Steve Walker of Cobaltix on IT Outsourcing for Startups

Steve Walker of Cobaltix - Podcast Transcript

Scott Orn:	Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting and our very special guest this week is Steve Walker from Cobaltix. Cobaltix is an IT outsourcing firm. We use them at Kruze Consulting. They’re awesome. They take care of our computers. All that stuff. Welcome Steve.
Steve Walker:
Scott Orn:	Hi. Good to be here. Thanks for coming by. So Steve, you are the Founder of Cobaltix. Do you mind spending a few minutes just telling us how you got in the business? How did you have the idea for this?
Steve Walker:	Well, I think I did consulting for a long time and worked around. Got kind of lucky with a couple of companies and then had a little bit of a cushion and I decided with a partner to start this in 2003. I think part of me wanted to do something where I didn’t actually have to work for anybody else. Another part of me wanted to do something really right. I’d worked for a lot of companies where some of them did a lot right, some of them did not so much right. And I actually wanted to actually not just do IT right but also do consulting right. And so this gave us a chance to kind of test out our theories and see how things worked.
Scott Orn:	When you say like doing it right, were you at like some big conglomerate that was just kind of like turning up the billing or something like that and you wanted to kind of make sure customers were taken care of basically?
Steve Walker:	That was a big part of it. We started off … I worked for two little companies. One started off at I think I was the 12th employee and the other one maybe the 14th. Something like that. And each one, one actually bought the other one. I left the first one, joined the second one and got bought and so it was kind of cool but that company …
Scott Orn:	You didn’t make anyone mad on the way out of the first one, did you?
Steve Walker:	I did not. I tried not to burn my bridges. It was kind of cool because I got my old email address back but then we grew and the first company had a pretty big appetite for M&A stuff and ended up buying not just us but lots of other little companies and we ended up with like more than a thousand people and then getting bought by a bigger company again. And that went pretty cool but I think as we grew, I saw a lot of things like in the small company I saw things that I didn’t like so much that were kind of like poor business practices. In the larger companies, I saw things that were poor service and things where they didn’t really take care of clients. And those were real the things that I wanted to make better. The other thing too is just that the companies I noticed didn’t innovate very much. They didn’t provide their clients with especially good solutions. Like solutions that would save their clients’ money and I kind of would get in there and I try to do that myself but like I was one guy in an uphill battle. It’s like, “Let’s provide them with a Dell solution because we’re partnered with Dell. Let’s provide them with this particular thing because it’s on sale and we get a big margin.” And I always wanted to do a little bit better than that. I thought that our clients deserved better than that.
Scott Orn:	That makes total sense. One of the kind of leaps that Vanessa made with Kruze Consulting was, it doesn’t sound so revolutionary now but it was going to all the Cloud tools like Gusto for payroll and Zenefits and Bill.com and like none of the old school accountants at the time wanted to do that because it cut their billable hours. It sounds like maybe what your old company is used to be like where they weren’t really interested in innovating on behalf of a customer and worrying about their margins later. It was like, we’ll just stay with the tried and true.
Steve Walker:	Yeah. It’s kind of funny because one of the things that I figured out like 25 years ago was that clients tend to have the same amount of money to spend on IT and maybe they spend a little bit more, a little bit less but they’ve already got an idea what they’re going to spend almost always and like if we can save them money by doing something more efficiently, they just do something that’s going to make their IT better which they end up spending usually the same amount on us. So it actually never hurts our bottom line and it only makes their business better which makes them happier, which means more referrals. It’s just a good circle.
Scott Orn:	We do the same thing. They all want … depending on what stage they are, they spend a certain amount of dollars on accounting and HR and when we made them really happy and save them much money, we actually like show them how much money they’re saving. They’re like, “Okay, let’s do Expensify now or Bill.com or whatever the next thing is.” That’s a really cool way of … was that part of like the foundation of Cobaltix? Like how did you … did you just brought that in and were like, okay.
Steve Walker:	Absolutely. That was one of the founding things that … it was one of the founding pieces of our philosophy.
Scott Orn:	Maybe you can talk about how you met your partner and how you guys gone to business together?
Steve Walker:	Well, it’s interesting because there’s two sides to that one. So we just randomly met. Somebody introduced us and we started talking. He had kind of the same ideas as me. We were great partners, great friends for 10 years and then he decided that he wanted to be in a different … he didn’t want me as a partner anymore and like I think probably, some of that probably was me but also a lot of it was just him. He wanted to run his own show. And so this was probably about 4 years ago now. We split up and he took half of the company with him. It was definitely a very tough split. It wasn’t something that I would ever recommend for anybody but when you have a partner, when you have partners, eventually you’re going to want to kick one of them out. Somebody’s going to want to leave. It’s going to happen.
Scott Orn:	Also like in a services business, your business is similar to ours. It’s intense. This isn’t like a software, set-it-and-forget-it business. The team has to gel. Everyone has to be 100% or else you just can’t execute it. Like did you find … what are some of the warning signs? Were you like started seeing that or maybe someone’s taking like three months of vacation or something like that?
Steve Walker:	No. I think, it was kind of interesting but I was the details guy and he was the charismatic guy and like when he left I had to figure out how to be the charismatic guy too which was tough. I had a lot of growing to do after that but I think the thing is that he wanted to run the whole company and when he decided that that was more important than our partnership, things just crumbled very quickly.
Scott Orn:	Yeah. That’s interesting. Maybe you just kind of explain like your services. Like what you do for startups. Like I said, we use you guys. We love you guys. Actually you and I met over email because I was sending a thank you note about Romeo who’s at Cobaltix who did an awesome job and totally saved my computer and was amazing. So we started changing emails but like maybe just talk about what you guys do for startups.
Steve Walker:	Well, I think we do the same thing for startups as everybody else. Like one thing that I’ve noticed is that we work with successful companies. We work with people who are successful and it’s kind of funny but it doesn’t really matter whether you’re a startup or whether you’ve been doing it for 20 years. You still will have those same qualities. You’re going to be innovative. You’re going to be like I’ll use the word cheap although that’s not quite accurate. It’s more like you want to get every ounce of value out of every dollar that you spend. And I’ve noticed that like a lot of consulting companies don’t want to do that because they want to work with people that spend money loosely. I feel the exact opposite. I want to work with clients that are really successful because as they grow, they’ll spend more money with us but also they make good decisions and those are kinds of people I want to associate with. But so regardless of whether it’s a startup or somebody who’s been in business for a long time, one of the things that we’ll do is we’ll set up like whether it’s a Cloud infrastructure, whether it’s onsite servers, whether if you’re a Mac and you’re going to all Cloud stuff or Mac shop or if you’re setting up PC’s because you’ve got really intense needs that need to be met with higher-end computers, whatever it is, we’ll walk you through that and the interesting part about that is just that from a consulting point of view, it’s very easy. Like as an IT consulting company, it’s very easy to say, “This is the solution you need.” You ask a couple of questions and basically within a couple of questions, you’ve got exactly what they’re going to need for the next five years. I think that we approach it very differently though. What we do is we look at things like what’s the budget and how fast is the growth supposed to be? A lot of business decisions. What kind of compliance environment are you going to be in if you’re not in it yet? What are your users like? What’s your tolerance for risk? How much money do you have? Are you capitalized? Are you undercapitalized? And we really go through at a very business level with what kind of the environment is. Then the second piece of that is we look at how is IT going to be an asset for you? If you’re just setting up like we got to give them computers. Let’s give them the cheapest computers we can possibly find, that’s one kind of asset. That is basically you’ve got to do it because everybody needs a computer. On the other side, there are ways to set it up where you’re actually doing things with that asset and depending on what the goal of the company is and what role IT could play in it, we really want to make it so that the company moves forward with a valuable asset and not just with a cost center because if you get a cost center, every expense is going to seem like a pain in the ass. But on the other side, if you’ve got a way to say, “Okay, when we make this change, it’s going to affect our productivity. It’s going to affect our profitability. It’s going to affect our sales. It’s going to affect our gross margins on this particular side of the business.” Whatever it is, we want to make sure that we’re really looking at it from a business point of view so that every cent that’s spent is really affecting the bottom line in a positive way.
Scott Orn:	Yeah. That was really good. You mentioned a ton of stuff and a lot of stuff that we think about too. In terms of like you talked about like is IT going to drive the organization or is this like just they’re looking at it as like a cost center, everyone needs a computer. Could you give like an example of each of those because in my head, I’m kind of visualizing it but like what’s an example of a company that’s using IT on the forefront to really drive their business and how have you helped those folks? Maybe they’re a FinTech company that’s doing some really extremely rigorous underwriting or maybe it’s a services company like us that has to be up and running and be really smart about their Cloud infrastructure. You probably have a bunch of clients and who’s using it really strategically?
Steve Walker:	Yeah. Well, it’s really interesting because we’ve got a couple of clients right now in the financial space that are … I’ll kind of leave it at that just because privacy obviously but what they’ve done is like these companies are regulated by the SCC, in some cases the FDIC and one of the things that they’ve done is they’ve said, “You know what, we know we have to be compliant. Let’s figure out how we can be compliant by doing it completely different than everybody’s ever done.”
Scott Orn:	That’s brave in a regulated industry.
Steve Walker:	It is very. You don’t know what’s going to happen but they’ll bring us in. They’ll say, “Okay, first of all, set up an IT infrastructure that makes a lot of sense. Now, as you’re setting it up, what we want to do is we want to be able to justify this from a compliance point of view and make sure that everything that we’re doing is going to pass mostly with the SCC. So what you’re going to have to do is you’re going to have to basically be able to answer in an SCC audit exactly what needs to be done and why we’re doing it this way and why it’s more secure. Not just secure but more secure than the traditional way of doing it.” And by doing a handful of small things, a lot of it’s Cloud and some of it is services based like AWS and stuff like that but by moving things out and then making sure they’re protected, sometimes instead of having a firewall, you use encryption. Instead of having PC’s that login to a domain, you have Macs that are encrypted. You can do a lot of stuff with an alternate technology that completely bypasses all the rules and is more secure than the way that you started and if you think about things in an innovative way, in an out-0f-the-box kind of way, you can solve all kinds of problems and make things a lot better for a lot less money a lot of times too.
Scott Orn:	That totally resonates to me because you wouldn’t know this but before I joined Kruze Consulting I was a partner at a venture lending fund and I was also Chief Compliance Officer. So I actually remember like we wrote a 135-page document about all of our practices internally and I had to go through all the IDE infrastructure and list all that stuff out. And it’s like your point about making it more secure not just kind of at parity is a really good one because the auditors ask those kind of questions like why would you do this? Why didn’t you just default to the normal stuff?
Steve Walker:	Yeah. That’s kind of interesting but one of the things that I do personally is that I’m the Chief Security Officer or the CSO for probably 50 companies.
Scott Orn:	Oh wow. So you’re on the hook.
Steve Walker:	Yeah. Instead of having like one CSO for every company, it takes me probably 2 or 3 hours a year to handle whatever’s going on.
Scott Orn:	For each specific client?
Steve Walker:	Exactly. But for all of them together, I can look out for all the big problems that they have. I can really think for them and like when it comes down to it, unless they have a breach which if we’re doing our jobs right, they don’t, the job is actually pretty simple and like the alternative would be to either appoint somebody in-house to do that or there’s not like a good alternative to that but that’s a very very easy and cheap way to do it.
Scott Orn:	Do you find though that I would think that’s one of the selling points for your clients is like I get to work with Steve. Steve has done this hundreds of times. Steve has all the documentation, all the processes like let’s not reinvent the wheel here.
Steve Walker:	Yeah. Absolutely. I think there’s that and then there’s another piece of that too and that’s like I talk about the CSO piece for myself which is cool because I get to see all kinds of different companies. But the other thing is, like looking at it from the other point of view, I see lots of companies but they don’t just get me. They get like a bunch of people in my company who have a bunch of different technical and security skill sets and so rather than hiring one person, they’re not just getting one. They’re getting half a dozen or a dozen that are really really good at what they do and it actually is a really big benefit because you don’t end up running into that my-guy-can’t and then you call in a consultant. You got to explain the problem to the consultant and this way, you start off with a consulting firm. You kind of do things in a cost effective way and then you got all these backup people that can do any kind of problem. So you don’t need to spend nearly as much money.
Scott Orn:	Our business are so similar because we are the same way. It’s like if you need to negotiate a term sheet, I can pop in and do that negotiation or someone can do help with revenue recognition. That’s really interesting. How do you … I’m just kind of curious, I can learn from you for a second. When you’re talking to your clients or selling a new engagement, how do you convey that to them? Like how do you explain to them? Do you have to come in and shake everyone’s hand? What do you do to get the client to understand the value you’re providing?
Steve Walker:	It’s kind of funny because it’s a really … the sales process for us is so different from any company I had ever worked for before and any company I’ve ever seen. Almost all of our business comes in through word-of-mouth. Let me rephrase that. All of our business comes in through word-of-mouth. So you don’t just trust somebody with your IT.
Scott Orn:	That’s how I found you by the way.
Steve Walker:
Scott Orn:	Yeah. A friend of mine is a banker and he recommended I email you. That’s what happened.
Steve Walker:	Exactly. You trust other people. It works out a lot better. But then you get into the conversation and whether it’s with me or Kerri who runs our biz dev group or even one of our engineers and the questions that we’re asking aren’t IT questions and I think that when you start off the conversation by making sure that everybody at the table knows what the business is about, I think that that really makes a big difference and the funny thing is that every once in a while we get somebody in and we’ll start asking those questions and they don’t even want to talk about it. It’s like, “No we don’t talk about business with people. Forget it.”
Scott Orn:	We’re stealth. We can’t share that with you.
Steve Walker:	Not even so much the stealth because I get the stealth piece but it’s more like, “Why would we share our business goals with our IT guys?”
Scott Orn:	Oh. That’s a huge warning sign.
Steve Walker:	Yeah. Exactly. You know, it’s just immediately that’s just never going to be a match.
Scott Orn:	Yeah. You can’t be a good partner if your goals aren’t aligned.
Steve Walker:	Exactly. But then you know, on the other side, usually within just 5 minutes, like both us and the clients like realize this is a match and we’ll walk in. A lot of times they’ve called 3 or 4 different companies and we walk out of the same meeting knowing that we’re going to be working with them. And it’s really like from a sales perspective, it’s like all of our clients come in as blue birds. It’s like literally, we get a call, we’re done working with them two days later.
Scott Orn:	Yeah. That’s amazing. It is a good feeling knowing when you have that sense of like yes, I know we’re speaking the same language. I know I can solve their problem. And also you like, I really like how you begin with like the business and where they’re actually trying to go. Vanessa will always say like, “What’s your business and where are you trying to get to?” And that really helps frame everything and I think you made the point earlier which I really like was it doesn’t matter if they’re a startup now. You’re going to be with these clients for a long time. You’re helping them grow. So it’s not just like this moment in time, right? You’re helping them plan.
Steve Walker:
Scott Orn:	That’s good. I like that.
Steve Walker:
Scott Orn:	Exactly. We’ve got a phrase that we use and it’s, ’20-year clients’. We want our clients to be around for 20 years. Yeah.
Steve Walker:	We’ve got a lot of clients from like that first year that we started which is like most of the people that started with us are still with us if the business still exists.
Scott Orn:	Are you getting like their Christmas cards and their kids are in college now and that kind of stuff?
Steve Walker:	Yeah absolutely. It’s really weird. I’ve got a 13-year-old. He was talking in the car and said, “Who is born first? Me or the company?” Sorry. The company.
Scott Orn:	I hate to break it to you.
Steve Walker:	Yeah but you know, we got clients that are the same way. We welcome their kids into the world and they’ve been with us for 10 or 12 years.
Scott Orn:	That’s awesome. Maybe you can talk a little bit about like some of the common mistakes you see startups or sorry just small business or bigger businesses make when they set up their infrastructure. Because a lot of what we do, we go in and we’re like, “Oh. Don’t do that or we’ll correct that very quickly.” But like what do you see out there and what can the audience learn from your experience?
Steve Walker:	I think the two big things are not feeling that you can figure it out and feeling like you have to hire an expert. Like you want to get a good accountant. You want to get … there’s things that you want for sure. You need a good accountant. There’s no question about that but like when it comes to doing things, like get an expert to come in and give you some advice like a couple of hours, few hours but the companies that always feel like they got to hire somebody, $225,000-person to be the expert on staff and I think that that ends up really … you want to hire quality people to come in to figure out problems not an expert who already knows how to do it and that’s one mistake that I’ve seen so many startups make over the years. Which is kind of interesting because you and I are both in the business of advising people and it holds true for me too. I imagine for you too. You want to bring somebody like us in but keep us on a tether. Don’t bring us in and say, “Hey, we plan on spending that quarter of a million dollars on advice.” Get the advice for cheap and then buy the services as you go. You do want to keep those people happy, your vendors happy but at the same time though, use them judiciously. Think about how much it’s costing because a lot of times that expert person is going to be very expensive or you bring in a smart person and the smart person can help you out a lot more quickly. They can figure out not just one thing but 15 things in so many different areas and I think that’s really really valuable.
Scott Orn:	Do you find that like some of that advice is actually part of your sales pitch? Like I find that like we gladly give away our advice because we know that we’re really good at executing and we know it’s the fastest way to convince a startup to work with us. And that’s the stuff they could find if they researched it or even just read our blog post, right? Or listen to this podcast. Things like that. We’re happy to give it away because it actually just demonstrates our knowledge and then we’ll make money along the way. That’s our business model. That’s the services business model that needed that too.
Steve Walker:	Oh absolutely. It’s kind of funny but I’ve got to describe this interaction that I had over the last two days. So Monday I swam at a pool out on the East Bay and a guy that I’ve known for probably 8 or 10 years, I played water polo with him, swam with him. He gets in. He jumps in after his polo practice and I’m swimming and we just both kind of stopped swimming and start talking because we’re good friends and he starts talking to me about business. I found out that he had changed jobs and in his new job he’s trying to solve this problem. He said, “Don’t you do something like …” We ended up sitting there for an hour talking on the pool.
Scott Orn:	Wow.
Steve Walker:	Then … so this was on Friday. Then yesterday, I went over and talked to him and two other people in his company and we sat and we brainstormed for I’d say probably 3 hours and just literally walked through like how should … they were talking, literally, what they were talking about going back to the last time, they were talking about hiring an expert for $175,000 and this guy, they had me look at his resume. His resume was horrible. This guy was just not qualified. And he wasn’t worth 175 either and we started talking about what do they really need and we mapped out literally how they’re going to do IT, how they’re going to do … they’re implementing an ARP solution and how they’re going to take the burden off of one of the guys in the company who’s been doing the IT and really he’s a mechanical engineer. He shouldn’t be doing that. And we’d literally mapped through the whole strategy and by the end of the conversation, we knew what we’re going to do. Now at the same time, like say it’s kind of like well, three hours of consulting. That’s easy. I can give that away for nothing. You also look at it and you’d say, “Well, that three hours of consulting, that’s strategic consulting.” You get somebody from McKinsey in to do that or Ernst & Young or something. They’re going to charge you like $1,000 an hour. It’s going to be a $25,000 mini engagement. It’s not the way that I think at all. I would’ve done it for free because Tom’s a friend of mine and I would’ve done it, gone into his office for free. Even to learn about their company. They make bionics. I mean this is cool stuff.
Scott Orn:	Like fake hands and things like that? Or electronic hands?
Steve Walker:	Yeah. Like robotic. I mean really really cool stuff. But so I would’ve done it for free just for Tom because he is a friend and I would’ve done it for free for a potential client even if they didn’t choose us because if we’re a match, we’re a match and if we’re not, I wouldn’t want them to pay for something or choose us because we’re not a match. But at the end of the day, I have a feeling this will probably work out that we actually do consulting for them too and handle their IT but it’s such a small thing to be able to give it away and you help people too.
Scott Orn:	It’s also a testament to where you got on Cobaltix though that you can afford to do that and that’s part of your sales methodology. I can also tell just from your facial expressions that you love hearing about new companies and new stuff and we’re the same way. Like we work for startups because it’s really fun and at some level, you’re helping these people achieve their dreams and we get to live vicariously through them. We’re feeling the success ourselves too but that’s part of the excitement of working with startups.
Steve Walker:	Yeah. I love going to the companies and just seeing what they do. It’s the same for me. Startups and established companies. I mean boring companies, no. But the thing is that like a successful company whether it’s a startup or a more mature company, they’re always innovating and that innovation, that’s the exciting part that I love. I mean this company has been around, this startup bionics company has been around for I think like 10 years. Maybe even longer. 15. And they’ve gone through all kinds of iterations of their company but they still act like a startup. They’re still innovating. They’re still lean. They’re still doing all kinds of like it’s just … talking to the people that are there, smart and I just love that kind of environment.
Scott Orn:	Speaking of being in the pool, total digression here as we are talking. Our office is a little cold so I was getting a sweater. I’m like, “Steve, do you want a sweater?” Tell the audience what you do in your spare time.
Steve Walker:	I’m an open water, cold water ultramarathon swimmer. So I swim long ways.
Scott Orn:	How long is the ultramarathon in the water? Is it like 10 miles? Or …
Steve Walker:	Well, marathon is 10k in the water. So like a 26-mile run is equivalent to a 10k swim.
Scott Orn:	So 6 miles?
Steve Walker:
Scott Orn:	6 miles, yeah. That’s really far.
Steve Walker:	Yeah. So an ultramarathon for me is generally going to be like north of 15 probably north of 20. A couple of weeks ago, I swam across the Irish Sea. I swam from Ireland to Scotland which the water was 54 degrees so about 30 degrees colder than the swimming pool. It was relatively flat for open water. Like it was a nice day which doesn’t happen very much in Ireland. And there’s no sharks up there but jellyfish and I got stung from head to toe.
Scott Orn:	Oh my God.
Steve Walker:	Yeah. About an hour away from Scotland, I got hit three times with these big huge lion’s mane jellyfish which are … they’re about 3 feet in diameter and the tentacles range from 9 to 12 feet and …
Scott Orn:	Are they seeing you as a threat or they want to eat you?
Steve Walker:	No. You just run into them and then they get tangled up and it’s like a combination of a cigarette burn and a shock, an electric shock and a bee sting all at the same time. All over your body. And I got hit with one and then about 3 or 4 minutes later I got hit with a second one and then the worst one came about 5 minutes after that.
Scott Orn:	That must be like just this crazy adrenaline rush.
Steve Walker:	Oh it was horrible. I was swearing and screaming and then by the third one, I didn’t even make a sound. I just kept swimming as soon as I got untangled.
Scott Orn:	What got you into that? Was it relaxation? Was it just a fun way to compete? Like what got you into open water swimming?
Steve Walker:	I love the water as a kid but the thing is that I just really didn’t have any talent and so …
Scott Orn:	I asked you if you’re a good swimmer earlier off-mic and you said …
Steve Walker:	I swam for Berkeley which is a swimming powerhouse but I was like the 32nd guy on the team and the only reason that they kept me there was because I could make the workouts. And I can keep going which is my strength but as a pool swimmer, I don’t have any talent. As a water polo player, I’ve got no shot. I’ve got no talent. I mean I can play and I can swim for a long time but that’s it. 22 years ago, I was getting back from grad school and I had been in law school for a year and then I quit and I was just not … like law school was really tough. I was working hard at work and I was going to school at night and I just decided I didn’t want to do it anymore. I was getting into technology and it was fun and I needed something that fill the time on the one side but also I wasn’t feeling really great about myself. I was done with law school. It’s like, “What am I going to do?” And a friend of mine that I’d played polo with said, “Hey, you got to come down and swim in the Bay.” And I was kind of like, “The Bay? Isn’t that dirty? Isn’t it cold?” And then he said, “I don’t know about dirty but it’s cold. Yeah.” So we went down there. We ended up kind of going in and there’s a club down there and two of them actually.
Scott Orn:	Yeah. Aquatic Park and …
Steve Walker:	Exactly. South End Club. And so anyway, we went down there. He brought me in as a guest and we ended up swimming with these two very attractive women wearing bikinis.
Scott Orn:	They were wearing bikinis in the Bay?
Steve Walker:	Yeah. It was pretty cool. It was a nice sunny warm day in the summer. We swam down and there’s a flag. It’s about a quarter of a mile away. It’s just a short swim. But one of the girls, they could both swim but one of the girls kept popping her head up and stopping suddenly and I was like, I couldn’t figure out what she was doing because she could obviously swim. It was like as though something was scaring her, freaking her out or something. So anyway, we got back into the beach and I turned to her friend and I said, “Hey, why is your friend stopping so much?” And she said, “Well, this is her first day back in in about a month.” When she was in the last time, she ran into a dead body.
Scott Orn:	Oh my God.
Steve Walker:
Scott Orn:	Yeah. That will scar you.
Steve Walker:	Yeah. So like for me, I was like, “Okay. Cool club. They’ve got a sauna. Cold water. You get to swim a long ways and you can run into a dead body. This is my sport.”
Scott Orn:	And girls in bikinis.
Steve Walker:
Scott Orn:	That’s awesome. Oh my God. That’s crazy. I’ve only swam on the Bay twice for I used to do triathlons. I would get these crazy headaches because it’s so cold. Like how did your body adjust?
Steve Walker:	guy.
Scott Orn:	Yeah that too. I think if you could see through the mic, you’d see that I’m not a skinny You’re not fat either.
Steve Walker:	Yeah. I’m 50 pounds lighter than I was when I swam in the English Channel 20 years ago but I’m still you know, I’m not skinny and I think that helps a lot. But you just kind of get used to it. You get in and you start doing it every day and your body gets used to it.
Scott Orn:	Have you been able to take stuff from the ultra-distance swimming and apply it to work? Like how have you kind of … I’m sure it brings you a lot of peace of mind because you have a lot of time to think and get all those thoughts out but like how have you applied that to work?
Steve Walker:	Well, you know, oddly enough, I’ll make a plug right now. I just finished writing a book and the book ties together kind of business and swimming. I’m publishing it through Amazon.
Scott Orn:	That’s great. What’s it called?
Steve Walker:
Scott Orn:	Where Do the Crazy People Swim? Oh I like that. That’s a good title.
Steve Walker:	Yeah. It’s kind of fun. But it was actually like I started writing a book about swimming because there’s a lot of stuff that I know that younger swimmers can really use. But I started to realize that there was a theme in there that kind of tied the two together very well and the theme was failure. Like in business, you innovate and the way that you innovate is by taking calculated risks and you want to succeed more than you fail but the thing is, you want to fail too because if you don’t have the failure, you’re not going to really know what it’s like when it’s hard. And also, you’re not going to know how to improve things. If you’re not taking risks that cause you to fail, you’re not pushing the boundary hard enough.
Scott Orn:	Totally agree.
Steve Walker:
Scott Orn:	Yeah. Totally agree.
Steve Walker:	And swimming’s the same way. I failed at a swim over the summer which was kind of interesting. I tried to swim from Vancouver Island, Canada to Port Angeles, Washington and it’s a 13.8-mile swim which is something I should be able to handle no problem. The water was definitely cold. So I got about a little less than 4 ½ hours in and my stomach, the way that it works is your blood starts being shunted away from your skin and that happens pretty early.
Scott Orn:	And you’d notice that like you can tell?
Steve Walker:	That happens early in the swim. So every swim that happens. But then as you get colder, your body starts to shut down the least important things.
Scott Orn:	You’re like diverting blood from certain organs or something like that?
Steve Walker:	Exactly. So my stomach stopped working next and I couldn’t take in any food. But I was okay. I was holding up and then my kidneys shut down and you start to feel like it’s more than an ache but not quite a sharp pain. It’s like kidney stones but not as bad. And then your muscles start to freeze up and seize and cramp and it’s more than just seize and then they start spasming. So anyway, I was 10.8 miles in and I had to get out. It’s the first ultramarathon I’ve ever quit. And I was conscious and everything and it was the first swim I’d ever voluntarily quit and the first one I had ever not succeeded at and this is only 15.8 miles. When I got out, I found out that the water was 46. So it was …
Scott Orn:	7 degrees colder than Irish to Scotland.
Steve Walker:	Exactly. And then I found out a little later that it’s the coldest swim of that distance ever on record. So I did a world best swim.
Scott Orn:	And you made it at 10.8 miles instead of looking at it like, “I didn’t make it.” You know.
Steve Walker:	Well, kind of both. I mean I was like, it sure messed with me when I was getting ready to do the Irish Sea. It’s like, “I got out. Am I going to get out next time? Am I going to get cold? What happens when I get cold?” But then on the other side, it’s like, “Yeah I did something that nobody else in the world has ever done.”
Scott Orn:	Wow.
Steve Walker:	Yeah. It’s kind of interesting. The day before I swam the Irish Sea, two guys tried it and both were pulled out of the water unconscious.
Scott Orn:	Oh my gosh.
Steve Walker:
Scott Orn:	And you have like a boat that goes next to you?
Steve Walker:
Scott Orn:	One after 8, one after 12 hours. Yeah. Okay.
Steve Walker:	They throw you food and stuff like that but they can’t touch you or anything. And then like I took it seriously and definitely I thought about it but I thought, “You know, that’s okay. I’m in better shape. I’m going to make this.”
Scott Orn:	It’s like 8 degrees warmer. This is going to be easy.
Steve Walker:	I could do this. Yeah. So after the swim, about a week after the swim, they pulled a guy out of the English Channel which is 62 degrees. So 8 degrees warmer. And they pulled him out a mile from France and he was dead.
Scott Orn:	Oh my gosh.
Steve Walker:
Scott Orn:	He had hypothermia. His heart stopped. He shut down.
Steve Walker:	So yeah like you don’t want to push it so close to the edge that you really threaten everything for sure and this holds true in business too. But you want to have small failures that test the system often. It’s one thing to say, “Oh we test our backups every week.” What you really want to do is you want to actually say, “Oh I need that file and you go back to your backups and make sure that it works.” You want to actually have small failures so that you know that what you’re doing is actually testing the system. Not just testing the theories behind the system.
Scott Orn:	Yeah.
Steve Walker:	Because if you don’t do that, then A, you’re not taking any risks but B, you’re also not putting yourself in a position where you really know that whatever happens, you’ll be able to recover because half of it is making sure that the system works. The other half is being able to know like what to do when the system doesn’t work.
Scott Orn:	Totally agree. You mentioned a couple of times earlier in the conversation too. You like clients that run lean and who are … and that’s what running lean does for you. You feel the effects when you’re not running optimally and then you can fix it. So the whole premise behind that.
Steve Walker:
Scott Orn:	Yeah. That’s absolutely true. So we should wrap up here. Can you tell the audience maybe just kind of summarize some of your thoughts? I really like the idea of when you go into a client, you’re actually evaluating where they’re going in business before you even talk about IT. Talk about that a little bit. And then also just tell our audience where they can find you online.
Steve Walker:	Yeah. Well, the online part is easy. It’s www.cobaltix.com. C-O-B-A-L-T-IX.com. my email address is, swalker, S-W-A-L-K-E-R@cobaltix.com and my cellphone number is 510-289-3226. Call me. Send me an email. It’s kind of funny. Most people don’t want to have anything to do with a cellphone online for their clients but we like our clients. I love to talk to people.
Scott Orn:	I’m the same way. I love calling people.
Steve Walker:	Yeah. So that one’s an easy one. As far as like the business pieces, having been a startup, I think that that’s probably the most valuable thing. Like be cheap. Be careful with the money that you’re spending. Make sure that what you’re doing is always in line with the goal that you have. Make sure that the money that you’re spending is always something that’s going to benefit the bottom line. We ran through a period probably about 7 or 8 years in where we bought a building and the building was a good investment and all that. But what we needed to do was we actually needed to have plants in the office. Plants don’t benefit the bottom line. It was really really hard for me to actually say, “Okay. We’re going to have plants and even more than that, we’re going to lease plants.” We’re going to have somebody come in and water the plants every week and they’re going to replace the plants when they die because they’ll die and we don’t want to deal with it. And it really took me a long time to wrap my brain around how does this affect the bottom line? And at the end of the day, what had happened was we’d grown to a certain size and we had to say, “Okay, there’s some expenses that we have to incur in order to keep everybody happy and having a nice office is one of those expenses.” But it’s really easy like coffee, bottom line. No problem. People are more effective. Beer, people are happy. Bottom line. It works. It’s a good thing. We got a kegerator at the office. We got food all over the kitchen. We’ve got a tech stipend for our engineers. It’s $1,600 so they can spend any way they want. Tax free because we’ve figured out a way to make it tax free. We call them trade tools.
Scott Orn:	I’m sure they discovered new things you should be working with.
Steve Walker:	Exactly. It keeps them happy. The other thing is it keeps them up to speed on technology. So always think about what you’re doing and make sure that it has an effect on the bottom line because there’ll be a certain day when like if you’re successful where you get to a certain stage in your growth where you can say, “Okay. We’re going to spend some money just because we want to spend some money.” But until you get to that point, think about how everything affects the bottom line because that’s the real key.
Scott Orn:	You do it purposely when you get to that point. Can you also share when your book is coming out and the title of the book again?
Steve Walker:	Absolutely. It’s, Where Do the Crazy People Swim? And it should be coming out some time in the next few days. Today is September 20th so it should be out by the 25th or the 26th.
Scott Orn:	Okay. And it takes me like a week to edit these things and post it so by the time the podcast comes out, it will be online. So search Amazon.com for, ‘where the weird people swim’?
Steve Walker:	Where Do the Crazy People Swim? Or just Steve Walker swimming and I think it pops up second. I’m not the gay artist in San Francisco. I’m the other Steve Walker.
Scott Orn:	Awesome. Steve, thank you so much and just a quick plug for Cobaltix, we use you guys. We love you guys. Thank you for always being on top of things and for helping us out. We never have downtime because of you guys. So thank you so much.
Steve Walker:	I really appreciate that. I’m glad that’s the case because I like helping people.
Scott Orn:	Awesome. Alright man. Thank you so much. Appreciate it.
Steve Walker:	Thanks.

Steve Walker of Cobaltix on IT Outsourcing for Startups

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