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AVG Confirms Layoffs, SMB Restructuring, MSP Challenges

John Little

John Little

AVG Technologies has cut 35 employees from its SMB business, outsourced a portion of its help desk and restructured management of the division, CFO John Little confirmed in an AVG 3Q 2015 earnings call with analysts. CEO Gary Kovacs also shed more light on the situation, which involves the company’s reseller, cloud and MSP strategy.

Updated Nov. 9, 11:30 p.m. ET: AVG Technologies and SMB Leader Mike Foreman part ways, sources tell ChannelE2E.

ChannelE2E first heard the AVG layoff rumors early on Nov. 4. AVG’s SMB business includes CloudCare and Managed Workplace, plus two mobile products for location and control, and Privax for VPN privacy. ChannelE2E believes AVG’s core SMB challenge involves Managed Workplace, a managed services provider (MSP) platform acquired as part of the Level Platforms buyout in 2013.

AVG SMB, MSP & Cloud Challenges

Gary Kovacs

Gary Kovacs

During AVG’s Q3 2015 earnings call yesterday, neither CEO Gary Kovacs nor CFO John Little pointed directly at the alleged Managed Workplace challenges. But read between the lines and it sounds like the company is still trying to figure out a channel growth strategy for the platform.

The company blames customer commitments to on-premises software and a slower than anticipated shift to newer cloud-based products. But that sounds a bit far fetched, considering how quickly MSPs are adopting cloud-based services from AVG’s larger rivals in the MSP space. One key anecdote: Continuum Managed Services — a pure cloud platform for MSPs — is growing nearly 40 percent annually, and likely generates 4X to 8X the revenues of AVG’s Managed Workplace, ChannelE2E estimates based on key sources in the channel.

Still, AVG is working to put its challenges in context. Kovacs made this revealing statement during the earnings call:

“As we discussed in the last earnings call, our expectation of the uptake of our cloud-based services was not where we wanted it to be as a result of our existing customers’ commitment to our traditional on-premise product.

To fix this, we have taken specific actions to improve our go-to market strategy, including a significant restructuring and streamlining of the business and further simplification of our products to make it even easier for our resellers to go out with our products to serve their end customers’ needs. This restructuring and leadership changes, we believe, will put us in the right position to capitalize on a large and growing opportunity.

We believe strongly in this market and we’ll continue to invest as we have been in anticipation of accelerated growth in the future. To do this, we have also continued to deliver best-in-class products. And during the quarter, we launched AVG Business Managed Workplace Version 9.2. This latest version contains multiple enhancements and is a fully-integrated remote management and monitoring platform that is winning quite a lot of critical acclaim. It is developed based on an award-winning technology and should augment our improved go-to market strategy to really enhance our cloud offering.”

AVG SMB and MSP Missteps

AVG acquired the Level Platforms Managed Workplace platform in 2013. If you were watching closely, it was clear that the SMB challenges along with some missteps surfaced immediately.

Chief among them: At the time of the 2013 buyout, numerous Level Platforms employees were in limbo — unsure for several days (or longer) if AVG would make them job offers, sources say. Rule number one of a successful buyout: Have offer letters with retention bonuses and incentives ready for key staff members even before the deal is announced.

Further complicating matters, AVG acquired Level Platforms amid major MSP software industry consolidation. Although the market continues to grow, M&A and private equity activity created a range of stronger competition across the MSP software landscape.

AVG essentially acquired Level Platforms for a nominal price, sources add, because the acquisition target had to pay debt that was coming due.

Amid all that uncertainty, rivals swooped in and hired away some of Level Platforms’ key channel talent. Other employees left on their own accord or weren’t offered positions. Key channel- and MSP-savvy departures in 2013 included Rob Rae, now VP of Business Development at Datto; Dave Sobel, now senior director of partner community at LogicNow; and Dan Wensley, now channel chief at Passportal.

Still, AVG has taken steps in more recent years to solidify the Managed Workplace business — including key investments in cloud technology, along with two key hires from N-able Technologies. Clarification:  I think AVG’s MSP-focused employees understand the market. I think AVG Corporate does not.

Remember WordPerfect and Quattro Pro?

Despite those steps, AVG’s SMB business isn’t growing as quickly as expected. The company’s SMB revenue was $16.6 million in Q3 2015, up 13 percent from $14.7 million in Q3 2014. But the growth mainly involve AVG’s Norman acquisition, the company said during the earnings call.

In some ways, AVG’s modern day effort to build synergies between CloudCare and Managed Workplace looks a bit like Novell’s early-1990s effort to build bridges between WordPerfect and Quattro Pro — just as the overall industry was consolidating around more comprehensive suites with bigger installed bases.

Now, AVG’s SMB business is experiencing layoffs and leadership changes. Who’s in charge of fixing the SMB business, and who are the lieutenants? ChannelE2E is still checking for answers.

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2 Comments

Comments

    craig kensek:

    Their market cap is back to around $1B. Ouch. Poorly executed strategies. Their growth by acquisition has resulted in being able to say, “we now have close to xx customers” (with some double counting when a customer has more than one service, most likely). They’ve been trying to break into the SMB market for more years than they’re willing to admit, including investigating a free limited seat version. They need to improve on their below avg tactics and strategies. The window to be a major play is shrinking.

      Joe Panettieri:

      Hey Craig: Thanks for your readership. I think new windows of opportunity always open in the IT space. AVG simply needs to decide what financial model it wants to pursue. Low-cost consumer software that people can turn on in an instant? That’s a far different model than the MSP software market, where long lead times and heavy partner handholding are required.

      And to clarify: I think AVG’s MSP-focused employees understand the market. I think AVG Corporate and overall channel management do not.
      -jp

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