Major portions of the MSP industry are gathering this week for two key conferences in Arizona. First up is IT Glue's GlueCon 2018 (Sept. 16-18) followed by SolarWinds MSP's latest Empower MSP (Sept. 18-19) gathering. ChannelE2E will be on-hand for both events.
So what should managed services providers (MSPs) expect? Here are 10 key themes and trends that will likely emerge at GlueCon. (We'll be back with a separate SolarWinds MSP conference preview soon.)
1. Transforming Into a Platform
IT Glue VP Luis Giraldo IT Glue CEO Chris DayIT Glue is best-known as a documentation software provider for MSPs. But the company continues to round-out its offerings -- extending into feature areas like checklists; categories like password management and plenty more. Explore the feature lineup and IT Glue now resembles a platform.
Where is the company's R&D heading next? Keynotes from CEO Chris Day (Monday) and VP Product Luis Giraldo (Tuesday) will reveal the answers. We'll be blogging live from the sessions.
2. The Titan's Actually Talk to One Another
IT Glue CEO Chris Day has pulled together quite the panel for Monday. It features Day and such market "Titans" as:
I'm set to moderate -- and perhaps even referee the session.
Kidding aside, I expect a cordial but witty discussion. The Titans have never been in the same room together (at least not all at once). Despite the Cold War between each vendor, the executives have quietly developed hotlines between each other. And from time to time, the Titans even compare industry notes with one another. It's a healthy development. A thawing of sorts, though the competition remains fierce.
Panel Focus - Teaser Alert: So what will we cover on the panel? I suspect we may touch on the following:
The MSP Software Ecosystem.
MSP Business Models, Profit Models and the Role of Automation.
Tomorrow’s MSPs: What Will They Look Like?
Of course, the bullet points above are subject to change -- dramatic change. Why? Put six strong personalities on a stage, give them open microphones, and audibles are bound to happen .
3. MSP Valuations and Exit Strategies
Service Leadership's Steve Lewis
You know ChannelE2E covers M&A deals, valuations and exit strategies non-stop. And increasingly, MSP-centric conferences include sessions on those topics. Here at GlueCon, sessions in those areas will include:
Scaling Up: How a Few Companies Make It… and Why the Rest Don’t (Verne Harnish)
Pivotal learnings from growing a $100 million MSP (Steve Lewis, an M&A expert from Service Leadership)
Scaling Your MSP Business: The 5 Big Levers (TruMethods CEO Gary Pica)
MSP of the Future (Datto VP Rob Rae)
Buying or Selling an MSP (Service Leadership's Lewis takes an encore)
We expect to attend each of those sessions, and we'll weave together some valuation & exit coverage.
In the meantime, it's safe to say MSP valuations have been rising. What about the classic 5X to 7X EBITDA valuation? Frankly, it sounds a bit low in the current market. We've heard of some deals in the 8X to 10X EBITDA range -- particularly for MSPs that are large, platform plays or IP (intellectual property) owners.
4. Listen More, Talk Less, Ask Questions
That's my advice to men in the room who attend the 'Amazons' session featuring:
Christine Gassman, director of global channel engagement at Datto
Dana Liedholm, chief marketing officer at ID Agent
Holly Pateman, VP of marketing at IT Glue, moderating
The panel's premise: Companies with strong female leadership see a 36% higher return on equity than those without, yet only 3.6% of organizations in the channel are spearheaded by women.
I've seen and explored ways to correct similar shortcomings in other sectors. For instance, in 2015 I joined Golden Seeds -- an angel group that only invests in female-owned startup businesses. And in our own business, the best person to lead our company isn't me. It's my business partner Amy Katz. In fact, Amy was my boss for a couple years when we sold our previous company to a big media firm.
It's been a great working relationship. But I do stumble from my own unconscious biases from time to time. For instance, I've sat down for a meeting with a male and female business team, assumed the woman reported to the man, and discovered that the opposite was true. It's one small example of where I can improve my own thinking in terms of diversity, empowerment, and avoiding assumptions. And yes, I know I likely have additional blind spots on this topic.
I look forward to hearing where Gassman, Murphy, Bodell, Liedholm, and Pateman take their panel discussion.
5. Managed Security Services
Every MSP will become an MSSP... Or not. That's likely one piece of the larger security discussion I expect to heat at GlueCon.
Frankly, I tread carefully on this topic. I believe every MSP will need to move deeper into the security market. As Continuum's George and ConnectWise's Bellini will tell you: Every SMB customer expects their MSP to handle security.
Still, I don't think every MSP will earn the MSSP moniker. Instead, MSPs need to start with the basics:
Webroot CTO Hal Lonas
Practice better overall IT hygiene
Focus on endpoint security
Address business continuity
Master patch management
What about building a SOC, mastering SIEM, offering penetration testing, moving into threat hunting and more? Don't get ahead of yourself. In those cases, I believe most small MSPs will need to partner for MSSP-class services. (Hence, ChannelE2E's sister website, MSSP Alert.)
Here at GlueCon, I look forward to catching up privately with each of the Titan panel members for their thoughts. Also, I'll check in with Webroot CTO Hal Lonas, who's on-hand to discuss threat intelligence for SMBs and MSPs.
Continue to page two of two for a look at items 6 to 10 that MSPs should track at GlueCon.Here's page two of two previewing GlueCon 2018.
6. Emerging MSP Platforms: RMM Disrupters?
Within the RMM (remote monitoring and management) software sector for MSPs, the best-known providers likely are ConnectWise Automate, Datto RMM (formerly Autotask Endpoint Management), Continuum RMM, Kaseya VSA, and SolarWinds MSP's RMM and N-Central.
Still, ChannelE2E often points to a range of emerging RMM options. Here at GlueCon, we'll strive to catch up with Auvik Networks, NinjaRMM and Pulseway...
"It’s getting a little bit too crowded in MSP Town, isn’t it? If I remember correctly from when I first launched TruMethods, there were about 10,000-15,000 MSPs in all of North America. Now, from what I’ve been told, there are 35,000-40,000 MSPs across the entire continent. It’s time to adjust strategy, and this isn’t only because of increasing competition. There’s something a lot bigger going on — a new adventure is awaiting us."
Generally speaking, Gary and I often see eye to eye -- though he's a practitioner and market observer, and I'm just a market observer. No doubt, the MSP market is now crowded. In response, Gary is pitching the technology success partner (TSP) as your answer to overcome market saturation.
I agree, MSPs need to evolve. But I don't see the "MSP" moniker getting left behind. Instead, I think modern MSPs will simply evolve their managed services portfolios -- moving toward whitespace assessments, as CA Technologies' Ken Vanderweel often puts it.
Frankly, I'm shocked that so few SMB partners have effectively monetized and profited from Microsoft Azure, Google Cloud Platform and Amazon Web Services. Plus, I can't believe the majority of MSPs don't offer application performance monitoring and management (APM). And the list goes on.
I will pursue some updated thoughts from Pica on market saturation, and perhaps share more of my own...
8. Is Private Equity Good for This Market?
Private equity firms have been buying up regional and/or platform MSPs. PE firms have also snapped up several major MSP software suppliers.
But is PE ownership actually healthy for the long-term success of this industry -- and the MSPs within it? I see numerous pros and cons. Ultimately, the upside or downside comes down to each individual PE firm, as well as the executive leadership within each portfolio company.
An example of positive private equity ownership: Without private equity dollars and savyy executive leadership, Continuum's technology could have died. Previous owners had vision but the company lacked standardized R&D processes and also faced several other challenges. PE investors acquired the Continuum portion of the business and installed new leadership in 2011. The results? Solid, consistent growth -- and improved offerings for partners.
An example of negative-turned-positive PE ownership: We've also seen some PE missteps, such as the first year of Kaseya's ownership under a PE firm in 2013. Too many acquisitions, inconsistent MSP market focus blended with a heavy corporate IT push, and numerous executive changes nearly crippled Kaseya by late 2014. A stabilizing CEO change arrived in 2015, the company regained its MSP focus, and the business regained momentum by late 2016 or early 2017 or so.
Promising Start: A PE firm acquired Datto and tucked in Autotask in late 2017. So far, the deal looks very promising. Yes, there has been some executive turnover on the former Autotask side of the house. But Datto's leadership is consistent in its messaging and focus. All MSPs. All the time.
The Big Wildcard: Every PE-owned firm essentially has a five to seven year exit window. PE ownership is temporary. That means MSPs should carefully study a PE firm's track record for clues about what's coming next. Does the PE firm typically invest in R&D and more add-on buyouts, or does the owner strip down the company -- reducing costs to improve profit margins?
No doubt, the PE stakes are getting higher. Everyone is pursuing more M&A. Plus, SolarWinds MSP's parent is pursing an IPO. We'll be seeking updates here at GlueCon and the neighboring SolarWinds MSP conference.
9. Remaining Switzerland
IT Glue has a reputation for integrating with a range of third-party tools across the MSP software ecosystem. Rumors about a company sale pop up from time to time. But I don't expect any IT Glue-related M&A moves here. Instead, it's safe to expect IT Glue to focus on strategic partnerships with technology companies here.
10. Next Acquisitions: MSPs and Their Technology Vendors
No doubt, many MSPs will use GlueCon to explore and perhaps even negotiate potential M&A deals with one another. The same can be said for the major industry vendors.
The challenge? Lofty valuations -- particularly in the security sector. MSSPs can be purchased at somewhat reasonable prices, but some security startups with true IP (intellectual property) appear to have inflated egos, and inflated asking prices...
Still, some promising tuck-in deals have recently emerged -- such as:
It's a safe bet ConnectWise, Continuum, Datto, Kaseya and SolarWinds are in the market for more buyouts -- particularly in the security sector. But I'll repeat: Valuations could be prohibitive.
Instead of opening their wallets to snap up more security tools, it might be wiser for vendors to remain on the M&A sidelines. Surely, a security sector shakeout is coming, and that means some discounted valuations will likely surface soon...
Next Steps
Stick around. ChannelE2E will update our GlueCon conference coverage multiple times in the next few days. Although our meeting calendar is now packed solid, please email me if you want to potentially grab a few minutes, say hello, or send along a news tip ([email protected]).
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.
NinjaOne has had a great year. It hit a $1.9 billion valuation, won a major contract with TeamLogic IT, broke into the Champions quadrant for RMM leaders, and overtook N-able's number 3 market share spot.
A new white paper uncovers essential steps for IT solution providers to deliver better conferencing experiences in dynamic, collaborative environments.
IT Glue CEO Chris Day
I'm set to moderate -- and perhaps even referee the session.
Kidding aside, I expect a cordial but witty discussion. The Titans have never been in the same room together (at least not all at once). Despite the Cold War between each vendor, the executives have quietly developed hotlines between each other. And from time to time, the Titans even compare industry notes with one another. It's a healthy development. A thawing of sorts, though the competition remains fierce.
Panel Focus - Teaser Alert: So what will we cover on the panel? I suspect we may touch on the following:
Service Leadership's Steve Lewis
The panel's premise: Companies with strong female leadership see a 36% higher return on equity than those without, yet only 3.6% of organizations in the channel are spearheaded by women.
I've seen and explored ways to correct similar shortcomings in other sectors. For instance, in 2015 I joined Golden Seeds -- an angel group that only invests in female-owned startup businesses. And in our own business, the best person to lead our company isn't me. It's my business partner Amy Katz. In fact, Amy was my boss for a couple years when we sold our previous company to a big media firm.
It's been a great working relationship. But I do stumble from my own unconscious biases from time to time. For instance, I've sat down for a meeting with a male and female business team, assumed the woman reported to the man, and discovered that the opposite was true. It's one small example of where I can improve my own thinking in terms of diversity, empowerment, and avoiding assumptions. And yes, I know I likely have additional blind spots on this topic.
I look forward to hearing where Gassman, Murphy, Bodell, Liedholm, and Pateman take their panel discussion.
Webroot CTO Hal Lonas
TruMethods CEO Gary Pica
