When ConnectWise kicks off the IT Nation Connect 2020 virtual conference on November 10, MSPs (managed IT service providers) will be seeking roadmap, integration and partner support updates from the IT management and business automation software provider.
It's a safe bet ConnectWise, led by CEO Jason Magee and backed by private equity firm Thoma Bravo, will share plenty of roadmap updates. And there might even be an acquisition -- or two -- on the IT Nation Connect agenda. Here's what to expect, and what MSPs want from the virtual conference.
1. Building One ConnectWise
What MSPs Want: A single ConnectWise -- essentially, the Microsoft 365 model applied to the MSP software industry. One ConnectWise URL from which to source, pay for and manage all ConnectWise services. One sales person (or one sales team) to assist in the selection of those ConnectWise services. One simple method to scale up or scale down those services on-demand.
ConnectWise's Strategy: It has been roughly one year since ConnectWise acquired Continuum and ITBoost. The moves armed ConnectWise with some new offerings, including:
- Continuum's network operations center (NOC), security operations center (SOC), outsourced help desk and backup services for MSPs;
- BrightGauge business intelligence software; and
- ITBoost's MSP documentation software, which competes against Kaseya's IT Glue.
Still, the deal also introduced product and service overlap. Among the challenges: Both ConnectWise and Continuum offer RMM (remote monitoring and management) software. Moreover, the Continuum SOC in some ways potentially competes with ConnectWise's Perch Security investment from 2018.
The overall ConnectWise product suite now spans business management, unified management, security management and expert services. But in some cases, the products or services either overlap with one another or lack integration.
Amid that reality, Chief Operating Officer Geoffrey Willison has spent the past year overseeing the integration of ConnectWise and Continuum. And there are some clear signs of progress -- including the growing ability for MSPs to receive a single invoice from ConnectWise, rather than disparate bills from ConnectWise and the former Continuum.
Longer term, it's safe to expect ConnectWise to announce a clearer path forward for its two RMM offerings -- now branded as ConnectWise Automate and ConnectWise Command. At some point, I suspect, the two paths will converge into one path...
2. Securing ConnectWise, Partners and Customers
What MSPs Want: Rewind to point one of this blog. Partners want "One ConnectWise." That demand will require careful alignment of Perch Security and ConnectWise Fortify, as well as one security architecture across all ConnectWise products.
ConnectWise's Strategy: The MSP software market remains a prime target for hackers, since MSP-focused management systems provide doorways into thousands of end-customer systems. Amid that reality, ConnectWise and the broader MSP software industry have spent considerable time improving their software development, risk mitigation and vulnerability management strategies.
ConnectWise shared its overall strategy for improved software development and security disclosure processes in March 2020. The overall effort includes such steps as a “shift-left” product development, an expansion of cybersecurity training programs for TSP partners, and the creation of the MSP+ Cybersecurity Framework, the company notes. More recently, ConnectWise introduced a bug bounty program in September 2020.
Perch Security Rumors: So what's next? Rumors about ConnectWise acquiring Perch Security have popped up from time to time over the past two years. Fast forward to present day, and CRN reports that the rumors are true.
ConnectWise has owned a stake in Perch Security since 2018. Both companies are based in Tampa, Florida. Perch promotes co-managed threat detection and response (MDR) as well as security operations center (SOC) technologies for MSPs. Key launches in 2020 include Perch's RMM threat monitoring service -- essentially, helping MSPs to ensure their own IT systems aren't under attack.
Stratozen Rumors: ConnectWise may also want to acquire Stratozen, a SIEM (security information and event management) and security operations center (SOC) technology company, some sources suggest. The rumored price tag: $28 million. ChannelE2E has not confirmed the rumor.
On paper, tucking Perch Security and/or Stratozen into ConnectWise makes solid business sense. But if the M&A deals do surface, ConnectWise will need to proceed in a thoughtful manner. After all, certain portions of the Perch strategy and/or Stratozen may overlap with ConnectWise Fortify. But on the flip side, ConnectWise Fortify was dependent on third-party cybersecurity software tools. The alleged Perch & Stratozen deals may allow ConnectWise to focus on its own security IP -- rather than licensing third-party tools for ConnectWise's SOC.
3. ConnectWise ISV Partner Strategy
What MSPs Want: True online stores where they can point, click, and pay for integrated solutions -- with scale up/scale down payment models that allow MSPs to adjust their monthly consumption on the fly.
ConnectWise's Strategy: Backed by Thoma Bravo, ConnectWise in some ways aspires to build an ISV ecosystem that's similar to the Salesforce AppExchange. Indeed, AppExchange is a "cloud marketplace with ready-to-install apps, solutions, and consultants that let you extend Salesforce into every industry
To participate in the AppExchange, Salesforce charges:
- an initial security review fee of $2700 (then renewed annually for $150); and
- 15 percent of the app’s revenue. That is known as the Standardized partner program.
On a similar note, ConnectWise launched its own ConnectWise Marketplace portal way back in 2012. The initial marketplace essentially displayed company logos and product descriptions, but wasn't a full-blown online store. More recently, ConnectWise has attempted to monetize the marketplace and ISV relationships -- essentially charging ISVs (independent software vendors) a recurring fee as MSPs piece together solutions from the marketplace.
Webinfinity Partnership: On a somewhat related note, the company in October 2019 announced ConnectWise Engage powered by Webinfinity. The partnership and associated software were designed to give MSPs a "single pane of glass" for managing multi-vendor services procurement, product support issues, SKU management, content distribution, training and education.
The big questions:
- Is ConnectWise Engage still central to the company's multi-vendor management dashboard for MSPs?
- Does the ConnectWise ISV financial math work for all parties -- namely, ConnectWise as well as the ISVs and the MSP customers?
Pax8: Those question remains especially timely as ConnectWise both competes and cooperates with pure cloud distributors (i.e., Pax8) and traditional distributors that now offer third-party SaaS procurement services to MSPs.
Datto Gluh: Meanwhile, rival Datto is preparing a sales quoting, procurement and online store platform for MSPs. The forthcoming Datto platform, based on the recent Gluh acquisition, will extend self-service capabilities from MSPs to SMB customers, with the MSPs remaining in control of the technology sale. Those end-customers can access, shop, and purchase from approved devices cataloged by MSPs, improving the customer experience, Datto says.
4. ConnectWise Acquisition Strategy
What MSPs Want: Offerings that address one to three opportunities:
- Offerings that further automate MSP businesses, thereby improving profit margins.
- Offerings that further automate end-customer businesses, thereby showing value to those end-customers and driving down churn.
- Offerings that drive down risk for both the MSP and end-customer businesses.
ConnectWise's Strategy: ConnectWise has been plenty busy acquiring businesses over the past decade. Some of the acquisitions -- particularly LabTech Software (now ConnectWise Automate) -- helped to reshape the MSP software industry, drove down MSP software costs, or completely changed the overall revenue model in the market. Note: Newly formed MSPs may not realize just how expensive IT automation software was a decade ago, when some RMM systems required MSPs to acquire licenses in massive blocks -- even before the licenses were used. The ConnectWise-LabTech deal plus the rise of third-party cloud software destroyed those old, more costly software models.
Gradually, private equity firms fell in love with the MSP software industry because of the recurring revenue models, growth prospects, and the undeniable conclusion that MSPs are the preferred doorway into the small business technology market.
Amid that reality, multiple private equity M&A deals have largely consolidated the MSP software market around four or five major platform providers (Barracuda, ConnectWise, Datto, Kaseya and SolarWinds MSP).
Private Equity Chatter: Another round of consolidation may be on the table. In Q3 2020, private equity firms were carefully studying potential alignments of ConnectWise, Datto, Kaseya and SolarWinds MSP. The exploratory discussions tried to pinpoint how the MSP technology market would re-align if two or more of the major platform providers merged.
Meanwhile:
So What's Next: Fast forward to present day, and several sources speculate (repeat: speculate) that ConnectWise may be seeking to acquire one or more businesses that generate $500 million or more in annual recurring revenue (ARR).
If true, ConnectWise and private equity parent Thoma Bravo will need to proceed in an especially thoughtful manner. Fact is, some MSPs are experiencing M&A indigestion. Indeed, the MSPs simply cannot afford to swallow all of the acquired tools that technology vendors are pitching. And with each new M&A deal, MSPs must carefully consider potential product overlaps, roadmaps, competitive issues and other challenges that may arise.
Meanwhile, a large slice of the MSP market is now turning to technology platforms that are based purely on in-house R&D -- rather than acquired products. Two examples: Independent platform providers like NinjaRMM and Syncro are gaining momentum. And at the high-end of the market, some MSPs are shifting to ServiceNow because it is emerging as a modern enterprise standard for IT service management (ITSM).
All that said, ChannelE2E still believes in the value of M&A -- particularly in the MSP software market. Indeed, M&A deals like ConnectWise acquiring LabTech, SolarWinds acquiring N-able, and Datto acquiring Autotask (just to name a few) propelled the industry forward. Plus, multiple Kaseya acquisitions restored that company to MSP software industry prominence.
Bottom Line: ConnectWise parent Thoma Bravo recently raised $22.8 billion for more investments and acquisitions. I don't know how much of that money -- if any -- is allotted for ConnectWise's M&A war chest. We may find out soon...
