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.
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.
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