13 March 2018
Dan Caruso has been rebuilding Zayo, the company he started 11 years ago. He’s replaced top managers and launched SD-WAN. He talks to Alan Burkitt-Gray about bringing back energy and ambition into the company
Dan Caruso has emerged from a
period when, by his own admission, he had trouble sleeping at
night. It was not that Zayo, the company he founded and still
leads, was in trouble, but he felt that something had gone out
of it. So he replaced most of his colleagues at the top, people
he’d started Zayo with. "It was hard –
coming to the realisation that we were going to have to rebuild
a lot of our senior team," he says.
The newcomers aren’t significantly younger, and
many of them – like those they have replaced
– used to work with him in companies such as Level 3
Communications. But, having gone through the process over the
past year or so, he says, "the energy, ambition that Zayo
always had has returned. The zest has returned.
Let’s take that to the next level".
He’s surprisingly critical, both in a speech he
made to Capacity’s Metro Connect conference in
Miami Beach in January and, the following day, sitting at our
booth at the same event. "We had to rebuild the executive team.
It was beginning to stagnate," he says. Zayo needed a team
"that was looking to the next five years". There was no
animosity, he suggests. "We have a close relationship. Some of
them made a lot of money. The core group made $10-$20 million
or more than that. And they had a lot to show for it –
new houses and new cars."
Now, "most of them are on the golf course, one way or
another". Some are "on a couple of boards in some nice areas",
he adds. "They’re all a very talented team
– saying maybe they should do something like
The new team features people such as Matt Steinfort, who
became CFO at the end of 2016. He used to work at ICG
Communications and Level 3 Communications – as did
Caruso. There’s Jack Waters, the CTO, who was CTO
of Level 3 Communications for many years. Andrew Crouch was
appointed COO in April 2017, having previously been Level
3’s regional president of Europe, Middle East, and
"Jack Waters started at Level 3 a month after I started
there," says Caruso. "The reassembled team were people that
It didn’t always work smoothly. Ed Morche,
formerly Level 3’s group VP of sales, became
Zayo’s president of sales in May 2017, only to
resign to return to Level 3 a few weeks later.
And the new chief revenue officer is Phil Mottram:
he’s a Brit, like Crouch, but hasn’t
worked for Level 3. Instead he’s had senior
positions at Vodafone and used to head CSL, the Hong Kong
mobile operator, when it was owned by Telstra. Before that he
was at BT and AT&T.
Thinking at scale
"Now things have changed pretty dramatically," says Caruso.
"Now 2018 is just about simple execution." What’s
new about the new team? "They’re more global, more
used to thinking at scale." Mottram managed 3,000 people at
CSL, he adds. The newcomers can handle a "more complicated
sales strategy". Zayo is "much bigger now, with more business
units. It’s more global. Now we go outside the
boundaries of where we have networks – to bring
customers to Hong Kong, Sydney, Brazil."
One of the significant recent changes is a move into
software-defined wide area networks (SD-WANs). "We have a few
businesses that have to do with connectivity at both the
Ethernet and IP layers, so we have a WAN business." This
"serves customers that are on our target list that have more
locations, so the WAN could take different forms. It could be
MPLS, IP VPN or Ethernet-type WANs", says Caruso.
"You also have the category where our key customers either
connect to multiple public cloud environments." They may want
to connect to Amazon Web Services, Google and other cloud
services. "That’s another area where the SD-WAN
type functionality comes into place," he says.
"We view it as first and foremost having command and control
of your infra-structure and your data. It’s
paramount you do it in that way. How you turn up and turn down
capacity, take advantage of automation –
that’s where SD-WAN comes into place." He adds:
"It doesn’t necessarily change or expand our
aspirations. It’s just the progression of getting
better and better at serving our key customers."
When Zayo announced its SD-WAN plan in January, the company
said it was "an integrated extension" of its fibre-based
IP/MPLS backbone offerings "that makes
enterprises’ networks easier to manage, improves
performance and enhances reliability and failover
As part of Caruso’s reorganisation of the
company, with a new management team, he has split the company
into five business segments, each operating globally.
The carrier segment is the biggest, providing about 48% of
Zayo’s revenue. Below that there is the finance
and professional services unit, with 16% of the revenue; media,
content and commerce, with 13%; and cloud, software and
infrastructure, also with 13%; and then public health and
utilities with just 10%.
But in an earnings call earlier in the year, Caruso reveals
that just 10 customers – five global carriers and five
webscale companies – produce 26% of the total revenue.
He didn’t identify the customers, of course, nor
put the carriers and the webscale companies into any sort of
order. Zayo’s top 100 customers generate 57% of
its total revenue, he added.
Opportunities in finance
In that same conference call he said there were "big
opportunities" in the finance sector, set up in 2017.
"We’ve had multiple deals in Europe and the US
with the same customers. It allows you to get deeper and
broader with that vertical."
He added that 2017 "was a transitional year" for Zayo. "We
developed this great platform that has global significance as
the largest independent provider of communi-cations
infrastructure, but we needed a team of people and an
organisational approach that was going to take us forward not
just through 2018 but for many years to come. We accomplished a
lot in 2017 to position ourselves for long-term value
So let’s turn back to Metro Connect, and his
"reflections of an anxious chairman" – the term with
which he introduced his keynote speech. Zayo has continued to
acquire companies over the past few years, despite
One of the most intriguing acquisitions – and
possibly his best recent bargain – was Spread
Networks. If you’ve read Michael
Lewis’s book, Flash Boys: A Wall Street Revolt,
which came out in 2014, you’ll recognise Spread
Networks as the dead-straight fibre from New York to Chicago
that was designed to cut latency for high-frequency
The fibre – 827 miles or 1330km –
allegedly cut the latency from 17ms to 13ms by being
ultra-straight, to give traders connected to Spread Networks a
4ms advantage over their rivals. Lewis says in his book that
the project cost $300 million. Zayo bought Spread Networks for
less than half that: $127 million. Not so much high speed, as
be patient and it’ll come to you. "We now have a
business unit called Spread Networks by Zayo," says Caruso.
"We’ve just announced a cable from Minneapolis to
He’s looking for other acquisitions –
and Annette Murphy, the company’s former SVP for
fibre solutions, who became managing director for Europe in
Caruso’s great management reorganisation, will
have a role in that. "We’re actually looking in
Europe" for potential acquis-itions, he says. "Annette has a
really strong knack for finding opportunities. She is working
with Ian Cunningham, the head of sales in Europe."
Cunningham joined in January this year after a year at
– surprise – Level 3. He spent the previous
three years at credit information agency Experian. Before that,
though, he was at Vodafone and BT.
Zayo is looking to extend the network "to Hong Kong, Tokyo,
Singapore, Sydney", says Caruso. And apart from the big
potential acquisitions the company is working on, they are
looking for small gap-fillers. "We call the small ones
tuck-ins," he says. "We like tuck-ins. I want to do lots at the
And, having parted from so many former colleagues at the
company, is Caruso determined to stay strong and stable in
Zayo? "I don’t have the inclination to take my
money and go off," he smiles. "I don’t want to go
and play golf. I’m not ready to hang up my
But, he adds, "I should have less of a hands-on role. I want
to get to the point where Andrew and Phil are driving the