IT Glue GlueCon: 10 Trends, Developments MSPs Should Track
Here’s page two of two previewing GlueCon 2018.
6. Emerging MSP Platforms: RMM Disrupters?
Within the RMM (remote monitoring and management) software sector for MSPs, the best-known providers likely are ConnectWise Automate, Datto RMM (formerly Autotask Endpoint Management), Continuum RMM, Kaseya VSA, and SolarWinds MSP’s RMM and N-Central.
7. MSP Market Saturation?
“It’s getting a little bit too crowded in MSP Town, isn’t it? If I remember correctly from when I first launched TruMethods, there were about 10,000-15,000 MSPs in all of North America. Now, from what I’ve been told, there are 35,000-40,000 MSPs across the entire continent. It’s time to adjust strategy, and this isn’t only because of increasing competition. There’s something a lot bigger going on — a new adventure is awaiting us.”
Generally speaking, Gary and I often see eye to eye — though he’s a practitioner and market observer, and I’m just a market observer. No doubt, the MSP market is now crowded. In response, Gary is pitching the technology success partner (TSP) as your answer to overcome market saturation.
I agree, MSPs need to evolve. But I don’t see the “MSP” moniker getting left behind. Instead, I think modern MSPs will simply evolve their managed services portfolios — moving toward whitespace assessments, as CA Technologies‘ Ken Vanderweel often puts it.
Frankly, I’m shocked that so few SMB partners have effectively monetized and profited from Microsoft Azure, Google Cloud Platform and Amazon Web Services. Plus, I can’t believe the majority of MSPs don’t offer application performance monitoring and management (APM). And the list goes on.
I will pursue some updated thoughts from Pica on market saturation, and perhaps share more of my own…
8. Is Private Equity Good for This Market?
Private equity firms have been buying up regional and/or platform MSPs. PE firms have also snapped up several major MSP software suppliers.
But is PE ownership actually healthy for the long-term success of this industry — and the MSPs within it? I see numerous pros and cons. Ultimately, the upside or downside comes down to each individual PE firm, as well as the executive leadership within each portfolio company.
- An example of positive private equity ownership: Without private equity dollars and savyy executive leadership, Continuum’s technology could have died. Previous owners had vision but the company lacked standardized R&D processes and also faced several other challenges. PE investors acquired the Continuum portion of the business and installed new leadership in 2011. The results? Solid, consistent growth — and improved offerings for partners.
- An example of negative-turned-positive PE ownership: We’ve also seen some PE missteps, such as the first year of Kaseya’s ownership under a PE firm in 2013. Too many acquisitions, inconsistent MSP market focus blended with a heavy corporate IT push, and numerous executive changes nearly crippled Kaseya by late 2014. A stabilizing CEO change arrived in 2015, the company regained its MSP focus, and the business regained momentum by late 2016 or early 2017 or so.
- Promising Start: A PE firm acquired Datto and tucked in Autotask in late 2017. So far, the deal looks very promising. Yes, there has been some executive turnover on the former Autotask side of the house. But Datto’s leadership is consistent in its messaging and focus. All MSPs. All the time.
- The Big Wildcard: Every PE-owned firm essentially has a five to seven year exit window. PE ownership is temporary. That means MSPs should carefully study a PE firm’s track record for clues about what’s coming next. Does the PE firm typically invest in R&D and more add-on buyouts, or does the owner strip down the company — reducing costs to improve profit margins?
No doubt, the PE stakes are getting higher. Everyone is pursuing more M&A. Plus, SolarWinds MSP’s parent is pursing an IPO. We’ll be seeking updates here at GlueCon and the neighboring SolarWinds MSP conference.
9. Remaining Switzerland
IT Glue has a reputation for integrating with a range of third-party tools across the MSP software ecosystem. Rumors about a company sale pop up from time to time. But I don’t expect any IT Glue-related M&A moves here. Instead, it’s safe to expect IT Glue to focus on strategic partnerships with technology companies here.
10. Next Acquisitions: MSPs and Their Technology Vendors
No doubt, many MSPs will use GlueCon to explore and perhaps even negotiate potential M&A deals with one another. The same can be said for the major industry vendors.
The challenge? Lofty valuations — particularly in the security sector. MSSPs can be purchased at somewhat reasonable prices, but some security startups with true IP (intellectual property) appear to have inflated egos, and inflated asking prices…
Still, some promising tuck-in deals have recently emerged — such as:
- Kaseya’s recent buyout of RapidFire Tools
- Continuum’s deal to buy CARVIR
- SolarWinds’s buyout of Trusted Metrics
It’s a safe bet ConnectWise, Continuum, Datto, Kaseya and SolarWinds are in the market for more buyouts — particularly in the security sector. But I’ll repeat: Valuations could be prohibitive.
Instead of opening their wallets to snap up more security tools, it might be wiser for vendors to remain on the M&A sidelines. Surely, a security sector shakeout is coming, and that means some discounted valuations will likely surface soon…
Stick around. ChannelE2E will update our GlueCon conference coverage multiple times in the next few days. Although our meeting calendar is now packed solid, please email me if you want to potentially grab a few minutes, say hello, or send along a news tip (Joe@AfterNine.com).