ConnectWise CEO Arnie Bellini and President David Bellini have spent the past two years preparing for software industry convergence and competitive wars. The result: ConnectWise and its investments — most notably LabTech Software and Quosal — have been in growth mode. But ironically, the anticipated MSP software wars never fully emerged. Here’s the back story.
January 25, 2012, will mark two years since ConnectWise launched ConnectWise Capital, a $20 million investment fund that seeks to incubate channel-centric technology companies.
Key Moves
Yes, ConnectWise Capital was designed to help channel partners (the IT Nation, as ConnectWise calls ‘em) manage and grow their businesses. But the ConnectWise Capital investments also involved strategic competitive moves. Specifically, I believe…
- ConnectWise invested in LabTech in February 2010 at least partly to counter Kaseya’s potential move into the PSA software market. Instead of waiting for Kaseya to wage a war on ConnectWise’s home turf (PSA software), ConnectWise leveraged LabTech and took the battle to Kaseya’s core market (remote monitoring and management software).
- ConnectWise invested in Quosal in May 2011 at least partly to counter Autotask’s purchase of VARStreet, a SaaS-based IT product sourcing platform.
- ConnectWise invested in CharTec in February 2010 at least partly to counter Zenith Infotech‘s strong position in the BDR (backup and disaster recovery) market.
The Chess Match Changes
I can’t speak for ConnectWise, but I believed the competitive battles listed above were inevitable. But so far they’ve yet to fully emerge. The evidence:
Kaseya: I believe Kaseya remains the largest provider of IT automation software to MSPs. But Kaseya’s PSA effort, rebranded as Kaseya Service Desk, has yet to disrupt the traditional PSA market. Perhaps that’s because Kaseya has been really busy extending its software module strategy for MSPs and enterprise customers.
Autotask: Autotask sold VARStreet back to VARStreet’s employees a few weeks ago.
- On the one hand, Autotask CEO Mark Cattini accurately stated that VARStreet really didn’t fit with Autotask’s global cloud strategy and open software strategy. Cattini doesn’t want to play favorites in the quoting and sales proposal platform market, where companies like VARStreet, Quosal and QuoteWerks often compete.
- But on the other hand, I believe Autotask would not have sold VARStreet if the platform was a rapidly growing, thriving service. Read between the lines and I believe Cattini simply didn’t see enough potential upside for VARStreet. Plus, I think Autotask’s due diligence on VARStreet during the M&A process failed to reveal just how much polish VARStreet required at the time.
Zenith Infotech: The company maintains a big MSP installed base, and Zenith Infotech has been pushing hard into the private cloud market with MSPs. But Zenith Infotech also defaulted on a bond payment in September 2011, and since that time Zenith Infotech has been locked in a legal dispute with bondholders. At the same time, CharTec has offered a range of services that don’t exactly compete with Zenith Infotech.
Successful Investments, Nonetheless
So did ConnectWise — through ConnectWise Capital — make competitive moves that weren’t needed? Actually, the preliminary results look good.
To the best of my knowledge, LabTech continues to sign up about 100 new MSPs per month and the company has introduced pricing competition in the RMM software market — a healthy trend for MSPs. Also, Quosal — the quoting and sales proposal software platform — is in growth mode. Bellini thinks Quosal could ultimately enjoy at least a 50 percent attachment rate with new ConnectWise sales.
And in many respects, CharTec has been a successful investment — though I have a hunch the financial dynamics of the CharTec deal are different from ConnectWise’s investments in LabTech and Quosal.
Rethinking Competition
When I think of the MSP software market, I think of a famous line from Steve Jobs, who once said:
“We have to let go of this notion that for Apple to win, Microsoft has to lose. We have to embrace a notion that for Apple to win, Apple has to do a really good job.”
So how would I apply that statement to the MSP software market? For ConnectWise to win, Autotask, Kaseya and Zenith Infotech don’t always have to lose. In fact, I believe ConnectWise, Autotask and Kaseya each remain in growth mode — though I can’t make a firm statement about Zenith Infotech’s current growth status, given the debt default.
Also of note: many companies that compete with the ConnectWise Capital investments — names like GFI Max, Level Platforms, N-able, QuoteWerks and PacketTrap MSP — remain in growth mode.
Serving IT Nation
For the Bellini Brothers to maintain their own winning streak, ConnectWise must follow three principles:
- First, ConnectWise has to tighten integration with LabTech and Quosal. Arnie Bellini demonstrated those integration plans (focused on manged print services, as an example) during the IT Nation conference in November 2011.
- Second, ConnectWise must ensure that customer and partner support continues to scale as ConnectWise, LabTech and Quosal grow.
- Third, ConnectWise must keep its APIs open and offer a level playing field for ISVs that compete with LabTech and Quosal. If ConnectWise ever wavers here, ISVs could get even cozier with Autotask.
At times the ConnectWise Capital investments have triggered some competitive angst. But the investments have also helped MSPs to negotiate better pricing with a range of software companies.
Checking the Account Balance
One final thought: When ConnectWise Capital launched in January 2010, ConnectWise said the fund would contain $20 million for channel-centric investments. I wonder: How much of that $20 million has ConnectWise pumped into CharTec, LabTech and Quosal? And how much money — if any — remains for additional investments elsewhere?
Stay tuned.
Read More About This Topic
Share This Post
Posted In: Acquisitions | Managed Services | Mergers & Acquisions | Professional Services Automation (PSA) | Remote Monitoring & Management Software
Tags: Arnie Bellini | Autotask | CharTec | ConnectWise | ConnectWise Capital | David Bellini | GFI Max | Kaseya | Kaseya Service Desk | LabTech Software | Level Platforms | Mark Cattini | N-able | PacketTrap MSP | Quosal | QuoteWerks | VARStreet
Interact: Add a Comment | Trackback Link | Permalink
Subscribe: RSS Feed
Take a look at our 
One thing is certain: while many of us were nervous that CW branching out would not be good for the channel, that has not turned out to be the case. CW took a few marginal (some would argue second tier) products and made them legitimate competitors to the leaders in those spaces. The result for the channel has been great – increased competition has led to better products at better prices. The consumer wins. We are paying $1,300 a month for our Kaseya instead of $3,000. Thank you Connectwise! So far companies like CW and Kaseya have managed to keep a truce and focus their efforts on their own products and growth and not on warring with each other. Got to hand it to Arnie, he seems to have made some excellent business decisions, and we all benefitted. Let’s hope things stay that way.
Dave,
I never want to paint any vendor as “all good” or “all bad.” But generally speaking, the ConnectWise Capital relationships have worked out better than I expected. In particular I assumed that the vast majority of MSPs by now would want a cloud-based RMM platform. LabTech’s on-premise growth proved me wrong.
-jp
I’ve been a CW partner since 2008 and also happen to use Labtech and Quosal — although, I made both of those decisions prior to the CW Capital investment.
That said, I can say that the MSP community that I know – was very nervous about the Labtech investment first and foremost. I heard numerous concerns that “ConnectWise is trying to take over the MSP market” and “I don’t want to be forced into using Labtech just because CW invested in it”.
From what I’ve seen though – nearly all of the initial concerns became non-issues. People are NOT being forced to use Labtech (although many are choosing to do so).
ConnectWise has not given Labtech preferential treatment (some were concerned about that as well) — and, I’ve actually heard someone tell me that the integration between Labtech and Autotask may be better than the integration with ConnectWise. Ironic, huh?
Long story short — from what I’ve seen — these investments have been a win-win-win for everyone involved. The ConnectWise users have benefitted by having more options. Labtech/Quosal have benefitted by having some much needed capital and consulting – which has spurred both of those organizations into a hyper-growth mode, thereby leveling the competitive landscape and improving the product for end-users. And, despite competitive concerns, if anything, it has helped create greater awareness surrounding the strategic importance of a good RMM and quoting solution.
I applaud Arnie and David — and the entire CW Capital team — for their continued foresight and look forward to seeing the next investment (and, of course, hearing the conspiracy theories that will surely follow).
Regards,
Rich Anderson
Next Level Cafe
CW Advisory Council Member since 2010
CW Partner Summit Instructor since 2009
CW Partner since 2008
Rich,
I see your points but also disagree in some areas. For instance, I believe LabTech gains a natural advantage (in some areas) by really discussing how the MSP software market will evolve. ConnectWise and LabTech can bounce ideas off each other 24×7. That’s not a conspiracy, of course; it’s strategic planning. But I believe LabTech is also sincerely interested in tight integration with the other PSAs.
The other RMM players also deserve credit. They maintained ConnectWise relationships even as they continued to integrate with Autotask, Tigerpaw, etc.
-jp
I agree whole-heartedly that Labtech has a geographic advantage. But they are using the same API as other RMM tools. They have not been given anything more than what Kaseya and others have received – and arguably, having an RMM at the table has materially impacted (i.e., improved) the API capabilities.
And, to your point, Labtech has continued to be very loyal to the other PSA toolsets — and, while nobody brought it up, they continue to have their own ticketing system built into Labtech itself which, arguably, competes with ConnectWise in that regard.
All told – I think we’re saying the same thing…
What was once feared as anti-competitive or possibly a monopolistic ploy – has ended up helping nearly all parties involved.
Now, to Dave’s point above, I doubt Kaseya was very happy about offering discounts to their partners after Labtech started ramping up…so they may not concur with the win-win-win statement I made earlier…but, from an end-user, open-market point of view, it needed to happen. Competition is a good thing. And these transactions have helped competition.
Always good to hear from you Joe — I hope all is well!
Rich
Rich, Thanks for that last line. I’m sitting in my home office, sipping latte, blogging and chatting with folks like you. Translation: It’s safe to say “all is well” here. Still having a blast. Best wishes for a big 2012.
-jp
Tough to add much to this conversation, I agree with where you all landed. What I will say is that I moved forwarded with LabTech right after the capital investment from CW. I believed that with that investment LabTech could quickly become a strong competitor with the other options at a lower cost. It just made sense to me. I wanted the tightest integration I could get, and felt LabTech would have a clear advantage over the competition because I am sticking with CW.
I assumed, incorrectly, that LabTech would have hooks into CW that no other RMM tool would have access to. I am a CW User Group Facilitator, and the rumblings right after the investment in my neck of the woods were not good. Everyone was guessing what I had, that LabTech was going to be “integrated” unfairly, well beyond public API’s. I didn’t really mind, I was using both tools so there wasn’t a short term downside for me personally, but the community was getting grumpy. I had heard from ConnectWise directly that LabTech did not have access to “hook” into CW beyond the open API’s just before ITN 2010, and I asked Arnie a question while he was on the main stage to address the concerns. I think his answer quelled the storm.
Since that time the concerns have lessened to nearly non-existant. MSP’s have won across the board with lower pricing and better software whether they switched vendors or not. It seems that some RMM vendors (LPI sticks out because of a conversation I had with them) didn’t see this as much of a challenge at all, and embraced the far better API’s with open arms. I have heard from LPI customers that integration with CW has improved with every API improvement CW makes.
In the end, options seem better and less expensive for all, and the CW Capital investments seem to have helped that process along. Cheers to Arnie and David!
And Happy New Year Joe!
Hi Jamison, I know the CW User Groups are private gatherings. But as big-picture trends emerge please keep me posted. And thanks for reading MSPmentor.
-jp
As a past user of nearly all the big boys (TP, AT and now CW) I can certainly attest to the importance of community on the success and growth of business. From my perceptive, I was concerned about the Capital investments as each rolled out — however, what I found was an industry catalyst to propel integrations and best practices to the forefront. Case in point is Quosal — Many either love or hate it and usually Quotewerks is the alternative considered. However, it wasn’t until CW Capital brought Quosal to the forefront, that BOTH Quotewerks and Quosal deepened their integration with CW, which was a definitely advancement for the community at large. In fact, as a by product, we can seen both improve their integrations with other platforms.
Ultimately, the CW Capital has advanced the openness of the community, the API’s for integration and the efficiency of the user base as a whole. There have definitely been some stumbling blocks along the way — mainly the fact that the new CW Capital firms are not as “mature” in their business cycle as CW itself, which sometimes causes frustrations from the user base when they expect CW’like responsiveness from the CW Capital projects — many have to realize you have to crawl before you walk and walk before you run. Ultimately, I believe the overall results, 2 years later, have been incredibly beneficial and I am eager to see the next round and its impact on the CW community and industry at large.
Great summarization of the past and good perceptive for the future… Appreciate the great article.
-mc
Michael: To reinforce one of your points… I barely knew anything about “quoting and sales proposal software” until the ConnectWise-Quosal deal emerged. The deal, as you point out, also put QuoteWerks in the spotlight and QuoteWerks just had its best year ever.
Thanks for the feedback on the article. Coming back to blog entries and seeing new comments like yours keeps me energized and engaged. Really appreciate it.
-jp
JP
Great discussion and coverage. The real value of the ConnectWise Capital investments have been in helping define the marketplace. Through these strategic initiatives, everyone serving the MSP partner community has had to step it up a notch, including ConnectWise themselves.
There have been the usual conspiracy theories floating around these investments, much as there were when HTG created a strategic and exclusive relationship with ConnectWise now almost four years ago. We heard then how the world was coming to an end and history has proven that our partnership has strengthed not only both our respective organizations, but the partners we serve jointly as well.
My hats are off to Arnie and David for having a vision for the channel, and the guts to make the investment without so much as any promise of a return. They are making bets on what is right for the channel – strong and competitive products at an affordable price – hoping that the investment will provide a return at some future time. I am confident they will see that ROI as they stay the course.
The ConnectWise Capital activity has created a much more affordable set of tools with more functionality all around. That is a win for everyone involved. Thanks for your continued balanced reporting, and helping keep us all informed on what matters in the MSP market.
Arlin
Hi Arlin,
Thanks for always reading and weighing in. I’ll let you know if I hear any conspiracy theories about HTG. Roswell, N.M., peer group sounds particularly interesting
In terms of our reporting: We are biased… but we strive to disclose our biases all the time. Do we agree with all ConnectWise moves? Nope. Is there evidence in the market that ConnectWise Capital was a wakeup call for all vendors to (A) strengthen ISV relations and (B) get aggressive on pricing? Yup.
-jp
Great Article Joe and Great comments but I would like to share a different perspective on this topic that may shed light on how other partners may feel.
I began looking for a PSA 3 Years and of course took a look at Autotask and ConnectWise. After a very extensive evaluation I went with ConnectWise as I felt at the time it truly fit my companies needs and could bring the largest ROI. Another reason I did not move forward with Autotask is their pressure sales with VarStreet. I elaborated that I had gone with QuoteWerks and couldn’t be happier with the software.
It seems as of late the roles have been reversed , I call in to get support or ask a question to ConnectWise and I get hammered with a Quosal Sales Pitch from ConnectWise. Keep in mind, I did not call Quosal, I called ConnectWise.
I understand their investment and how it has helped the community at large , but I feel as a consumer and partner of ConnectWise that they put be in an awkward predicament when they are constantly trying to sell me on a product that I want no part in. In fact , ConnectWise sales reps have made several attempts to draw me in by telling me that , “Everyone has made the switch” and made false claims of what QuoteWerks can and cannot do. (I was told I was wrong , but I use the software so I know what they can do). Furthermore, I never had to go through this process when Labtech was acquired or when CharTec came into the picture.
More and more Joe this is leaving me to not want to reach to my CW because its all about how I can spend more money with them even though I made it clear its not best for my business or I am already using an alternative tool.
At the end of the day , I invested in this software to better my business and streamline a majority of my internal processes. Now it seems like I’m calling a sales/call center and having to fight a battle that I didn’t sign up for.
Thank for sheding light on these relationships Joe
Jason P: You raise an important point about aggressive cross-selling. I heard the concerns in early/mid 2011, specifically tied to LabTech calling on ConnectWise customers. But by late 2011, I was told, the aggressive cross-selling tactics had softened since some ConnectWise MSPs had politely but firmly said their platform choices were in place and not changing.
My advice: If/when you have concerns about an MSP software vendor escalate the concerns right up the food chain. Arnie Bellini and many of his rivals are very responsive.
-jp
Jason P:
I agree with you. Your relationship with ConnectWise is very important to us. We love that you have QuoteWerks and are happy with it. Just because we have an investment in Quosal, we DO NOT want you to feel that your choices are limited. You have choices and SHOULD always choose what works best for your company.
That being said, sales people are sales people…. I will make sure they don’t make you feel uncomfortable.
Arnie Bellini
CEO, ConnectWise
Arnie: I’ve been researching quite a bit about CW today, and everywhere I looked there are mostly positive reviews of CW and especially you. I am therefore very disappointed that such a successful and respected CEO would not only throw his own people under the bus (“sales people are sales people….”), but hide behind them to cover up a poor company policy.
Disappointed.
Tom