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Datto CEO’s Views on Axcient-eFolder Merger

Datto Founder Austin McChord
Datto CEO Austin McChord

When Axcient and eFolder announced their merger yesterday, one of the unspoken goals was to compete more aggressively vs. Datto in the overall SMB data protection market while extending into the midmarket. And that invites an interesting question: What are Datto CEO Austin McChord's views about the M&A deal? ChannelE2E reached out to McChord for some perspectives, and McChord promptly replied.

First, some background: Axcient, launched in 2006, certainly has a big installed base of data protection services. But early company strategies (full-blown, cloud based disaster recovery; an MSP-centric go-to-market for SMB customers) never quite fired on all cylinders. A shift toward midmarket cloud services in early 2016 delivered good technology and some growth. But the growth rate wasn't strong enough for Axcient's venture capital investors, sources tell ChannelE2E. As a result, Axcient started seeking a potential buyer for the company several months ago, sources add.

The search for a buyer led to K1 Capital, which owns a stake in eFolder -- a successful provider of data protection and file sharing services designed for MSPs and their SMB customers. Together, Axcient and eFolder say their merger delivers multiple benefits.

Datto CEO Austin McChord's Perspective

With that background in mind, ChannelE2E approached Datto for the company's views on the deal. Here's a summary of my exchange with CEO Austin McChord.

ChannelE2E: Was Datto approached about buying Axcient?

McChord: We did not consider acquiring Axcient. Our acquisition strategy is focused on additive technologies to complement our current offerings.

ChannelE2E: What’s your overall reaction to the deal?

McChord: It's an intriguing move for both eFolder and Axcient and surprising in many regards. eFolder’s strategy has been to acquire additive technologies, but this move creates overlapping platforms and potentially severe integration challenges. It will be interesting to see how they address the conflicting channel models, disparate pricing models and particularly their plans to converge their different technology platforms. It’s unclear to us how this merger will ultimately benefit their partners or their clients.

(ChannelE2E Side note: eFolder CEO Matt Nachtrab in this interview addressed some of the issues McChord raises.)

ChannelE2E: Generally speaking, eFolder is active in the SMB channel, while Axcient has a direct sales model in the mid-market, along with some big MSP partners. Do you have any concerns about facing a rival with a blended business model that can directly support customers, when needed?

McChord: No. Datto’s 100% commitment to the MSP channel is a differentiator for us, our partners and their customers. MSPs are already the preferred channel for providing IT services for Small and Midsized businesses, and MSPs are rapidly evolving to also effectively serve the needs of larger enterprises. Datto continues to focus on enabling our partners’ success with a broad suite of managed services built exclusively for the needs of MSPs.

ChannelE2E: eFolder and Axcient made some lofty claims about their combined business -- more than 50,000 customers, 400,000 endpoints under management, and nearly 4,000 MSPs. How does Datto measure up?

McChord: Our market leading solutions are delivered by over 6,000 MSPs to more than 140,000 businesses around the world.

ChannelE2E: The Axcient-eFolder merger creates a company that has it own clouds plus the ability for partners to leverage public clouds. Datto depends on its own cloud rather than public clouds. Are there pros and cons to the approaches that ChannelE2E should keep in mind?

McChord: The Datto Cloud continues to be one of our strengths and a compelling competitive differentiator. Our custom built hyper-converged infrastructure, innovative storage architecture and patented IP enables us to store data much more efficiently than any of our competitors. Companies that rely on the public cloud for their back-end storage are exposed to the potential high costs that accumulate over time. By controlling this essential part of the value chain, Datto can deliver cost-effective solutions and bring to market innovative offers such as our Infinite Cloud Retention and the new high-performance Datto SaaS Protection platform which outpaces the leading competitors by leaps and bounds.

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.