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Memo From Webroot CEO to MSPs: Focus on Profit Margins, Finances Now

Within the red-hot cybersecurity market, Webroot CEO Mike Potts has a cautionary warning to MSPs: Focus on your finances and profit margins now — to ensure your business doesn’t go into crisis mode once a technology or economic market correction arrives.

Those thoughts and more from Potts emerged during a CEO panel last week at the Continuum Navigate 2018 conference in Boston.During the panel, moderated by ChannelE2E, Continuum CEO Michael George and Thoma Bravo‘s David Murphy also drove home the need for partners to focus on their profit margins.

Continuum Navigate 2018 CEO Panel: ChannelE2E’s Joe Panettieri, Continuum CEO Michael George; Webroot CEO Mike Potts & Thoma Bravo’s David Murphy

The best-performing MSPs typically enjoy 20 percent or more profit margins. By contrast, typical MSPs have 9 percent profit margins, and the bottom quartile are breakeven or perhaps even losing money, according to benchmarking firm Service Leadership Inc.

All three panelists expressed optimism about the overall MSP market, but they also recounted the dot-com implosion nearly two decades ago, and the financial services crisis of 2008. During those events, thousands of companies that lacked strong cash flow, profit margins, balance sheets and financial controls imploded.

Naturally, the executives see security as a potential high-profit pathway forward for MSPs. The Continuum Security portfolio includes SOC (security operations center), threat monitoring and other services for MSPs. The company’s key technology partners include EventTracker, SentinelOne and Webroot.

Webroot’s Business Momentum

Anecdotal evidence from Webroot suggests the company’s business and MSP relationships remain strong.

The security company has generated double-digit revenue growth for 18 consecutive quarters. Annual recurring revenue (ARR) rose 12 percent for Webroot’s fiscal year ending on June 30, 2018. The company’s business segment grew by 25 percent, while its consumer segment ARR grew six percent.

Key moves include acquiring Securecast — which is now the foundation for Webroot Security Awareness Training. The platform allows MSPs to offer end-user education focused on phishing, ransomware, and other cyber threats.

Other highlights from Webroot’s fiscal year 2018:

  • The company exited the year with 12,800 managed service providers (MSPs), up from 9,400 MSPs at the end of its fiscal year 2017.
  • Gaining 26 new BrightCloud Threat Intelligence Services technology alliance partners, including LogRhythm, Centripetal Networks, Digital Shadows, and Zerum, bringing the total to more than 80 worldwide partners.
  • Potts joined as CEO in September 2017, succeeding Dick Williams.

Webroot believes it is the world’s top security provider to the world’s Top 500 MSPs. Still, competition is intensifying from giants like Cisco Systems and numerous next-generation endpoint protection upstarts.

Additional reporting by Ty Trumbull.

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