Channel technologies, Mergers and Acquisitions, Mergers and Acquisitions, MSP, VAR

Why Microsoft Dynamics Partners Keep Getting Acquired


When IBM acquired Optevia today, it marked the latest buyout of a systems integrator focused on Microsoft Dynamics CRM. What's driving the trend?

The simple answer is in the financials. Check around and you'll see some of the most profitable professional services companies focus on Microsoft Dynamics. Examples include ConsultCRM (an Optevia rival on some fronts) and StoneRidge Software.

Think of it this way: The top 25 percent of IT service providers generate EBITDA margins of about 18.3 percent, according to Service Leadership Inc. CEO Paul Dippell (check out ChannelE2E Podcast Episode 063).

Those are frothy profit margins. But margins can be even stronger among top-tier professional services firms focused on SaaS applications -- somewhere in the 20 percent range, if you read between the lines and track data from Service Performance Insight.

Cloud Services Inspires Dynamics CRM M&A

Now here's where things get extra interesting. Dynamics CRM and Dynamics ERP started out as on-premises installs -- which often required multiple months to customize, activate and troubleshoot. More recently, those deployments have increasingly shifted to Microsoft's cloud.

The cloud shift has triggered a new wave of Dynamics CRM partner revenue opportunities. That reality has triggered an M&A frenzy in the channel. Examples include:

  • RSM US — which provides midmarket audit, tax and consulting services — acquired Junction Solutions, a national technology consulting firm focused on Microsoft Dynamics AX. That deal surfaced in November 2015.
  • HCL Technologies acquired PowerObjects in October for $46 million. PowerObjects had trailing 12-month revenues of approximately $37 million as of September 30, 2015. Over 250 PowerObjects employees joined HCL. PowerObjects is a professional services firm completely focused on providing service, support, education and add-ons for Microsoft Dynamics CRM. The company has won Microsoft’s ‘Partner of the Year’ award three of the last four years.
  • Sonata Software acquired IBIS Inc. for a reported $14 million or so. That deal allowed India-based Sonata to expand its U.S. footprint. IBIS is a two-time winner of Microsoft Dynamics Outstanding Partner of the United States Award, and a Worldwide Finalist for the Microsoft Dynamics AX Partner of the Year.

IBM Buys Optevia for Dynamics CRM, SaaS and More

Now IBM is stepping up to the table and joining the feeding frenzy. The company today purchased Optevia, a privately owned Software as a service (SaaS) systems integrator specializing in Microsoft Dynamics CRM solutions for public sector organizations. Financial details were not disclosed.

Optevia will join IBM Global Business Services and help meet the increasing client demand for CRM SaaS solutions within the public sector, IBM said. Optevia’s main focus areas include UK Emergency Services, Central Government, Local Government, Health Authorities and Housing and Social Enterprises, IBM added.

The Optevia buyout comes even as IBM cuts staff across many business units -- including the Global Business Services organization. The key takeaway: Dynamics CRM talent in the IT channel must be fetching a premium at the moment.

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.