ACQUISITION BOOM :
MSP SOFTWARE VENDORS BEING BOUGHT AT RECORD PACE
BY JOE DIGRIGOLI
Restructuring , mergers , and acquisitions : These are all facts of life in the modern business environment . It ’ s natural for widespread changes to frighten customers , but are their fears valid ? With the recent acquisition boom in the MSP software vendor space , how investment will continue to shape our industry is a major topic of conversation for 2019 and beyond .
Recently , the biggest news on this topic came in the form of Thoma Bravo ’ s acquisition of ConnectWise . With Datto being acquired last year by Vista Equity Partners , Thoma Bravo acquiring Logic Now and Continuum in 2017 , and Kaseya being owned by Insight Partners , most of the MSP software vendors , at least in part , are owned by private equity . It ’ s important to discuss how this investment landscape impacts MSPs and what things MSPs need to consider when dealing with vendors who have been acquired .
THE REASONS FOR THE SURGE
First , the reasons behind this buying spree are of great benefit for MSPs : Investors and large vendors have realized that the market that MSPs serve is huge and growing fast ! In fact , the SMB market is the fastest growing portion of the IT Infrastructure market with over $ 300 billion in annual spend across millions of end customers . Simply put , global software vendors and investors have realized the MSP space is the gateway to the huge SMB market , and they are aggressively investing in companies that serve this market . While this means that your preferred vendor may be acquired , it also means that your business is in the right market at the right time .
Second , SMBs are increasingly demanding and requiring the same technologies and processes that have been pioneered and used for years by enterprises . That advanced technology , once complex and reserved for large enterprises , is coming downstream and providing huge benefits for SMBs . Small businesses now view technology as critical to their core business and their IT infrastructure spend is growing at six times GDP — a trend that is very attractive to investors . In today ’ s tech-centric world , small businesses will only continue to prioritize IT investment to help grow their companies .
Third , the growing SMB space has been difficult for vendors or investors to reach directly . However , MSPs have found a way to aggregate this market by providing IT services to multiple businesses , essentially becoming a conduit to the SMB market . Large vendors , such as Konica Minolta and Ricoh , and investors are acquiring MSPs and merging them as a way to consolidate their reach into SMB . Fundamentally , this makes your MSP more valuable , and this consolidation 12 | MSP SUCCESS is leading • VOLUME to the 1 rise of large , national MSPs .
BECOMES LATEST BIG NAME TO BE ACQUIRED
WHAT IT MEANS FOR MSPS
In an article from Channel Partner Insight , a ConnectWise customer perfectly distilled the fears of many who experience the acquisition of a service provider . Chris Pierce , service manager at WhizKids Tech in Minneapolis said , “ ConnectWise just informed us that the team working on our ticket was laid off . I knew they just got bought — not a great sign . I guess it ’ s time to start looking for alternatives .”
This statement elucidates both the changes that come with any acquisition and the anxieties these changes can cause customers . ConnectWise has already announced restructuring and layoffs , and we ’ re still in the early days of the transition . Longtime CEO Arnie Bellini is stepping down and being replaced by Jason Magee . Despite Magee ’ s long tenure with ConnectWise , there is no denying that these are sweeping changes . Partners of ConnectWise would be wise to keep abreast of all the latest updates coming from the organization .
Most independent software companies serving MSPs are privately held by the founder or CEO , and when they are acquired , it will require major restructuring to take the step for large-scale growth . As we have seen with ConnectWise , this typically means rationalizing their staffing and pricing in order to fund the deal , typically a two-year process . Generally speaking , it takes a company two years to normalize after an acquisition . During the interim , the best advice when your vendor has been acquired is to continually assess if your needs are being met and your business can handle the vendor turbulence for 24 months . If the level of service falters in a demonstrable way , then it ’ s time to re-evaluate your working relationship . Alternatively , if you are skittish about rolling with the punches , you may look to vendors who have been acquired less recently , because they ’ ve already weathered the storm that ConnectWise is currently in the middle of .
Joe DiGrigoli is the lead writer at The Newsletter Pro in Boise , Idaho . He ' s a content marketing specialist who keeps a keen eye on tech industry trends .