The overall MSP (managed services provider) software market remains very healthy. But when it comes to standardized toolsets, the RMM (remote monitoring and management) software market remains overly fragmented. Frankly speaking, there are too many players and too many options. And I've reached a simple conclusion: A shakeout has got to be coming. I'm just not sure which products, if any, will wind up unplugged.
Every IT sector eventually consolidates around fewer players. Some stark examples:
- Rewind to the 1980s when we had hundreds of PC suppliers. Today, we've go the big four (Apple, Dell, HP, Lenovo) and all the rest.
- In the 1990s, we had multiple network operating systems (Novell NetWare, Microsoft/3Com LAN Manager, IBM LAN Server, Banyan Vines, DEC Pathworks, Artisoft LANtastic and the list went on). Today, we've got Linux and Windows.
- And how about the commercial relational database market, where Oracle and Microsoft SQL Server eventually steamrolled most of the x86 competition.
MSP Software Building Blocks
To understand how the RMM sector may shake out you need to look at the bigger picture. More and more MSPs are adopting three to five basic building blocks to automate their businesses. The components typically include:
- RMM to remotely monitor and manage customer servers and PCs. Sometimes, there are additional RMM tools that are network- or cloud-centric.
- PSA (Professional Services Automation) to track and optimize internal business performance.
- BDR (backup an disaster recovery) or another business continuity/data protection-type offering.
- Security (beyond basic endpoint protection).
- Quoting and/or sales proposal software platforms to help speed customer engagements.
- And a few categories I've overlooked.
Consolidation and integration among those various toolsets has been a rather wild journey to date. Among the early consolidation milestones that nearly happened:
- A decade or more ago, N-able Technologies (now owned by SolarWinds) considered extending beyond RMM to offer a PSA-type platform built atop Sugar CRM. The move never happened, though SolarWinds has since acquired and integrated a ticketing system into N-able's RMM offering.
- Also around a decade ago, ConnectWise and Kaseya considered merging. But they had different views of the universe. ConnectWise saw PSA at the center of that universe. Kaseya saw RMM at the center. And culturally, at least at the time, Kaseya and ConnectWise were at opposite ends of the spectrum.
MSP Software Puzzle Pieces Coming Together: Round One
True consolidation started around 2010, when ConnectWise (PSA) invested in LabTech Software (RMM). Gradually, rivals like Autotask, Continuum, Kaseya, LogicNow and SolarWinds N-able (just to name a few) have acquired their way into multiple MSP-centric software markets.
Generally speaking most of the M&A deals have worked out well, though a "single pane of glass" remains mostly elusive for MSPs.
Now, for the twist: I think in some cases things are going to get worse before they get better. The reason? I think the MSP software industry will resemble the ERP, CRM and Groupware markets in the 1990s and early 2000's, when M&A was required but didn't always involve "perfect fit" deals.
MSP Software Puzzle Pieces Coming Together: Round Two
Think of it this way: When IBM acquired Lotus in the 1990s, CEO Lou Gerstner specifically said the deal was about Lotus Notes -- the fast-growth groupware platform at the time. Some pundits insisted IBM could also prop up Lotus SmartSuite, a Microsoft Office alternative that ran on Windows and IBM's own OS/2.
The SmartSuite pundits were wrong. IBM bet the house on Notes and essentially let SmartSuite wither away. Mark my words: Similar scenarios will eventually emerge in the MSP software market, where the buyer acquires a Golden Goose but also agrees to take on additional, less glamorous products as part of the deal.
The net result will be product consolidation, and the eventual death of some platforms.
MSP Software Companies: Potential Buyers, Sellers
Back in October 2015, I speculated quite extensively about potential buyers and sellers in the MSP software market. Two of the targets on my October prediction list have since been acquired (a private equity firm purchased StorageCraft; and Kaseya acquired Vorex).
Some pundits think more PSA-RMM type mergers are coming. I'm not sure I agree. I think the more likely scenario potentially involves more RMM-BDR under a single roof because there are so many players in both of those market segments.
Still, the puzzle pieces may not always be a perfect fit. There could be pain as M&A partners navigate product overlap. Long live innovation. But brace yourself for RMM market consolidation...