MSP, Mergers and Acquisitions, Content, Private equity, Small business

Zix CEO: We’re Committed to AppRiver’s MSP Partners

Zix, which is acquiring AppRiver for $275 million, will bet heavily on MSPs (managed services providers) as part of its long-term email security growth strategy, according to Zix CEO David Wagner.

In a call with ChannelE2E, Wagner described a multi-year journey to transform Zix from an encryption company into an email security provider that's partner-friendly. Acquiring AppRiver is the latest step in that extended journey.

Indeed, the company didn't wake up in Q4 and instantly discover and decide to buy AppRiver, he notes. Instead, Zix has carefully studied the MSP partner ecosystem for at least the past two years -- and the company has certainly been aware of AppRiver during that time.

Zix Ramps Up Its MSP Efforts

Even before the AppRiver acquisition, the Zix business transformation involved multiple key moves -- including acquisitions, partner-focused sales and business development, and R&D that focused on MSP needs. Among the key influencers in the strategy: Zix VP of Marketing Geoff Bibby.

True believers in the company include CalTech, an MSP that has worked with Zix for roughly a decade.

Geoff Bibby
Zix CMO Geoff Bibby
Zix CEO David Wagner

Still, Zix didn't have a formalized MSP push and associated tools until around April 2018. That's when the company revealed a multi-tenant platform buildout for partners.

At the time, the ZixPartner program expanded to help MSPs sell and administer email threat protection, email archiving  and email encryption options. The ZixPartner effort also introduced monthly and annual billing options, and a centralized management console for administration of all Zix solutions -- spanning:

  • ZixEncrypt MSP;
  • ZixProtect MSP;
  • ZixProtect Plus MSP; and
  • ZixArchive MSP.

Zix MSP Support

Key MSP-focused hires have also arrived. The Zix partner team includes National MSP Business Manager Joe Conti (a Kaspersky Lab and Trend Micro veteran), and Channel Manager Chris Perry (a Carbonite and Kaspersky veteran).

Chris Perry
Joe Conti

"We've always been good with VARs," Wagner asserts. "But our April 2018 news really showed our commitment to MSPs." And now, the AppRiver deal furthers that MSP-centric push, he adds.

Indeed, AppRiver supports roughly 4,500 MSPs. Wagner has vowed to maintain a "do no harm" strategy -- ensuring that AppRiver's laser-like focus on MSP enablement and support will continue.

During an M&A deal, "you don’t disturb the customer or the go to market motion," Wagner says. "You need to preserve that motion. That’s a guiding principle" for Zix as it moves forward with AppRiver's partner ecosystem, he adds.

While the Zix partner program has good, solid bones, the AppRiver partner program has nearly two decades of experience and lots of additional muscle that Zix plans to leverage, Wagner says.

Zix: Talent and Product Strategy

Zix and AppRiver each have about 260 employees. As part of the M&A plan, Zix expects to generate about $8 million in cost synergies -- which typically means some redundant jobs will be eliminated.

AppRiver Co-founder Michael Murdoch

AppRiver CEO Michael Murdoch is exiting because there's no need for two CEOs. But it's too soon to say what other positions may be eliminated, Wagner says.

On the product front, Zix has already proven that customers want to buy more than encryption technology. MSPs will therefore experience considerable cross-sell and upsell opportunities from Zix, he asserts.

There are also opportunities to expand globally. Zix doesn't generate any significant business outside of the U.S. at present. AppRiver is just getting started on the international front, with a growing footprint in London to start. "We'll be taking a hard look at how to onboard international partners," he says.

Wagner has been running Zix for about three years, and the company has essentially tripled in size. The Zix-AppRiver deal is a perfect "hand in glove" fit to continue that growth, he adds.

Cloud-based Email Security: Stiff Competition

The global email security market should be worth about $18 billion by 2023, expanding at 22 percent compound annual growth rate (CAGR) from 2016, this report asserts.

ustin Gilbert

Admittedly, competition in the email security market is intense. Most of the major endpoint security companies have been moving into email security -- emphasizing training services to mitigate rising phishing threats. Plus, Microsoft itself has been pushing into email security services that wrap around Office 365.

Still, Microsoft's core focus is business productivity software -- rather than security software, Justin Gilbert, director, North American Channel, AppRiver, noted recently. (We're checking to see if Gilbert will remain with the business, post acquisition.)

No doubt, Zix has lofty market ambitions. The company expects to generate roughly $200 million to $207 million in annual recurring revenue (ARR) at fiscal 2019 year end, up 11 percent to 15 percent year over year. We'll be watching to see if partners can Zix hit those targets.

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.