Instead of kicking back and relaxing for the holidays, managed service providers and integrators continue to discuss mergers, acquisitions and other potential business combinations. Two deals were announced on Jan. 2, and more are coming.
The latest moves: Only hours after ringing in the New Year, Managed Data Holdings acquired Data393, a leading MSP and data center specialist in Denver. Similarly, Minneapolis-based Corporate Technologies gobbled up Intermountain Technology Group (an offshoot of the former ComputerLand) of Idaho.
More buyouts are certainly coming. During recent managed services conferences hosted by the MSP Alliance, Kaseya, N-able and other industry players, numerous MSPs and VARs held exploratory merger discussions, notes a major Cisco solutions provider in New York.
“In the managed services space, the rich want to get richer by buying each other up,” said the Cisco VAR. “And the break-fix VARs see the writing on the wall. Those that don’t make the move to managed services are looking for an exit strategy in 2008.”
How many MSP combos will occur in 2o08? Our crystal ball isn’t that clear. But we’ll be sure to track buyouts and combos that occur within the MSPmentor 100 list, which we’ll unveil on January 28.
Posted In: Acquisitions | Business Transformation | Kaseya | MSP Alliance | N-able
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You raise a great point - some VARs will be afraid to try managed services and will throw in the towel. I would encourage them to try hosted MSP services like securemycompany.com. It’s a low-cost way to offer managed services without actually buying Kaseya or McAfee managed software. Get a few customers under contract and you’re increasing the value of your biz for potential sale.
The M&A Forum is a prime event that allows vars to meet privately with one another to discuss potential merger and acquisition activities.
Consolidation in this market is coming - that is a fact. Purchasing a new tool that provides the ability to ‘manage IT services’, however, is not the best first step IT Service Companies (ITSCs) should be taking to prepare their business for the M&A activity that is bound to heat up.
If not already done, making the decision whether to move into this new, annuity-based business model and which steps to take first seems to be tougher for most ITSCs rather than actually getting monitoring and other managed services tools in place. Changing business models with system upgrades is like fixing a virus problem with a VoIP solution - the solution does not fit the need.
I co-founded CoreConnex (www.coreconnex.com) to provide services to ITSCs that ensure business improvements and client communication came before systems upgrades. Yes, both are needed AND having the right tools follows closely behind getting the right business model in place. Focusing on the business and its processes and how client relationships must change in this new model should be the priority for ITSCs that have not yet made the leap into the managed services arena.
If an ITSC HAS made the leap to this business model, the next thing they should be focusing on are implementing financial and business controls to improve service delivery efficiencies, increasing recurring revenues and driving profits.
Whether you’ve made the leap or are still waiting to decide, think of the steps you need to go through to change your business first - upgrading systems is the easy part, especially for experts in this industry.