Kaseya, Unitrends Merger: MSP Software Rivals React
After Kaseya and Unitrends confirmed their merger this morning, some of their rivals reached out to ChannelE2E to share perspectives on the deal. Moreover, some MSPs began to compare the merger to the relatively recent Datto-Autotask merger, since both deals involved IT monitoring companies combining with backup companies.
So what do I think? And what do rivals think? I described the potential Kaseya-Unitrends merger upside this morning. But overall, I don’t see it as a head-on mirror image of the recent Datto-Autotask deal. Why? Because the DNA of each M&A deal is entirely different.
Among the differences…
1. Market Focus & Installed Base: They’re quite different in multiple areas.
- Datto-Autotask: Both Autotask and Datto essentially bet their entire businesses on MSPs and IT services providers. They both have big MSP installed bases. And their brands are both firmly established within MSP communities. It’s all MSP, all the time.
- Kaseya-Unitrends: Kaseya has a strong MSP installed base with some reach into the midmarket sector. But from time to time, MSPs have complained about those Kaseya midmarket sales — alleging that the effort competes with MSPs. I don’t necessarily see it that way. Kaseya is essentially selling direct to both MSPs and midmarkets. In my view, it’s up to MSPs to show the midmarket that MSPs can more effectively service end-users than any internal IT professionals.
- Unitrends, meanwhile, has a tiny installed base of MSPs, and only recently integrated its backup and disaster recovery platform with Kaseya’s RMM platform. The company has successfully targeted midmarket IT departments. But even there, competition is intense — with the likes of Veeam looming large. Going forward, Kaseya and Unitrends will cross sell into MSPs and midmarkets. Some MSPs won’t like that. Kaseya will need to work hard to ensure MSPs feel the love.
2. Ownership Path: Frankly, the history is quite different.
- Datto-Autotask: Vista Equity Partners acquired Autotask in June 2014. The software company grew nicely. But the twist came when Vista acquired Datto in November 2017, and then tucked Autotask into Datto. It was called a merger. But frankly, in my view, it was an acquisition — Datto essentially acquired Autotask, and Datto CEO Austin McChord was given clear control from day one. Autotask CEO Mark Cattini exited when the deal was announced.
- Kaseya-Unitrends: Insight Venture Partners has owned both companies since 2013. The path forward for each company wasn’t always a smooth one. After Kaseya stumbled a bit, Insight hired Fred Voccola in mid-2015 to stabilize the company. He has done exactly that, and even returned the company to growth. I’m not as familiar with Unitrends’ history, but the company has shuffled through multiple CEOs in recent years. For instance, Kevin Weiss replaced Mike Coney as CEO in January 2015. Then, Coney exited in June 2016 to run Spreon. Paul Brady, the third Unitrends CEO in less than three years, arrived in August 2016 and will now join Kaseya to run the Unitrends business.
3. Talent Overlap: Here again, the realities are quite different…
- Datto-Autotask: Here, the company had overlapping sales and marketing teams — all of whom are focused on engaging MSPs. I suspect some positions were consolidated but I’m told overall headcount at Datto (the combined company’s official name) is on a growth trajectory.
- Kaseya-Unitrends: Here, the talent overlap is minimal. Yes, both companies have the typical titles — sales, marketing, engineer, etc. — but they’re largely focused on reaching different customer sets. While Kaseya mainly pursues MSPs, Unitrends largely pursues midmarket enterprise customers.
Of course, Kaseya will need to compete with far more than Datto. Rivals like SolarWinds MSP and Continuum also have intellectual property across IT monitoring, backup and disaster recovery. Plus, ConnectWise has a lengthy list of IT automation and monitoring software, plus a half-dozen or so BDR partnerships.
But for the purpose of this article, I focused on the Kaseya vs. Datto M&A angle because their respective M&A deals involved somewhat similar technologies, and the deals happened within a few months of each other.
Rivals React to Kaseya-Unitrends Deal
When huge M&A deals occur, ChannelE2e typically reaches out to third-party executives for perspectives. In this case, we see Kaseya-Unitrends as transformative for Kaseya — but not overly disruptive to MSPs, since Unitrends doesn’t have much of an MSP installed base just yet. Amid that reality, I haven’t reached out to third parties for comments.
Still, some folks wanted to weigh in. So here’s a sample of the inbound chatter we received…
From Datto Chief Marketing Officer Matt Richards:
- We are pleased that others see – and are investing in – the same MSP market category that we have been actively engaged with for years. This is an exciting time to be in this space, and I doubt that we have seen the last of the MSP channel M&A activity combining PSA, RMM and other product portfolios
- As more and more SMBs turn to MSPs to meet their IT needs, a broad product portfolio will be required to be successful. MSPs would rather have one vendor relationship than to have to knit together a best-of-breed solution. At the same time, MSPs need choice. Retaining both integration and choice is a difficult balance across a larger portfolio
- Channel conflict will be a challenge as the businesses are brought together, as there are significant enterprise and direct businesses on both sides. Published pricing and other practices are decidedly not MSP friendly, and those will have to be rethought and refined
- Integration of the technology stacks will be interesting to watch, right up through providing a single panel for management of the combined products. This will be key and can be very difficult to do
- We wish Kaseya well with the merger, and remain committed to open platforms so that MSPs can choose the best-in-class services, and look forward to our continued partnership with Kaseya.
From Continuum CEO Michael George:
“Kaseya’s merger with Unitrends, a BDR vendor, should come as no surprise to industry watchers: any vendor with aspirations of providing a comprehensive platform for service providers must include a BDR solution in their portfolio. We solved this in 2014 with our acquisition of backup technology leader R1Soft to create our ContinuumBDR offering. Providers are increasingly demanding that their complementary IT solutions are all manageable through a single pane of glass for greater efficiency in operations and billing, and BDR is a critical element in that.
The Kaseya-Unitrends merger will go some way in meeting that demand as standalone product vendors are not desirable. The market has already gifted to where small businesses are demanding some combination of endpoint management, helpdesk, backup, disaster recovery and without exception, security. We anticipate that commercial grade providers will need to keep searching beyond this new joint company for that unifying platform, particularly when it comes to that newest and most complex pillar of security amid today’s heightened threat landscape and the skills-gap challenge in this category.”
From Steve Duckworth, CEO of Harmony PSA, which has a growing base of MSP partners:
“I hope the money the Venture Capital industry is pouring into the MSP software channel market through these M&A moves results in improved software and lower costs for end customers–not just improved performance for the venture capitalists. Despite all their marketing spin, most true product innovation in the market is driven by small, independent companies.”
That’s the chatter so far. If we hear anything else we’ll post updates. But again, the Kaseya-Unitrends deal should be placed in proper context. It’s a good win for Kaseya MSPs that want a new backup solution. And it’s a potential win for Kaseya’s midmarket efforts. But it also essentially eliminates Unitrends’ chance to build market share with MSPs that run third-party RMM platforms.