Unconventional MSP Buyers Emerge
When it comes to managed services provider (MSP) mergers and acquisitions, most deals often involve IT service providers, VARs or MSPs hooking up with one another. Sometimes, larger players like Konica Minolta (owner of All Covered) slip into the picture. But another type of buyer is now probing the market as well.
Indeed, online marketing and digital advertising agencies are now taking a close look at MSPs as potential acquisition targets. It’s somewhat similar to the Web Integrator wave from the late 1990s, when digital agencies like Razorfish blended digital strategy, marketing and Web development services.
Digital Marketing Agencies And MSPs
Fast forward to the present and the trend may be repeating itself. One recent example involves The Karcher Group (TKG) of North Canton, Ohio, buying Ossa Technology Solutions LLC of Hartville, Ohio.
TKG, founded in 1997, has grown into a full-service digital agency, providing online marketing, Web development and data services, the company indicates. Ossa Technology, launched in 2006, is an MSP. Financial terms and specific headcount information was not disclosed. ChannelE2E has reached out to TKG for additional comment.
TKG’s Karcher
No doubt, the line between digital marketing and managed services has blurred. A few other examples: Directive, an MSP in Oneonta, N.Y., offers website design services. And its sister business, Joomconnect, offers marketing services to MSPs. Somewhat similarly, Ulistic — which promotes MSP marketing services — is owned by Stuart Crawford, himself a former MSP.
More Deals Likely Coming
Still, the TKG-Ossa deal is slightly different. That business combination focuses all of its digital marketing and MSP services on end-customers rather than peer MSPs. And I suspect additional digital marketers and MSPs will do the M&A dance in the months ahead.
Related Coverage
> Why Some Top MSPs Aren’t Hooked On M&A>
> IT Service Provider M&A Guidance
> Selling Your MSP or VAR Business? No Room for Emotions
JP…this makes total sense. MSP are great targets because they control the technology side of almost all their clients but the one piece missing has been the business acumen side. Digital marketing firms, business consulting firms and accounting firms should take runs at MSPs for acquisition to round out their offerings. Just makes sense it my books.
Stuart Crawford
ULISTIC
MSP Marketing Consultant
Agreed. Like every other M&A deal, it all comes down to execution. But overall, any services that a small business outsources (payroll, marketing, HR, etc.) makes for a ripe M&A opportunity…
-jp
It is an interesting model that we have looked at several times – the question always comes down to what do you do well or not so well. Working the SP/MSP for so many years was a tough business. As a coach and digital marketeer, I find it refreshing to focus on one side of the business as an outsourced arm for so many MSP’s. The ability to focus with no daily distraction on products or daily issues an MSP has to focus to maintain others IT – Why dive in to a diluted marketplace?
A digital marketer should think twice about becoming a technology support company – companies like directive drove from their MSP space to digital marketing out of need for their own business – it made sense for them and have achieved great success. Look at the struggles the large format printing companies have had driving to the MSP space – they have failed at the M&A Model (Best Buy and others) with their acquisitions because they don’t understand the market – why would digital marketeers understand the operational side of an MSP?
Instead, our firm has decided to expand into software development to help optimize the MSP toolsets similar to others. Our connectmyPSA line will help users across all the popular PSA packages and connect them to all the digital tools for email or web driving better execution. Think, Plan, Implement and Optimize are the 4 cornerstones of our business model which drives MSP behavior for execution.
I personally think that is where the true value is for digital marketing firms – expand their offerings to stay ahead and help the small to midsize MSP without conflicts.
Pete: Thanks for sharing your views and background on connectmyPSA. Please keep me posted on product and service milestones, new initiatives, etc.
-jp
Joe,
The MSP/Marketing Services dynamic works for us because we are in the vertical of providing PSA integrations, MSP Websites and a full suite of Marketing Agency Services for MSPs and vendors including fulfillment and a VMM (Virtual Marketing Manager).
The MSP side of our business is critical to R&D which leads to a deeper understanding of what will help our MSP and Vendor clients succeed. It gives a unique perspective on all aspects of the IT industry. If it wasn’t for that, I’m not sure if I’d want to focus on two different businesses. I have so much I want to do on the Marketing Agency side that it would be distracting. But it’s not for us, I’m fortunate to have good people in place to manage the aspects that distract me.
I know the marriage works, we have been doing IT, websites, programming and marketing locally for more than 20 years. The IT side of the business was started in 1993. We added website and marketing services started in 1996. In general, once we start doing their IT or website, we get the other side of the business, too. It works out economically, as well. When the economy is up, businesses spend money on IT and infrastructure and when it’s down they spend on sales and marketing.
Our MSP Clients currently resell websites through us. They are able to get stickier with clients, control the billing and generate a new revenue stream. While we have already been doing this for years, in 2016, we will be launching a formalized white label service for them, with everything they need to market, sell, and add it onto their service stack.
Most of our creative agency services, such as branding, commercials, company videos, content, marketing campaigns, blogging, printing etc., will remain focused on our MSP and Vendor vertical.
-Chris Chase
Chris: Thank you for always sharing the deeper details that ChannelE2E’s readers really value. As do I. When the time is right for you, I’d love to hear more about the white label service you’re preparing. In the meantime, thanks again.
-jp