Kaseya Acquires Datto: 5 Questions MSPs Need Answered
Kaseya’s buyout of Datto, funding by multiple private equity investors, will create an $8 billion (valuation) plus technology company that provides IT automation, business management, data protection and cybersecurity capabilities to MSPs across the SMB (small and midsize business) sector.
Still, the Kaseya-Datto M&A deal also raises numerous questions. Among the MSP reader questions that hit my email inbox today:
1. How Will Kaseya Retain Datto Employees — And Which Ones?: Kaseya and Datto are both extremely successful in the MSP technology market. But their cultures are different. Datto had some employee churn ahead of the M&A deal. It’s a safe bet headhunters and executive recruiters are now dialing up Datto’s best talent to pitch positions elsewhere. The big question: Will Kaseya and lead private equity firm Insight Partners piece together some sort of employee retention plan for key Datto talent?
2. How Will Kaseya and Datto Coordinate Overlapping Product Roadmaps?: Near term, it’s a safe bet that Kaseya and Datto will continue to build and sell their respective RMM (remote monitoring and management), PSA (professional services automation), data protection and cybersecurity products.
The upshot: Kaseya has a massive RMM installed base, but Datto is no slouch in that market. On the flip side, Datto is far stronger than Kaseya on the PSA and data protection fronts — based purely on MSP-SMB installed base, ChannelE2E believes.
The question worth asking: Will Datto and Kaseya will set up a “clean room” team before the M&A deal closes in order to begin coordinating product roadmaps? Either way, I don’t expect revenue-producing products from either side of the deal to get phased out near-term. But that’s just my gut feeling based on the mutual Kaseya-Datto need to retain MSPs through the M&A deal, and then cross-sell/upsell post deal.
3. Can Kaseya Harness The Power of Datto’s MSP Community?: Kaseya has extended somewhat from software toward community. Key deals include acquiring TruMethods — an MSP coaching community led by Gary Pica — in 2021. Kaseya also has a growing relationship with the Robin Robins organization. And the Kaseya Connect IT Conference is popular with the company’s MSP and IT professional user base.
Still, DattoCon and ConnectWise IT Nation are widely considered the top MSP events and associated MSP communities. Kaseya will need to work extremely hard to keep the Datto community intact and loyal through the end of 2022, especially since some MSPs have mixed views of Kaseya’s software code and product support.
4. Can Kaseya Harness Datto’s Security Team?: Yes, Kaseya has been making more investments in security since the REvil Ransomware group attacked Kaseya’s VSA software in July 2021. Key moves include hiring Jason Manar as CISO. Still, it’s difficult to pinpoint exactly if or how Kaseya has overhauled its software development practices since the REvil attack.
In stark contrast, Datto CISO Ryan Weeks leads dozens of employees who oversee the company’s overall risk posture. I’m not saying that Datto is bullet-proof or inherently more secure than Kaseya. But market perception suggests that Datto generally has more security pros focused on the company’s own security. Can Kaseya harness the power of those Datto pros? We’ll be watching.
5. How Will Kaseya and Datto Counter Rivals?: When ConnectWise and Continuum merged in October 2019, Kaseya CEO Fred Voccola predicted the deal would cause roughly two years of business distractions for those companies. In some ways, Voccola was correct and he jumped on the opportunity — positioning Kaseya to offer competitive pricing promotions against those rivals.
Fast forward to present day and the competitive set has evolved. Both ConnectWise and N-able remain well-financed and are growing — though they’re both smaller than the anticipated Kaseya-Datto combo.
Still, the modern day MSP software market is more than a three-horse race (ConnectWise, N-able, Kaseya-Datto). For instance, MSPs should also closely watch NinjaOne. Indeed, NinjaOne could be one of the biggest winners in the Kaseya-Datto deal, ChannelE2E believes. Why? Because NinjaOne’s software is all home-grown, and the venture capital-backed business has extended from RMM to ticketing software to cloud backup and disaster recovery (BDR) and more.
Instead of digesting large acquisitions and managing multiple code bases, NinjaOne appears focused on two core priorities: Organic R&D, and channel support that extends from MSPs to VARs. Indeed, NinjaOne’s software is now surfacing in mid-market end-custom accounts — but those engagements largely involve VARs and not a direct sales motion.
Still, Kaseya and Datto have plenty of upside market opportunity together — though some MSPs are uneasy about the deal because of all the people, product and process question marks. And som questions about the deal will remain unanswered until Kaseya finalizes the Datto acquisition sometime in the second half of 2022.
Nevertheless, scale matters in the software market. The Kaseya-Datto deal certainly has plenty of that.