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Why MSPs Keep Launching Software Companies

Riddle me this: What do ARRC TechnologyConnectWiseITCompuquipBestMacsinhouseITNemsys and TruMethods have in common? The intriguing answer: Each of those managed services providers (MSPs) or MSP-oriented companies went on to incubate, launch and/or spin-off software companies. And in many cases, the software startups have been wildly successful.

But here’s the thing. I don’t see as many VARs launching software companies or building their own intellectual property. That’s not a knock on VARs. It’s an observation. And I think I can explain it.

  • Generally speaking: VARs spend a lot of time trying to solve customer problems.
  • Generally speaking: MSPs spend a lot of time trying to solve customer problems while ALSO trying to automate and scale their businesses.

How MSPs Spot Software Opportunities

The MSP’s journey to automation often turns into a self-help initiative. They often become frustrated by existing automation tools in the market. Instead of settling for a second-class solution, they build their own. Or, they spot a gap in the automation market that nobody else has capitalized on just yet.

The examples are everywhere. Here’s a sampling…

  • ARRC Technology is a leading MSP in Bakersfield, Calif. Instead of stopping there, CEO Alex Rogers launched CharTec — mostly a learning academy, but the company is starting to build its own intellectual property. In particular: Keep an eye on Relyenz
  • ConnectWise IT started as a Tampa Bay-based IT service provider. It still exists today. But the bigger story involves co-founders Arnie and David Bellini. Frustrated by existing business automation tools, they launched ConnectWise — a PSA (professional services automation) tool that evolved into a business management platform. ConnectWise and it’s broader portfolio of products (LabTech, Quosal, ScreenConnect) now ranks among the market leaders in their respective categories.
  • CompuQuip, a Miami-based IT service provider, went on to launch BrightGauge, a business intelligence system for IT service providers. The platform essentially gathers and manages data from MSP-oriented tools (PSA and RMM), accounting systems and more. The net result? A single dashboard to help IT service providers track their KPIs (key performance indicators).
  • BestMacs, an MSP in Kansas City, grew frustrated with remote management tools for the Mac. Instead of paying big fees for enterprise-class tools or settling for low-end SMB tools, BestMacs blended open source and some custom code to build Mac-MSP. That Mac management platform just got acquired by LogicNow.
  • inhouseIT is a very successful MSP in southern California. Instead of stopping there, the company launched SpamSoap, a custom version of McAfee-oriented SaaS security. SpamSoap sold through the channel, grew some more under a new brand called Nuvotera, and then got acquired for a healthy sum according to  the sources we’ve heard from.
  • Nemsys remains a successful MSP in Ohio. The company grew frustrated with RMM-oriented software and spun off its own platform — called LabTech. ConnectWise invested in LabTech in 2010, and ultimately integrated the company into the overall ConnectWise enterprise in 2015.
  • TruMethods is an MSP training, education and coaching firm in Pennsylvania. CEO Gary Pica and CTO Bob Penland previously built an MSP that mindSHIFT ultimately acquired. These days, Pica and Penland are partners with George Mach in Apex IT Group, another MSP. Just to keep things extra interesting, TruMethods is also building myITprocess, a SaaS-based platform that helps MSPs to manage their businesses.
  • Whom did I miss? Check out Part II of this blog for more company names.

Others to Watch

Meanwhile, a range of former MSP executives are now dabbling in the software market or making serious moves. They include:

  • Former HEIT CEO Dan Holt has moved on to launch BillHero, an app that eliminates the hassle of paying shared bills. It’s designed for apartment rental roommates and other people who have intertwined financial responsibilities.
  • After building and selling Invision to mindSHIFT, Tyler Roye is now CEO of eGifter — a social and mobile gift giving platform.
  • After building and selling Navisite to Time Warner Cable, former CEO Brooks Borcherding is now chief revenue officer at Datto, the fast-growing business continuity company that serves MSPs.
  • Former Thrive Networks CEO Jim Lippie now is building Clarity Intelligence Platform, a BI system that MSPs can leverage while working with SMB customers. I believe Lippie also owns a stake in independenceIT, which offers a range of cloud services to MSPs.

Which company and executives did we miss? Give us a shout and let us know.

And a note of caution: While most of the spin-offs above are quite successful, launching a software business isn’t for the faint of heart. As TruMethods CEO Gary Pica has often told me, many aspiring software companies have discovered that it takes twice as long and twice as much budget as expected to get a product out the door. Fortunately, TruMethods hasn’t suffered such setbacks.

Hey Wait… You Forgot…

A range of readers have been sending in additional examples of MSPs launching software companies. We’ll be back on Tuesday, February 2, with additional examples. Feel free to post comments or email examples to Joe@AfterNines.com.

Update: We posted Part II of this blog with more company names as promised on Tuesday, February 2, 2016.

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