Mergers and acquisitions have certainly reshaped the MSP (managed services provider) software landscape in the past four years or so. But I wonder if MSPs realize that the most dramatic changes may still be ahead.
Look across the MSP software industry, and you'll find a lengthy list of private equity firms now own PSA (professional services automation) and RMM (remote monitoring and management) software companies. I've long maintained that the PSA and RMM markets (and more) will blend into a new era of Total Business Management (TBM) solutions.
The big question: Which MSP software companies will successfully navigate the next market shifts -- especially as private equity firms continue to enter and perhaps exit the market? I purposely haven't spoken with any sources yet on this topic -- preferring to position this blog entry as an open letter to the industry. A sort of, "Tell me where you're going next."
Private Equity Time Horizon
Keep this in mind: The average time a private equity firm holds a company in its portfolio before exiting the investment is six years, according to the Center for Economic and Policy Research (CEPR). Sure, some investments will last longer. Others will have a shorter time horizon. But generally speaking, private equity firms eventually want to unlock a return on their investment -- either through M&A or IPO.
With those realities in mind, here are some of the potential long-term moves to watch...
ConnectWise: Unless I somehow missed a dramatic development during my market hiatus (May 2014-Aug. 2015), ConnectWise remains owned by co-founders Arnie Bellini and David Bellini. The Bellini brothers essentially control where the company will -- or won't -- head next. But keep in mind, ConnectWise increasingly encompasses key investments like LabTech Software and Quosal... Hiring a CFO, seeking a CIO, promoting Adam Slutskin to Chief Revenue Officer, and other moves could provide some directional clues involving... hmmm...
Continuum: Acquired by Summit Partners, a growth equity firm, roughly four years ago. I sense that Continuum, backed by Summit, remains a buyer rather than a seller for the next few years. After stabilizing and rapidly expanding its core RMM and NOC businesses in recent years, Continuum purchased BDR technology -- part of a tuck-in acquisition -- in mid-2014. I suspect CEO Michael George is serious about finding more tuck-in acquisitions to serve MSPs -- if the valuation is right. George, by the way, is set to address partners at Continuum Navigate 2015 later today.
Datto: General Catalyst Partners pumped $25 million into Datto in Sept. 2013. I believe CEO Austin McChord remains majority owner, and I also think the company is profitable. But through the venture capital deal, McChord has gained guidance from EMC and VMware veterans. And he's now pushing Datto beyond its BDR expertise and into the routing market sometime this fall.
Intronis: The cloud backup provider raised $12 million from GreenSpring Associates and OpenView Venture Partners in 2012. I don't know if additional venture or private equity money has since flowed into the company. OpenView initially invested in Intronis in 2007 -- eight years ago... Update, Sept 29, 2015: Barracuda Networks has acquired Intronis.
Kaseya: Insight Venture Partners acquired Kaseya in 2013. The software company has since made multiple acquisitions, and in mid-2015 transitioned its CEO leadership to Fred Voccola. I don't sense that any type of company sale is on the near-term horizon.
LogicNow: The MSP provider was created when GFI Software restructured in Sept. 2014 -- forming GFI (private cloud solutions) and LogicNow (MSP-centric solutions). I suspect CEO Walter Scott wants to eventually pursue a LogicNow IPO, and I also think he remains in acquisition mode.
SolarWinds N-able: SolarWinds acquired N-able in May 2013. A hands-off management approach has allowed N-able to grow its core MSP base. And SolarWinds has continued to acquire technologies to enhance N-able's code base. All the anecdotal evidence suggests that SolarWinds remains in acquisition mode.
Time Horizons?
That's just a sampling of the players -- and the ownership models -- across the MSP software landscape. Overall, I believe most of the private equity firms and venture capital firms in the market are committed to long-term hold, build and invest strategies. But the potential time horizons deserve a closer look -- which I'll be taking in the days and the weeks ahead.
