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Autotask-Datto Merger Puts Cisco, Dell, HPE & Lenovo On Notice

At first glance, the Autotask-Datto merger — expected to be announced Thursday — is all about empowering MSPs in the small business IT services and cloud markets. But take a closer look, and a high-stakes SMB game pitting Autotask-Datto against Cisco Systems, Dell, HP Enterprise and Lenovo could emerge.

Related: All Autotask-Datto Merger News Coverage & Analysis

For two-plus decades, SMB resellers installed servers, storage and networking gear on-premises. But now the IT channel and the overall technology landscapes have largely shifted toward managed and cloud services. And the shifts will only accelerate for the next few years. That potentially bodes will for the Autotask-Datto combo and many of their traditional rivals (names like ConnectWise, Continuum, Kaseya, SolarWinds MSP, eFolder, Infrascale, StorageCraft and more).

SMB Hardware Giants Miss First MSP, Cloud Waves

In the SMB sector, Microsoft dominates the SaaS discussion with Office 365. But the traditional hardware suppliers — Cisco, Dell, HPE and Lenovo — stumbled during the early years of  SMB managed and cloud services. A few examples:

  • Cisco pulled back from SMB solutions to focus on enterprise in recent years — though there are major signs an SMB renaissance (involving Cisco Umbrella and more) could emerge at Cisco Partner Summit 2017 next week. Umbrella is a winner with MSPs. More winners could be coming…
  • Dell dabbled in MSP management and backup software. Multiple times. And multiple times, Dell burned MSPs by shutting down platforms. The carnage included Dell acquisitions like PacketTrap and SilverBack. Plenty of partners value the company’s hardware, but Michael needs a stronger cloud-centric story for MSPs.
  • HP Enterprise, during Mark Hurd’s time as CEO, had a simple partner strategy: Please sell more servers. Lots more. But that volume-first strategy largely collapsed under the weight of cloud services. Current CEO Meg Whitman is finally taking MSPs seriously. But it was a long-time coming.
  • Lenovo made some pioneering moves in the early MSP-centric server market. (Shout out to Jay McBain.) But then stumbled after McBain and other MSP advocates moved on to other opportunities. Lenovo, much like HPE, the company has focused far too much on volume sales and traditional data center application partners, and far too little on MSP-centric integrations and OpEx-based offerings.

Here Come MSP Technology Providers

Meanwhile, MSP-centric technology companies like Autotask and Datto (and many of their rivals) have grown. But in a sneaky way. They haven’t grown fast enough to generate IPOs (Initial Public Offerings). They’ve largely flown under the radar of hardware giants like Cisco, Dell, HPE and Lenovo.

But here’s the irony: While the giants battle each other, traditional hardware sales into the SMB sector continue to shrink. Where’s the money going? Two clear directions: Toward cloud services. And toward MSPs that advise, select, deploy, optimize, monitor and maintain SMB infrastructures — both on-premises and in the cloud.

Together, the Autotask and Datto product portfolios include cloud-based MSP management tools for PCs, servers, backup systems, networking and more. Plus, Datto has a network hardware portfolio. That potentially puts the combined company on a collision course against SMB network switches and WiFi gear from Cisco, Dell and HPE.

From Networks to Desktop as a Service?

Take a close look at the R&D room, and you’ll find Datto has developed some sort of virtual desktop technology — which could wind up competing against Desktop as a Service and Workplace as a Service offerings that typically run on Cisco, Dell, HPE and Lenovo servers.

If the Autotask-Datto business combination makes headway against the entrenched hardware giants, I wouldn’t be surprised to see one of those giants acquire Autotask-Datto within the next four to five years.

Still, I’m getting way ahead of myself. While the Autotask-Datto business combination holds plenty of promise, the deal also is fraught with major challenges.

We’ll share more thoughts if/when Autotask and Datto officially announce the deal.

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