William Adams of ACS Services, one of the leading managed-IT firms in the Northeast, offered his assessment of these challenges in a recent interview.
Q: As a firm that partners with its clients to meet their technology challenges, how do you view what is happening in the cannabis space?
A: We are always interested in new business concepts. We especially like to learn and strategize about how we can add value for those who are trying to establish themselves in new markets where technology is important – and it is in the cannabis space – both from a risk management and business development standpoint. I have been studying the cannabis sector pretty closely to understand what is involved with the business and what is happening as the market evolves. I have been monitoring the actions of state regulatory agencies; and of firms that have entered the market in both the growing and distribution ends of the business. I have even attended conferences and public hearings to understand the regulatory frameworks that are being put in place to create and oversee the market. Because of this, I feel like I am developing a pretty informed perspective – particularly as it pertains to how technology needs to be deployed.
Q: At a high level, what are we seeing so far – particularly with regard to those who are trying to capitalize on the opportunity?
A: Some have said the sector is characterized by a bit of a “Wild West” mentality in that people are very anxious to get into the space and to use their skills and experience to launch and participate in new ventures. From where I sit, it appears that you have two different types of players. On the one hand, you have those with direct, long-term experience with the product (Laughs!) and who recognize its medicinal and recreational value. These are the cannabis “enthusiasts” and many of them have real, tangible experience and skills to be leveraged now that the product has been legalized. On the other hand, you have the sophisticated business and financial people – the venture capitalists, the private equity investors, the opportunistic high-net-worth investors – who recognize an emerging opportunity and understand how to blend capital, creativity and hard-edged business expertise to succeed. What’s interesting to me is that, in some cases, you see both of these types of players coming together to make things happen.
Q: What about the technology side of things? What are you seeing with regard to strategies and approaches?
A: It appears that the use of technology is a priority – but it also appears that not everyone has a strong conception of how to design and implement an IT strategy and the infrastructure to support their business needs. I think this can be a real problem – something that ultimately differentiates the winners and losers in the cannabis space.
Q: Why is that?
A: Cannabis is a very intriguing business sector from an information management, sharing and compliance standpoint. The capacity to effectively manage how critical cultivation, financial, transactional and compliance data is stored, managed and shared is absolutely critical. Let me give you an example. If you are growing or selling cannabis-based products, you have to be able to track the path of every single plant from seed to sale in order to comply with the regulations and mandates that are in force in most states. Here in Massachusetts, where ACS is based, the Massachusetts Cannabis Control Commission requires that commercial growers tag each and every plant with a code. That information is then uploaded to Metrc – a third-party, turnkey information and inventory management platform that provides real-time tracking and tracing capabilities. What this means is that someone from the commission can show up at a licensed grow-site or retail establishment and ask to see the exact marijuana plant referenced in the inventory system – or the processed product that may have been produced from it and that is now being offered for sale. If the grower or dispensary can’t provide this kind of chain of custody information, the state can shut them down until the data has been updated. That’s pretty rigorous regulatory compliance – and if you don’t have the systems, infrastructure and information management procedures in place to share your inventory data with Metrc in a timely and accurate manner, you could have a very big problem – one that could cost you a lot of money – both in fines and in lost revenue.
Q: Are there examples of this happening already?
A: Yes. One of the first dispensaries to open in Massachusetts – a retail establishment on the North Shore – was forced to shut down temporarily by the state because its inventory and chain of custody data was not being updated accurately or quickly enough. The state just came in and told them to lock the doors and from what I understand the business was closed for almost a full month while it worked to straighten things out.
Q: So, what you are saying is that there are some special business risk considerations that need to be understood and that having a strong technology foundation can help mitigate them.
A: Right. Having a well-conceived IT strategy and plan – one that is backed up with strong technology infrastructure and capable experts is important for managing business risk in the cannabis space. But that’s not all. To manage your inventory… To cultivate your growing stock… To prepare it for merchandizing… To promote your brand… To market your offerings at point of sale… You also need robust and reliable technology and support. You need it to keep track of your cultivation inputs and costs; to support and monitor your plant to product conversion processes; to build and manage your budget and finances; and, to ensure that your compliance processes are sound and are being followed. You also need it to price your end- use products competitively; to manage your operating expenses; to keep track of your sales and revenues; and, to ensure that you are managing your tax obligations appropriately – which obviously is a major point of interest for the state and regulators (Laughs!).
Q: So, what exactly are you talking about when you refer to IT infrastructure?
A: If you’re running a cannabis business, maintaining your data in the Cloud is the smartest and most cost effective approach, but that’s not the end of the story. You need reliable, high-speed internetaccess and computing technology – PCs, laptops, tablets and smart phones. You need a data and document management system, a stout firewall and other security technologies. You need cabling and smart technology to remotely monitor your HVAC and other critical environmental control systems. And, you need a strategy to integrate all of this and the expertise to build, manage and maintain it.
Q: It sounds like you believe the cannabis sector is a potential market for ACS?
A: I do. We think that we have all of the skills, experience and expertise growers and dispensaries need to manage their IT- related business risks and to position themselves to capitalize on the opportunities this new market is presenting. We’re out building relationships right now with people in the cannabis space and I’m confident that we are going to become recognized as both a thought-leader and a problem solver when it comes to managing their IT challenges.
Q: Is there anything that makes ACS particularly well suited to provide this kind of support?
A: The companies operating in this new space are right in our “wheel house” from a size standpoint. Our market is smaller to mid-sized companies – firms with 20 to 500 employees – and that’s where most cannabis businesses find themselves. However, the thing that really differentiates us is that we have a long and successful track record of providing a broad range of managed-IT services and support to companies that operate in highly regulated B2B and retail markets. We work with law firms that operate in highly sensitive practice areas and that have rigorous information security and management dimensions. We also work with medical providers that have a need to maintain and protect complex and highly confidential types of data and information and to comply with regulations like HIPAA. Finally, we’re not just involved in executing IT plans. ACS is different from many of our competitors in that we really dig in with clients to understand their businesses, to understand their challenges and opportunities and to develop comprehensive managed-IT strategies that are customized and calibrated to their circumstances. We’re knowledgeable, flexible and reliable – and those are characteristics that are extremely important for new businesses that need an IT partner to help them navigate in a new market. We’re excited about the cannabis space and about our capacity to add value for clients who are active in it.