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Build IT Live 2022: IT By Design MSP Market News

Credit: Joe Panettieri
Kam Kaila, partner and president, IT By Design
Kam Kaila, partner and president, IT By Design
Sunny Kaila, CEO, IT By Design

Several hundred MSPs and channel partners are attending this week's Build IT Live 2022 conference, which overlooks Manhattan, New York. Big themes for the manage services provider event -- hosted by IT By Design -- will surely include:

  • Talent acquisition, development and management;
  • cybersecurity;
  • profit strategies; and
  • MSP M&A strategies, among other areas of discussion.

Check this blog each day for official news and hallway chatter. Here is the latest...

9. Security Partnership: The relationship involves VijiLAN. Expected outcomes are below.

8. NOC-RMM Partnership: N-able and IT By Design confirmed a NOC-RMM partnership. The planned benefits are below...

Credit: Joe Panettieri

7. Wednesday Meetings: Here's our schedule and potential conversation focus for today. Stay tuned for meeting recaps -- at least for the on-the-record portion of the conversations.

  • Sunny Kaila, CEO, IT By Design: The company is perhaps best known for its talent pool, NOC, SOC and help desk services, and pure focus on MSP partners. But at last year's event, CEO Sunny Kaila and President Kam Kaila described how the company was also developing software. One key example involves Team GPS, a cloud-based platform that helps MSPs to manage their employees; job performance and satisfaction; workforce culture; and overall business planning. We'll poke around for updates on that effort during this year's event.
  • Colin Knox, CEO, Gradient MSP: In the era of cloud services, Knox is helping MSPs to further automate billing. Still, that's only one part of a larger story emerging at Gradient...
  • Peter Kujawa, VP at Service Leadership Inc. -- a ConnectWise solution: How is the overall service provider market performing? Kujawa provided an updated during last week's ChannelE2E webcast. But how might MSPs manage their finances and budgets in the second half of 2022 -- especially amid Microsoft's bullish financial forecast from July 26? We'll ask Kujawa for some thoughts.
  • John Pagliuca, CEO, N-able: Pagliuca and I typically catch up quarterly for the Pinot With Pag podcast series. Much of the recent chatter has involved N-able's push beyond RMM (remote monitoring and management). Among the moves we're watching: Just how far will N-able take its ticketing software into the PSA (professional services automation) software market? Hmmm...
  • Arlin Sorensen, VP of ecosystem evangelism at ConnectWise: Sure, Arlin and I discuss market trends when we catch up. But much of the chatter also involves life-work balance, legacy planning and family updates.

6. MSP Valuations Revisited: We'll be meeting with several M&A insiders to discuss MSP valuations. The context: Within the IT channel, some pundits position MSPs as “recession-proof” because of their predictable monthly recurring revenues. Generally speaking, operationally mature MSPs are well-positioned to navigate a recession. The good news as of July 2022: MSP and MSSP valuations have held up well — despite plummeting SaaS company valuations on Wall Street. Why’s that?

  • Generally speaking, MSPs and MSSPs have always been valued based on their EBITDA (earnings before interest, taxes, depreciation and amortization). Sure, there are additional valuation metrics. But M&A in the MSP market has largely been a profit-based conversation for more than a decade.
  • Meanwhile, SaaS companies until recently were largely valued based on their annual recurring revenue (ARR) — and many SaaS investors ignored bottom-line profits.

Still, the overall managed IT services sector certainly is not recession proof. The evidence: Even in a healthy economy, roughly 25 percent of MSPs are break-even or losing money each quarter, according to Service Leadership Inc., a ConnectWise business. Certainly, those money-losing service providers could face cash-flow pressures if their customers cut per-user head counts or scale back recurring services.

On the flip side, some pundits argue that MSPs can benefit during a recession. The thesis: As mid-size and enterprise businesses scale back their own IT hiring, they’re more inclined to outsource IT services to MSPs and MSSPs. The thesis makes sense and may give some high-performance MSPs a lift. But we don’t think a recession would cause an overall tidal wave of IT outsourcing opportunities.

We'll gather and share the latest perspectives from the conference.

John Pagliuca, CEO, N-able

5. Cloud Revenue Opportunities... And...: N-able CEO John Pagliuca and Senior Director David Weeks will describe cloud revenue opportunities. This is a rather interesting session, considering Pagliuca rarely takes the stage at third-party events. Could N-able and IT By Design be exploring a deeper relationship? Hmmm...

Rob Rae, SVP, Datto

4. Kaseya-Datto Post-Deal: Datto Senior VP Rob Rae will be on hand to help MSPs define their cyber resilience strategies. Rae knows his way around a stage and an open microphone. We doubt that he'll touch on some of the recent Kaseya-Datto town hall controversy -- but you never know.

3. MSP M&A Negotiations: Several MSPs at the conference are set to quietly discuss M&A negotiations. We're in touch with two of the potential buyers and sellers. If preliminary deal terms are hammered out at the conference, we expect official announcements sometime in October 2022. But perhaps we'll be able to share some of the backroom chatter here at the event...

Kevin Blake, CEO, ICS
ConnectWise VP Arlin Sorensen

2. MSPs and Employee Equity: Amid all the MSP M&A activity, some employees are wondering how they can potentially profit from company exits. ICS CEO Kevin Blake and ConnectWise VP Arlin Sorensen will provide answers during a discussion about equity plans, stock options and profit sharing.

1. Meet ChannelE2E: Email Joe Panettieri if you'd like to potentially meet at the conference. In your email, please include a quick bullet list of what you'd like to potentially discuss at the event.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.