Call it a small bet on a big MSP software market opportunity. The effort involves Datto Commerce, a new cloud-based sales platform for MSPs that supports sales quoting, procurement and e-commerce capabilities. It also connects to third-party distributors such as Ingram Micro and Synnex.
Datto Commerce is one piece of a larger MSP technology puzzle that CEO Tim Weller is assembling. The other pieces include the Azure Cloud Continuity beta test, and a growing focus on cyber resilience. The moves will extend Datto beyond backup and disaster recovery (BDR); cloud-managed networking hardware; RMM (remote monitoring and management); and PSA (professional services automation) software.
Datto Commerce: A Shopify Platform for MSPs?
No doubt, cybersecurity currently dominates the MSP industry headlines. The term surfaced 44 times on Datto's March 11, 2021 earnings call. And yes, Datto is betting heavily on security.
But on Wall Street, e-commerce platforms such as Shopify are also generating massive valuations. And I think Datto wants to bring that business model to MSPs.
Shopify is an e-commerce platform that hosts online storefronts for more than 820,000 businesses. The platform is super-hot. Shopify's Q4 2020 revenue was $977.7 million, up 94% from q4 of 2019. Startups that further improve the Shopify online experience include xGen. (Disclosure: I'm an angel investor in xGen.)
Now, apply the Shopify platform model to MSPs: What if MSPs could more easily set up their own e-commerce systems -- essentially, self-service digital storefronts for end-customers?
That's where Datto Commerce potentially enters the picture. The technology is based on Datto's purchase of Gluh in July 2020. Financial details from the deal were not disclosed... until now. Indeed, Datto spent a mere $4.4 million to purchase Gluh, according to a recent SEC filing that ChannelE2E dug through.
Datto is based in Connecticut. Amid SaaS startup bidding wars in Silicon Valley and technology SPAC battles on Wall Street, Datto somehow discovered Gluh's early beginnings... in Australia.
Buying Gluh was a low-cost bet that could potentially automate and speed sales pipelines from Datto and distributors through MSPs to end-customers. Along the way, Datto may end up competing in some ways against Pax8, ConnectWise Marketplace, ConnectWise Sell (formerly Quosal), and Quotewerks.
Datto Commerce: What's the Revenue Model for MSP Storefronts?
Among the big wildcards: What type of financial model will Datto offer to MSPs that leverage Datto Commerce to deploy online storefronts? ChannelE2E doesn't know the answer to that financial riddle just yet.
Admittedly, there's no guarantee Datto Commerce will succeed. But at $4.4 million, it's a low-cost bet (at least in the world of software) that could pay big dividends to Datto and MSP partners.