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Datto CEO Austin McChord: Autotask, Networking Acquisitions Performing Well

Datto's recent merger with Autotask and buyout of Open Mesh Networks are performing well, according to CEO Austin McChord. In fact, the MSP-centric technology company's financial performance is ahead of plan so far this year, McChord tells ChannelE2E.

Datto Founder Austin McChord
Datto CEO Austin McChord

Those comments and more surfaced during an interview this week at IT Glue's GlueCon 2018 conference in Phoenix, Arizona. Moreover, McChord's views about the MSP market differ quite a bit from rival CEOs who lead ConnectWise, Continuum and Kaseya, based on comments that surfaced during a so-called "Titans" panel at the IT Glue conference.

Among the biggest points of contention: Continuum CEO Michael George predicts massive MSP market consolidation through M&A, with well-funded MSPs dominating the largest 100 or so U.S. metro areas over the next two to three years or so. George also sees vertical market MSPs grabbing serious market share in those regions -- essentially, 20 percent of MSPs will control 80 percent of the U.S. managed services revenues, he predicts.

In contrast, McChord believes the rising tied of managed services has the potential to lift all boats -- if vendors and their partners continue to innovate. "There is room for every different size MSP in the market," he asserts. "It will be like CPA market, where there are certified public accountant firms of all sizes." The comment, McChord admits, aligns with what ConnectWise CEO Arnie Bellini said during the Titan's panel. (We'll share more points soon from each of the Titan panel participants.)

Datto Acquisitions & Business Strategy: 10 Key Points

Private equity firm Vista Equity Partners acquired Datto and tucked Autotask into the company in December 2017. The Autotask deal blended PSA (professional services automation) and RMM (remote monitoring and management) software tools with Datto's data protection, BDR (backup and disaster recovery) and networking businesses. The networking effort includes a home-grown appliance along with the Open Mesh networking acquisition from January 2017.

Fast forward to present-day, and McChord is pleased with Datto's progress -- but he concedes there's more room for improvement. Among the sound bites from our conversation this week, including paraphrases and quotes:

1. The Autotask acquisition is performing well. "We promised to increase the velocity of PSA enhancements and we've done it. We promised to invest in engineering. We have. Autotask Support has never been better but we still have work to do."

2. On partnering: "We laid out an open ecosystem vision, and we've delivered on that."

3. On consistent leadership: No seats in Datto's C-suite have changed this year, he notes.

4. On private equity ownership: "Their approach is pretty light touch since we're relatively mature in how we operate. They would be very involved if we were having issues running the business well."

5. On long-term ownership models: "The next logical move in our trajectory is IPO," he says. Of Datto's major head-on rivals, he expects SolarWinds MSP's parent to IPO first, potentially followed by Kaseya.

6. On the PSA and RMM opportunities: ChannelE2E assumed Autotask's RMM is a more difficult selling process and motion than Datto's core BDR offerings, since BDR is likely a far larger revenue producer than RMM. But McChord pointed out a flaw in my ease-of-sale reasoning. He notes:

  • MSPs can install two or more RMM tools on a single computer for live use or testing. MSPs that want to jump from one RMM platform to another can actually use an existing RMM tool to deploy an alternative RMM tool. So the RMM sales opportunity is strong, but you need a quality product to ensure high retention/low churn with MSPs.
  • In the case of BDR, it's a bit tricker to install two or more backup approaches on a single computer. Plus, you really have to inform a customer of a BDR platform swap-out, which invites a platform debate with the customer, McChord notes. In contrast, there's no end-user involvement with an RMM platform migration.

7. On Datto's networking business: "It's growing at an incredible clip. It will be greater than 5 percent of our revenue this year. And that's significant." Longer term, he says, networking "could be as big as story as our BDR business. We do hear about how we can improve our networking products but we're are chipping away at it." (We'll share more analysis on this soon.)

8. On philanthropy -- and his $50 million donation to RITThe school of computer science will leverage the money for a major cybersecurity push. RIT will also add a "maker space," where students learn to build and create things -- essentially giving students the power to piece together their own computers and more. The maker space will help students realize that they really can change the world around them, McChord asserts.

9. On the security sector and potential acquisitions: Yes, Datto is researching the market for potential deals. But security means so many different things to so many customers and partners. It's like cloud was a few years ago, he a few years ago. Plus, security company valuations are very high. Datto is willing to open its wallet for a potential deal, but the strategic opportunity and MSP partner business synergies have got to be clear.

10. On his top priority for Datto and partners: "We want to deliver more for MSPs, faster."

We'll share more thoughts soon from additional CEOs who attended GlueCon.

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.