The Smartest $4.4 Million Datto Ever Spent?

Datto CEO Tim Weller

Tim Weller, CEO, Datto

Call it a small bet on a big MSP software market opportunity. The effort involves Datto Commerce, a new cloud-based sales platform for MSPs that supports sales quoting, procurement and e-commerce capabilities. It also connects to third-party distributors such as Ingram Micro and Synnex.

Datto Commerce is one piece of a larger MSP technology puzzle that CEO Tim Weller is assembling. The other pieces include  the Azure Cloud Continuity beta test, and a growing focus on cyber resilience. The moves will extend Datto beyond backup and disaster recovery (BDR); cloud-managed networking hardware; RMM (remote monitoring and management); and PSA (professional services automation) software.

Datto Commerce: A Shopify Platform for MSPs?

No doubt, cybersecurity currently dominates the MSP industry headlines. The term surfaced 44 times on Datto’s March 11, 2021 earnings call. And yes, Datto is betting heavily on security.

But on Wall Street, e-commerce platforms such as Shopify are also generating massive valuations. And I think Datto wants to bring that business model to MSPs.

Shopify is an e-commerce platform that hosts online storefronts for more than 820,000 businesses. The platform is super-hot. Shopify’s Q4 2020 revenue was $977.7 million, up 94% from q4 of 2019. Startups that further improve the Shopify online experience include xGen. (Disclosure: I’m an angel investor in xGen.)

Now, apply the Shopify platform model to MSPs: What if MSPs could more easily set up their own e-commerce systems — essentially, self-service digital storefronts for end-customers?

That’s where Datto Commerce potentially enters the picture. The technology is based on Datto’s purchase of Gluh in July 2020. Financial details from the deal were not disclosed… until now. Indeed, Datto spent a mere $4.4 million to purchase Gluh, according to a recent SEC filing that ChannelE2E dug through.

Datto is based in Connecticut. Amid SaaS startup bidding wars in Silicon Valley and technology SPAC battles on Wall Street, Datto somehow discovered Gluh’s early beginnings… in Australia.

Buying Gluh was a low-cost bet that could potentially automate and speed sales pipelines from Datto and distributors through MSPs to end-customers. Along the way, Datto may end up competing in some ways against Pax8, ConnectWise Marketplace,  ConnectWise Sell (formerly Quosal), and Quotewerks.

Datto Commerce: What’s the Revenue Model for MSP Storefronts?

Among the big wildcards: What type of financial model will Datto offer to MSPs that leverage Datto Commerce to deploy online storefronts? ChannelE2E doesn’t know the answer to that financial riddle just yet.

Admittedly, there’s no guarantee Datto Commerce will succeed. But at $4.4 million, it’s a low-cost bet (at least in the world of software) that could pay big dividends to Datto and MSP partners.

Return Home



    Dave Sobel:

    So, I’ll totally bite here Joe.

    I’m very “pro” e-Commerce for MSPs. I recently did a pair of pieces (starting here: highlighting the very big gap between most other industries and the delivery of IT services when it comes to e-Commerce. With the significant shift in buying habits in the past 12 months to e-Commerce, and the expectation of digital sales continuing to accelerate, it’s time not to be moving.

    You’re right, this could (and emphasis on could) be a solution to that need for providers. I’d argue that those providers need to be in flight now rather than waiting on this to be a significant thing, and more importantly, the tools to do so are well established… including things like Shopify as you outline.

    If the key value of a provider is their ability to simplify down to a solution for a customer, then less is more when it comes to a providers online “shop”. A highly focused, highly curated collection of products will be why you purchase from a speciality retailer like a service provider. It’s not about having “all the products” from Ingram or Synnex, it’s about the curation.

    Far too many of these tools focus on the “back end” rather than delivering a good end-customer experience. You can see it in the features list.. an emphasis on quoting, feeds, procurement, and integrations, rather than leading with eCommerce.

    There’s real potential here for sure — I fear for the over emphasis on the backend rather than the focus on the end customer. Those providers who want to be in the lead here shouldn’t be waiting for a product bet to pay off when the tools to be delivering ecommerce now are available and mature. If vendors want to capitalize on that, they had better be moving more aggressively than small bets.

    Dave Sobel
    Host, The Business of Tech Podcast.

    Joe Panettieri:

    Hey Dave: Thanks for your note and readership. As I understand it, MSPs will be able to “curate” the products they want to feature on their site, or a preferred “stack” to keep customers standardized. That said, I think we’re on the same page by underlining, capitalizing and emphasizing the world “could” — as in this “could” be a solution that fills a gap. No guarantees. But definitely something ChannelE2E will watch closely.

    My best,

    Karl Palachuk:

    I guess I’ll bite as well. This might be successful for a few very large MSPs. But the program is perhaps too full-featured.

    If you want to compete head to head with CDW, Best Buy, and Walmart, this looks like your tool. But with a thousand such stores, you will never stand out.

    I think the real ecommerce opportunity is in starting a conversation with clients and prospects. There is absolutely some “low fruit” in self-serve sales to existing clients. But the bigger opportunity is to showcase the variety of offerings you have and lure in clients who are interested in more than a commercial transaction.

    My assumption is that IT Service Providers will be more successful adding a few ecommerce elements to their current business model rather than changing their business model to become ecommerce-centric.

    Joe Panettieri:

    Hey Karl: Great to hear from you.

    I agree: Not all MSPs will want to jump into e-commerce. But I don’t think the MSP decision tree on e-commerce involves competing against CDW, Best Buy or Walmart. More importantly for MSPs, it’s about standardizing and promoting your tech stack, easing customer refreshes, and being the total solutions provider to an end customer without “leaking” revenue or customer engagements to other vendors. An online store with a few curated items (chosen and promoted by the MSP) potentially fills those needs.

    Also, Datto Commerce isn’t just about the e-commerce capability. Although I emphasized the e-commerce angle in the story, the platform clearly seeks to compete in sales quoting & proposal market.

    All that said, I haven’t personally tried Datto Commerce and I’m not in a position to say whether the platform actually fulfills its promise.

    Thanks again for the note.

Leave a Reply

Your email address will not be published.