When Andy Gilbert left Dixons to create a startup, he had no idea that his company would become a leader in 'cloud computing'. "It's one of these buzz words at the moment but when I first started out it wasn't part of my plan."
Gilbert's original plan was to provide firms with IP telephony services, which involve using the internet or an internet protocol-based network to carry voice conversations. Gilbert realised that many small business were unaware how sharply IP telephony could bring down communication costs. So he planned to win business by "tailoring a solution to fit each client".
But he lacked capital. In 2003 he managed to persuade a friend and a former client to stump up £250,000 between them to get Node4 started. "They didn't have IT backgrounds but they had faith in my ability. They were prepared to leave the running of the business to me."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Gilbert's first move was to buy a warehouse in a Derby business park. "Derby might not be a place people associate with IT but the site was large, cheap, and suited my needs." A partnership with leading telephony equipment specialist CISCO allowed him to offer the latest equipment.
With capital, headquarters and equipment taken care of, all Node4 needed was clients. So Gilbert set about cold calling and visiting firms. "It was pretty tough as a 23-year-old to persuade these companies to trust you with their IT systems especially as our competitors were sometimes big multinationals."
He decided "not to be greedy on the margins" and undercut competitors. Yet, even with the cheaper rate, his tiny firm found it difficult. "There is a saying in IT: no one ever gets sacked for picking IBM." To get around the trust issue, Node4 hosted IT conferences. "Some of our competitors were advertising in magazines but I thought this would be more effective."
Sales duly jumped from £300,000 in the first year to £900,000 in the second. By 2007, Node4 had taken on new staff and was generating £1.5m in sales. That's when Gilbert decided to move into cloud computing. It was a decision that would transform the firm and take sales in 2010 to £11m.
Cloud computing allows systems on different sites to share resources, storage space and information. It was the popularity of social applications such as Facebook (supported by a vast network of data centres) that convinced Gilbert. "Nowadays cloud computing is everywhere... but I could tell back then that the industry was going that way."
Gilbert converted his warehouse, which was "way too big for its original use", into a data centre. This cost £600,000, but it was rapidly filled. "The success of the Derby centre convinced us to build more." With the company's profits and more cash from his original backers, Gilbert built a data centre in Wakefield and is building another in Northampton. Node4 now has "large financials and local authorities" on its books.
The future looks bright: "as businesses understand what cloud computing can do, the potential for our company is massive".
How high earners could boost their pension by thousands and cut childcare costs
Monzo launches 11 ETFs via Blackrock to help savers invest
