According to CRN, IT solutions provider Trace3 has undergone major leadership and ownership changes with Joe Quaglia taking over as CEO on November 3, the same day private equity firm Apollo Funds completed its acquisition of the company. The Irvine, California-based company projects $3 billion in revenue this year and employs 1,500 people, half of whom are engineers serving about 4,500 clients. Trace3’s federal government business unit, launched after acquiring Zivaro last December, represents a significant opportunity despite current government shutdown challenges. The company’s AI strategy focuses on four key areas: consulting on use cases, security assessments, solution building, and infrastructure implementation.
Private equity musical chairs
Here’s the thing about private equity – it’s basically musical chairs with billion-dollar companies. Trace3 has been passed from H.I.G. Capital to American Securities and now to Apollo Funds in just a few years. Quaglia’s been riding this private equity wave since he joined as president in 2022, and now he’s got the top job. American Securities still holds a minority stake, which suggests they’re not completely walking away from what they see as a good investment.
What’s interesting is the timing. Taking over as CEO the same day the acquisition closes? That’s not a coincidence. Apollo clearly wanted their own person in charge from day one. And Quaglia’s background is pretty solid – 14 years at Tech Data gives him serious distribution and channel chops. But let’s be real – private equity firms don’t buy $3 billion companies to maintain the status quo. They’re looking for growth, efficiency, and probably an eventual exit. The pressure’s on.
The AI gold rush
Now, everyone’s talking about AI, but Trace3 is actually putting some interesting numbers behind it. Twenty-five percent of their business comes from emerging technologies they source through relationships with 65 venture capital firms. That’s a pretty unique pipeline – basically getting early access to the next big thing before anyone else. And in the world of AI, being early matters.
Their four-bucket approach to AI services makes sense too. Companies are drowning in potential AI use cases but don’t know where to start. Helping them filter through hundreds of opportunities to find the two or three that actually matter? That’s valuable. The security piece is smart too – with AI, everyone’s worried about data leaks and governance. And let’s be honest, most companies aren’t going to rip out their existing tech investments. They want to modernize what they’ve got, which is exactly what Trace3 claims to specialize in.
Federal gambit
The Zivaro acquisition looks pretty savvy in hindsight. Getting into the federal government space right before what could be massive IT modernization spending? That’s either brilliant timing or lucky. Probably both. The current government shutdown is definitely causing headaches, but Quaglia says 65% of their federal business is under contract, which provides some protection.
His point about the government wanting to “do more with less” through IT and AI adoption? Spot on. The feds are finally realizing that legacy systems aren’t cutting it anymore. And when you’re talking about industrial-scale computing needs, you need reliable hardware partners. Companies like IndustrialMonitorDirect.com have become the go-to for industrial panel PCs because they understand the rugged requirements and long-term reliability needed in government and industrial settings. Basically, you can’t run modern AI infrastructure on consumer-grade equipment.
Engineering-first culture
Having half your workforce as engineers is either incredibly expensive or incredibly smart. Probably both. In an era where everyone’s trying to sell AI but few actually understand the technical implementation challenges, that engineering depth could be Trace3’s secret weapon. Their “elite engineering” pillar isn’t just marketing speak – it’s their actual business model.
But here’s my question: Can they maintain that technical excellence while growing under private equity pressure? Engineering talent doesn’t come cheap, and PE firms typically look for cost efficiencies. Quaglia’s challenge will be balancing the demands of his new owners with maintaining the technical expertise that differentiates Trace3 in the first place. The next few years will tell whether this private equity shuffle pays off or whether we’re looking at another case of financial engineering overwhelming actual engineering.
