go to the user, right. They'll find, hey, I developed something that can help maintainers on aircraft, or I developed something that can help the army guys shoot better during weapons training, whatever it is. A lot of times they'll go to the user and then they realize, oh, they can't actually make any purchases from me because they're not in control of the funding and they're not contracting officers. So we need to find someone. But with the SBIR program changes everything. And this is why SBIR is an amazing opportunity, is because you now can go to the user. You don't have to go to an acquisitions unit. You can go to whoever's in a year case, I'm not sure who you went to, but you could go to the maintainer in that case and maybe have their Ops group commander sign the MOU. All they need to do is think it's a good idea because it's usually not their money.

[22:58] Jim Abercrombie: It's usually the money.

[23:00] Richard C. Howard : So if it's not their money and they don't have to go through the effort of putting you on contract because usually the cyber office does that, in this case, half works. It's much easier for somebody to say, hey, if they like your solution, that's a great solution. All they have to do is sign the memo, which all they have to do, that could still be a significant amount. Sure. Yeah. I guess the bottom line is you went out and you got this MOU signed by a customer or by a unit. What was that process like?

[23:30] Jim Abercrombie: Yeah, so before I get into that detail, I think what you're describing the classic sales process, right? You need pain, you need budget, and you need decision making authority. Right. And so in the example you gave about helping shoot on the range or whatnot, that user may have pain, right. And that's great, but without the other two. And by the way, in the corporate world, often the same person or a small number of two people might have all three of those things.

[23:58] Richard C. Howard : Sure.

[23:59] Jim Abercrombie: In the government world, they could have pain, they could even have budget. But if they don't have authority, that's what comes from, you know, what you used to do, right? That's the contracting officers. And if you don't have that pathway, it doesn't matter at all if someone has money, if they like what you have, if they want to buy from you, there has to be a vehicle. So what SBIR does is, first of all, they don't need the budget because the small business office is paying for it. And second of all, it handles that kind of authority to do it. Right. So that's why it removes, I think, so much of the friction. Right. You're just looking for that pain. There what our process looks like. We worked with I told you we were working with business development partner and they introduced us to a number of customers. We went through our own discovery efforts, sets up Cohorts. There's a lot of help from a lot of the other companies in the Cohort. We are all kind of boarding together, sharing contacts. There was a matchmaking component where Fworks would give like de-identified problem statements and if you selected and say, hey, I think my thing can address problem statement 37, they would reach out to the cost of the owner of the problem statement. If they wanted an intro, they would then make that happen. I think that's been a little harder for them to do as the program's gotten so much larger than it was in the early days. But yeah, basically anything we can do, right. If you listen to some of the other podcasts people just talk about kind of turning over every rock there is because you have this limited window and you know that at the end of the window, if you can find that customer, you have this opportunity. I mean, our first deal was 750K. That was a huge deal for the size of the company. We were then yeah, right. And so, you know, we put a lot of effort into finding that we found this customer with the Air Force Simulations Office. We saw eye to eye, they signed the MOU, which again, it's not just signing a document. They basically commit to work with you and there is a whole list of information they need to fill in. It's not overly onerous, but security officers reporting structure. It has to be there because what African wants to see is, is this just someone at the last minute that signed it because someone promised them they might get some money? Or is this someone who actually believes this is a solution that could translate into an operational capability. They want to field which would come under a civil phase three, which you alluded to.

[26:20] Richard C. Howard : Right. And I mean, not only that, now the silver field has gotten a little bit more competitive and they really take a strong look at that MOU to see who's signing it, what the use case is, how closely doesn't match what they're trying to go after. And you're right, so every silver phase two is a little bit different. But you're right, typically they are committing to maybe it's a demonstration on the base, maybe it's a modification where they're going to work with their team to figure out what the nuts and bolts of that are going to look like. Interesting. So you've done that now. You've been pretty successful in the SBIR process. So why don't you walk me through what happened after that process. What were some of the positives and negatives that you experienced after sorry, just.

[27:08] Jim Abercrombie: To be clear, after what process? After the contract.

[27:10] Richard C. Howard : So after that cyber phase II, you won the Sipper phase II. And you went through probably adapting to government need there. Did that go well and what were the next steps after that? What was your assessment of the whole process?

[27:26] Jim Abercrombie: Yeah, I would say we thought it went really well and we thought we were going to be moving on to a super phase three kind of immediately afterwards. And that just didn't end up being the case. Right. For a number of reasons that I won't get into, it just wasn't appropriate for that customer at that time, which came as a surprise to us. Looking back, it's not a surprise. There were some telltale signs that I think we could see now with a little more experience. But what we did as someone that was in the markets, there was a saying that I loved that people used to say, we're in the business of doing more of what's working and less of what's not. Right. The what's not was that first foray in 2016 for us trying to crack into the government. Once we realized this worked, we took a real hard look at our business and said, hey, we actually do a lot of different things here and we're going to systematically go through and evaluate those for their appropriateness for this program. And so we want our second phase one in the very next cycle in 19 one with our cloud support operations. We call it Cloud Ops and that's actually been our most successful one to date. We hooked up with an Air Force software factory early in the process and won our second phase two in August of 2019. And we've part way that into multiple follow on contracts, most currently an SBIR phase three, which we're under. And so I'm sure you'll get into the difference between phase two S and phase threes. But to go back to that question, I think it was really important. A key learning is that as we're executing on the contract for the second one, those conversations about we're building this in service of something larger. Right. And what's our plan for what might come next if this is successful and just having those conversations versus sort of being led by the process the first time we did it.

[29:26] Richard C. Howard : No, I think that's extremely important because there's a lot of assumption about what the government knows, what the military knows, and what they don't know. And I think a lot of people are probably surprised to find out how few people actually do understand the entire process on the government side and are they even planning on taking your solution to the next? Because it's very common, especially in the military. Guys are moving every couple of years, right. So there might be an assumption that someone's going to take that ball and run with it, or they're just not even thinking about it because they have their own efforts that they're working on.

[30:04] Jim Abercrombie: And there might be competition that's in place that you're not aware of, right? Like a lot of what we do is net new, a lot of what we build for our commercial customers and that we've done with the Air Force so far has been net new stuff. So with net new, there's just not the entrenched competition that's there. But we've definitely run into situations where we thought we were in a way and that was pretty good. And then as we've gone down the line, we realized, hey, there's a couple of long term players here that are in it. And if this thing is going to get any bigger, like it's going to get on their radar and Candidly, they probably have a much better chance of winning that deal or that relationship than we do. So taking a real hard look at is your tech, is your solution something that's not new or is it something that is trying to displace an incumbent, which we need. Right? We need that across the DoD. There's a lot of tech that needs to be displaced. It's just a harder fight, right? It's more of an uptill slog when you're doing that.

[30:59] Richard C. Howard : No, much harder. Can I pause for one moment?

[31:02] Jim Abercrombie: Absolutely. Thanks.

[31:48] Richard C. Howard : Hey, how's it going? Are you there?

[31:51] Jim Abercrombie: Sorry about that. No worries.

[31:53] Richard C. Howard : Oh, I can't hear you now. I can't hear you.

[31:55] Jim Abercrombie: Can you hear me? Is this better? Yeah, I can hear you.

[31:58] Richard C. Howard : Okay, perfect.

[31:59] Jim Abercrombie: Let me see here.

[32:00] Richard C. Howard : How far along are we? 244. Okay, great. No, sorry for the pause there. So we were just talking about having your technology, having a plan when you are in that phase two area, kind of knowing if there's an incumbent on the other side that you're trying to displace, because that could be a huge process, right? And you could have an amazing solution, by the way, and not be able to displace them. Right. Because there are a lot of factors at play with trying to do something like that. But right now you are on a phase three, as you mentioned. So I think it would be better for everyone to hear from your point of view. Hey, what did that look like? What does that mean from a business point of view?

[32:44] Jim Abercrombie: Yeah, absolutely. So there's a couple of different things between Super Phase Three and the other parts of the Silver program. The first and most glaring is that super phase three, the money comes from the customer. So phase one and phase two comes from the airport small business office. Phase three, the customer needs to put their money where their mouth is or where their desires are. Right? And so that's where we get back to that classic. That's when you do have to qualify for budget, right? Someone could want what you have all day long, but if they don't have the funds to pay for it, probably not going to happen. The other thing that's really interesting about phase three is that statutorily, it needs to derive, extend or logically conclude from your phase one or phase two technology, but contractually, it is a sole source, noncontestable uncapped vehicle. Right? So, you know, one thing that we found being part of the early cohorts is that there just weren't a lot of folks across the air force that were familiar with the server program. Even folks that had been acquisitions officers had been in various roles for many years. It was kind of in its own little corner. And so there was a big knowledge there was a big knowledge gap. And afworks has done a tremendous job both for the commercial world, but also for government employees and really providing a lot of resources to understand what this is. Because you can imagine someone calls you up, hey, I've got this cool thing. Yeah, great. Oh, and by the way, you don't have to pay for it. I just need you to sign this letter, and we can wait. What are you talking about? Is this legal? We get that question all the time. Right? Yeah, sure. This is legal. So people, rightly, so all want to stay on the right side of the law. But getting that education over the last couple of years, I think has been really helpful. The phase three, the one we did, it was with the customers contracting shop, so I know they shared they had gone through a learning curve when they started setting up phase three s, they kind of learned the power of them and really liked that as a vehicle. But for us, it was all about continuing the momentum that had started. Right. And we were with one of the software factories, so it was an ecosystem. And we weren't the only company to get phase three. I think there were five different companies that were working on different parts of the stack for the software factory, and all five of them were awarded phase three. So we kind of grew together. So it definitely was an advantage of we weren't all out on our own. We were learning with other partners, with other like-minded companies, and with a really progressive customer that was looking to build on the momentum that they had put together through the silver phase two process.

[35:23] Richard C. Howard : I got you. Okay. Interesting. So, yeah, phase three, that is another hard challenge. I guess. Each of the phases present their own challenge to the business and to the government. Right. And one thing, I guess, just for anyone listening to this. If you're in a phase two or you're graduated from a phase two, one thing that you mentioned, which I know is true, is that even contracting officers often don't understand that a civil phase two graduate that gives certain capabilities to put somebody on contract very quickly that you wouldn't normally have. So that's something that and by the way, you can get somebody to write something up for you. And we've actually done that for some of our clients, which is, hey, just hand this to the contracting officer and this is step by step with the law, like exactly what they can do. Because one of your goals is always, how can I make it easy for the government to put me on contract? And I'll point out for the listeners, one thing that you haven't really talked about is maybe aside from putting the application or the proposal in to get into the civil program itself, when you got into the phase three, I'm assuming you didn't have a huge competition where you were battling it out with, you know, 200 other people. You were graduate of the phase two. You had your, you know, you had that and then you had a customer already aligned and you said to use their contracting shop. So I'm assuming what they did is they used you through the civil process, they were able to bring you to the next contract.

[36:54] Jim Abercrombie: That's right. Yeah. So civil phase one and or phase two, whichever way you answer, because there is the concept of a direct to phase two, right. We follow the phase one, then phase two, that phase three route, but those are fair and open and those satisfy the competition requirements. So silver phase three is our sole source and direct awards, right. Once you're there, that's why people call it kind of the holy grail, right. Once you're there, you have the ability, if the customer wants you legally and statutorily have the ability to set up these contracts. And really that's just all about during the early process, proving that you can deliver on what you say you're going to do. Right. Like so many things in life, it's do what you say you're going to do and good things tend to happen. But this is where even when you're thinking about that phase two signer, right? I mean, I know for us, we used to joke, who's your ideal customer when you start a business? Well, anyone that wants to give you revenue, right? Anyone that wants to pay you to do something. For our first phase two, it was like, oh, hey, someone's interested in signing it. Great. I think we had two parties and we ended up going with one that we thought had the better, more mature prospects. But for someone that's on their first phase one and they're looking for a phase, phase two, you're really going to be excited when someone says, yeah, I want to work with you, I want to sign that MOU.

[38:14] Richard C. Howard : Absolutely.

[38:16] Jim Abercrombie: But I think it's worth as long as you have the time, I think it's worth taking a step back and saying, hey, is this the kind of customer that really has the ability to move on to the next phase if we're done? There is a lot more competition these days. A lot of customers are more aware of this. On the dark side of things, there are some folks probably that just use these repeatedly as ways of getting their checklist done with no intention of moving on to the next phase. So as a small business owner or leader, you ought to yourself and your company to do your best to kind of qualify to say, hey, is this an opportunity or is this a good opportunity? Right. Because they're all not created equal.

[38:53] Richard C. Howard : No, they're not. And then we can probably talk about this for the next 2 hours. But if you do find yourself in the phase two silver realm and your customer didn't have the funds to take it to the next place, there's certainly ways of finding funding from other agencies, other offices that could potentially go into that, or finding another customer to use your phase two graduate status with. That might be something similar.

[39:21] Jim Abercrombie: That's a really interesting point. Right. So truck ten across our different server contracts, 15 years down the line, assuming we're still a small business, we could, you know, all our, all our servers have been with the Air Force. Some Navy customer could say, hey, this thing about the simulation, you know, somehow we find out about this and we want to engage you to do this work. Our phase two satisfies all the requirements they could on a phase three years from now to do something that derives, extends, or concludes from that. Right. So you keep momentum going when you go right from phase two to the next phase relatively quickly. But just because the customer you had didn't work out doesn't mean the door is closed. Right. You definitely have the ability forever as long as your company owns that tech and that contract rights to continue to set up or potentially set up phase three with other customers. So the BD can continue well after the phase two expires.

[40:23] Richard C. Howard : Absolutely. It's a great way to get your foot in the door and start making connections. And it does. It's kind of like having a contract vehicle or even a set aside that allows for some sole source contracting work. It gives the government another way, another means to put you on contract that could potentially be a little easier. And every office is different. Some offices would be open to it and some wouldn't. But just having that, I think, is extremely valuable. Okay, so you've done a lot. We've talked a ton about SBIR and kind of your pathway here. Where are you guys at right now and what's next for you as far as government work is concerned? And then I have a couple of follow up questions.

[41:03] Jim Abercrombie: Yeah, sure. So we've got a couple of good opportunities we're working on. Right. One is with that simulators group I mentioned, there's some interest in taking some of what we've done, which is really move a training simulation to the cloud, moving it up to the classified side. So we're in the works with a group to get a contract stood up to do to really take this to scale so it can go out into the field and can go to the high side. So we're really excited about that. We have a number of folks on our staff that do have clearances. Former military, I don't have that background, I don't have a clearance as of today. So we're learning a lot as we go through that process. But candidly there's a lot there, but it's also exciting, right? That's kind of an exciting position to be in. The other thing that we're really focused on is when we started Trek Ten, we thought this was going to be a ten, maybe 1520 year movement to the Cloud. We think it's going to be a 50 year movement at this point, right? If it really started almost 1213 years ago, like Cloud, we think it's got decades to go, right? I mean, we're seeing major large enterprises, household names that are just within the last twelve months making big commitments to move to the Cloud. I talked to the third largest customer at AWS, this was several years ago in a pre COVID event in New York. They were one of the top five biggest customers that Amazon had and they were always laid out as the spotlight customer that's doing everything right and Cloud native and whatnot. And I talked to their head of containers and DevOps and he said, I think it best for three years into a seven year journey to get fully automated. And I thought to myself, I don't even have a good analogy. It blew my mind to think about how far ahead they are and how much they still had to go to get to where they felt like was real, to harness the full capabilities. And that tells me that there is just such a long tail. If you look at obviously the joint warfighting, cloud now is a successor to some of these other contracts that have been under major protest. But across the individual services, air Force is moving to Cloud. One army has the cloud modernization contract that's coming. There's been some movement, but I think we're talking about single digit percentages of applications that have moved to the Cloud across the DoD so far. So we really feel like calendar year 23 and 24 are the years where a lot of big moves are going to start happening. And we feel like as a company, because we've been working with some of these clouds I mentioned before, because we've built a lot of tools and processes to help government customers, but to also help stimulate small businesses that need to deliver to the government and need to do it in the Cloud. We've built those chops and we think the next two years we're really bullish on the opportunity set. So when we kind of constructed this government practice, it was kind of like a dog chasing squirrels, right? Oh, there's an opportunity. Oh no, there's an opportunity. Someone like I said, who's the best customer. It's someone that is willing to engage with you. Right. What we've realized is that got us to where we are today. But the way we're going to get to our next phase of growth is with focus. So we're really focusing on those two areas and pouring a lot of resources into developing those as much as we can. Because like I said in the very beginning about the saucer example, whole world is moving to the cloud. They're going to need expertise and guidance in getting there and that's kind of the role we are seeing ourselves play over the next several years.

[44:48] Richard C. Howard : Yeah, I know. I mean, you've got a ton of work ahead of you. I know. The government is usually lagging behind industry anyway, right. So when you think about you were just talking a little bit about the high side and security clearances and everything, there was hesitancy for the government to go. Even when I was in, I was in till 2019 talking about the cloud, I think we knew that we needed to get there. But if you look at the mountain of cyber-security requirements that government imposes on just our on premise networks to make sure, just to connect to that, to put a software suite on it, to do whatever now looking at the cloud and how do we ensure that the requirements are on there? We don't need to have that conversation now. But it's taken a long way for the government to start putting things into the cloud. Right. And they are the Department of Defenses and there's a lot of different efforts where they're using the cloud. There's government cloud services and there's cloud one and there's a bunch of things going on that the different services are working on. So yeah, no, I feel like we're just getting started seeing what's going to happen there with the cloud. We're coming towards the end of our time here. Maybe we could kind of close this out by giving us your thoughts on pluses and minuses for you, for your business, working with the government, selling to the government and advice that you'd give on a business that maybe has just started the process or struggling a little bit. What would you tell them about, hey, focusing on government sales, balancing that with commercial work, what would you say?

[46:30] Jim Abercrombie: Yeah, so as far as working with the government, personally, I've really enjoyed it. Actually. It was our CEO that kind of pushed me in this direction to say, hey, I think we have some critical mass here. I think you should be the one to take it and scale it. I think it suits my personality really well. I'd rather work with a couple of customers and get really in depth with them than work with a couple of dozen or scores of them. Kind of on the other side, I like the fact that our teams are organized around these larger, longer projects because they really can work as a unit and I think we can develop a lot of really good results for the customers doing it that way. So I personally really like it. It definitely comes with headaches that are different, but there's also a lot of positives, right? Like are we in a recession right now? Maybe not. We've seen our big commercial customers actually lean in more, but we've seen some of the smaller ones, especially those exposed to some of the high flying spaces. Pull back a little bit. The government is going all in, right? They're jumping in with both feet. Whether there's a recession in 23 or not, they're still moving a whole bunch of stuff to the cloud. So the counter cyclicality of it is, I think, good just from like a business leadership perspective. But the advice I would give folks today is that it is a little bit of a different landscape, right? So A, the bar to get in is much lower than it was pre Affworks. And not only that, Afworks was the leader. There was a recent announcement that I think across the DoD, all of the services need to have an open topic at least once a year, right? So open topic was what I described earlier, where if you have a tack that people tell us about it kind of thing, they're all going to take their own little different spin on it. Right? I think the Navy probably is going to bring in less companies, but have put a lot more effort in making sure that the ones that do get in do have a clear path to those phase two. But it's a great channel. Innovation and government are words that usually don't go in the same sentence. And it really does feel like that has changed in the last couple of years. So if someone's getting into it, if they're considering it, I'd say try it. If you're in the process, I'd say get excited about that first MoU signer, but qualify them. And I would say there are a lot of companies out there that have gone through this. There's probably three to 4000 at this point that have won at least a phase one through F works and every Cohort there's. I know in the early Cohorts we would always start slack rooms and invite people and collaborate. So many people are in the position of, hey, we do something different. We're trying to figure this out together. It's a great wide government, right? It's like we say we sell to the Air Force, right? That's like saying we sell the, I don't know, Massachusetts or something. It's so big, really? Because I'm getting something. It's not hurting you. And vice versa. Right. It's like we can all win together. And I think that the state of a lot of companies that have worked with the government for a long time. Let's be candid, they aren't always on the cutting edge of technology. So if you really do something that your customers value, that you think can make a difference, I think it's worth really leaning in to explore that to its fullest extent.

[49:41] Richard C. Howard : Yes, well said. How can people contact you? What if they want to work with Trek Ten or reach you personally? What would you give them for contact information?

[49:50] Jim Abercrombie: Yeah, I'd say head to the website. Trek ten. We've got a great blog for those more technically minded. It's one of the top ten AWS blogs in the ecosystem that gets really into details. But you can have contact info, there [email protected] and some phone numbers. If you do want to reach out, reference this podcast and it will get routed to me directly. Or if anyone wants to connect on LinkedIn, you can find me there. Jim Abercrombie on LinkedIn, pretty easy to get a hold of and again, get lots of random reach out. So if someone wants to message reference the podcast and I'll put that one at the top of the response list.

[50:26] Richard C. Howard : Hey, thanks, Jim. Jim Abercrombie, founder president of Trek Ten. Thank you for coming on the podcast. This has been great.

[50:33] Jim Abercrombie: All right, thank you, sir. I enjoyed it.

[50:35] Richard C. Howard : All right, and thanks, everyone for listening. Head over to Dodcontract.com if you're looking for any help selling to the government. We have some free training there and a couple of programs about to come out, and other than that, we will see you next time.

If you enjoyed this episode, you can also check out Koren Wise: CMMC, FedRAMP and Mastering RFI response where I talked with a good friend and former member of the DoD Contract Academy Koren Wise who is the owner of Wise Technical Innovations and covers her own approach to federal sales as a small business owner as well as giving us an over view of CMMC and FedRAMP.