I Was Wrong About Managed Services Consolidation

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  

When RMM vendor N-able was acquired by SolarWinds last month, I said it wasn’t a big deal and that it wouldn’t necessarily open the floodgates for further consolidation among managed services vendors. Since then, two more acquisitions have happened. I was wrong, sort of. Here’s why.

Time for Larry Walsh to eat some crow.

Following the acquisition of N-able Technologies by SolarWinds last month, I dumped on the deal, saying that, unlike others in the market, it wouldn’t necessarily lead to a rapid consolidation among the managed services tools vendors.

Related articles

Since then, Level Platforms was acquired by AVG Technologies and, yesterday, Kaseya was bought out by venture capital firm Insight Venture Partners.

So what happened? Basically, I misread the tea leaves. Or, as Fonzie would say, “I was wr, wr, wr….ong.” (Anyone under 35 will probably have to look that up, so click here to see the reference.)

Level Platforms had been looking for a buyer for some time. It had approached several companies about an acquisition and finally found a home with AVG. N-able, which had taken a substantial investment from Accel-KKR, was destined to be sold. And Kaseya -- well, that one just slipped by, but it was no surprise that it was bought by a VC because it needed new funding and leadership to grow to the next level.

Was N-able a trigger for all this activity? No. That much is true. All of these deals happening in rapid succession means negotiations have been going on for months. It’s coincidence that they happened to culminate at virtually the same time.

In truth, this consolidation was inevitable. Remote monitoring and management (RMM) tools belong to a greater portfolio of system management products. RMM vendors have evolved beyond the early days of server and endpoint monitoring to incorporate mobile device management, storage and backup, and even security applications. This is what hosted managed services provider Continuum is doing as it partners with other vendors to provide network assessment and security capabilities to its users.

Five years ago, I had an extended exchange over cloud computing at an HTG Peer Groups meeting with Dave Sobel, who was then CEO of Evolv Technologies and is now the director of communities at Level Platforms. My position was this: Managed and cloud services are virtually indistinguishable given the similarities in their business models. Sobel’s position: Cloud is a technology, and managed services is a business model.

Over the years, Sobel and I have had many conversations about managed versus cloud services. Our respective positions have softened as we’ve seen managed services move toward cloud models and cloud computing integrate with third-party management. As cloud computing and hosted assets become the norm, MSPs will become cloud administrators on behalf of their clients.

And this leads to my next point: why RMM consolidation is happening and its market potential.

Since the dawn of RMM tools a decade ago, I’ve wondered why the big IT companies haven’t dived into the market if the opportunity is so vast and lucrative. Microsoft Corp. dabbles in it with Windows InTune. Cisco Systems Inc. experimented with its OnPlus service. But few major vendors have actually taken the plunge into RMM in the way that Kaseya International Ltd. , LabTech Software, Level Platforms Inc. and N-able have. The most likely reason: not a big enough market.

All of these RMM companies are private, but the estimate for Level Platforms' revenues is $15 million annually, and N-able is between $20 million to $25 million. This shows the total addressable market is minute compared to Microsoft’s business tools ($5 billion) or Cisco’s network equipment ($40 billion).

What large hardware and software vendors have done is enable and support managed services powered by RMM tools by providing price protection on products and marketing support. IBM Corp., for instance, is actively driving business to its managed services partners; as their businesses grow, so too will their consumption of Big Blue products.

But, as part of a larger portfolio of tools and services, these RMM companies look far more interesting because they can expand and enhance the gross revenue and profitability of packages. That’s what’s going to happen at SolarWinds and AVG.

Rather than looking at this consolidation as the end of the standalone RMM vendor, perhaps it’s time to look at the evolution of managed services. These companies and products are quite valuable in the context of broader product portfolios. And, incorporation into larger vendors could open much more opportunity for MSPs constantly looking for that next value-add opportunity.

If anything, all this activity should be seen as a sign of progress.

  • Tweet  
  • LinkedIn  
  • Facebook  
  • Google plus  
  • Send to Kindle
  • Send to  
More on Channel Business
data-quality

Value over volume, RackWare says of expanded channel partner program

Aim is to have the right coverage with close relationships, VP says

divorce-pa

The velvet divorce? Options and disruptions to come from HP split

News that Hewlett-Packard is breaking into two companies continues to reverberate through the channel. While the ultimate impact on HP partners and customers remains unclear, the new entities will have plenty of options for plying their futures

treasure-chest-with-gold-coins

Channel strikes gold selling to non-techies

Tech sales staff busy selling to business units as much as tech staff, according to Gartner

jessica-m-225x300

Welcome to the new Channelnomics

Channelnomics goes live with new-look site. Join us on Twitter to give us your thoughts - @channelnomics

Visitor comments
Add comments
blog comments powered by Disqus
In-depth
Broken heart

An amicable split?

Where will HP and Symantec's conclusion that the sum of their parts is greater than the whole leave partners?

elvis67878787

Suspicious minds in the post-Snowden world

Investment in new technologies being avoided with security experts wary of cloud and new technologies post-Snowden

Old-fashioned cash register

Vendors need to get with the times, Channel conference hears

MSPs need up-to-date support from vendors, including working together

seo-checklist

‘Internet of Things’ shifting IT spending priorities

Analyst firm Gartner says enterprises spent more than $40 billion on what could be called Internet of Things (IoT) programs. As more IP-enabled devices get connected, enterprises may shift spending patterns and disrupt the way IT is acquired and supported