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ConnectWise's moves shake up the managed services platform market

November 8 2019
by Aaron Sherrill


Introduction


Just eight months after being acquired by private equity firm Thoma Bravo, ConnectWise has started to put its strategic plan, under new CEO Jason Magee, into motion. At IT Nation Connect, the company's annual user conference, Magee announced the acquisitions of IT documentation platform provider ITBoost and longtime competitor and MSP enabler, Continuum. The acquisition of Continuum advances ConnectWise's cybersecurity capabilities and moves the company into the outsourced IT services business for MSPs. Along with the acquisitions, ConnectWise also announced a strategic partnership with partner relationship management (PRM) platform provider Webinfinity. The company also made another interesting move when it announced the creation of the Technology Solution Provider Information Sharing and Analysis Organization (TSP-ISAO), an organization tasked with the mission of advancing the cybersecurity resilience of the global technology solution provider (TSP) industry.

The 451 Take
The SMB-centric MSP industry is thriving as private equity firms continue to invest, fueling mergers and acquisitions aimed at seizing a larger share of the overall market. SMB-centric MSPs, dealing with growing pains and increased customer demands, are looking for help in scaling and growing their businesses. Many MSPs are seeking a single, unified platform that can deliver capabilities and expertise spanning IT operations and management, advanced security services, cloud management and compliance while enabling them to go to market faster with new services.

The ConnectWise Continuum deal is one of many recent transactions in the MSP tools space as platform providers continue to expand their capabilities to meet MSP demand. Although ConnectWise and Continuum operate with distinctly separate business models, the move should prove to be successful for ConnectWise if it can fully embrace and integrate both models to serve MSPs across a wide spectrum of needs and capabilities.

Context


Founded in 1982, Tampa Bay, Florida-based ConnectWise provides business process automation for MSPs and TSPs, delivering tools for quoting and selling, billing, remote monitoring and management, service and project management, relationship management, and cloud management. The privately held company was acquired by Thoma Bravo in February.

ConnectWise (post-acquisition of ITBoost and Continuum) reports that it serves 30,000 MSPs and partners in 65 countries. ConnectWise has grown organically, citing consistent 20+% annual revenue growth rates and strong profit margins. The company reportedly posted $243m in annual revenue in 2018.

Promoting an open platform, ConnectWise says it gives MSPs and TSPs the flexibility to choose the best combination of technologies and services that fits their business model, expertise and customer mix. The platform supports over 250 third-party integrations that span reporting and business intelligence, accounting, customer relationship management, security, IT management, quoting, telephony and payment processing. A library of open APIs enables MSPs to build custom integrations to other third-party technologies or services and homegrown, custom applications.

ConnectWise expanded into the cybersecurity domain last year. Primarily focusing on enabling MSPs to deliver cybersecurity services, the company invested in Perch Security, a provider of self-service threat intelligence tools for MSPs, and acquired the Sienna Group, a security services provider. In April, the company launched ConnectWise Identify, a risk assessment tool based on the NIST framework, and announced the availability of Perch's co-managed threat detection and response platform services through the ConnectWise platform.

Continuum


Continuum, a managed services platform provider and master MSP, equips MSPs with the technologies, platforms, services and processes necessary to deliver managed IT and security services. Leveraging a SaaS-based technology suite and platform backed by Continuum's network operations center (NOC), security operations center (SOC) and helpdesk, the company enables MSPs to remotely monitor, manage, secure and back up their clients' IT environments from a single pane of glass. The Boston-based company contends that its services help MSPs close expertise gaps, provide 24/7 services, reduce costs through automation, go to market faster with new services, increase profitability and achieve scalability. Continuum reportedly employs more than 1,400 professionals and monitors more than 1.2 million endpoints for its 5,800+ MSP partners that service more than 65,000 SMB customers.

The company added security services to its portfolio last year, quickly expanding its capabilities through the acquisition of Carvir, a cybersecurity provider focused on delivering security information and event management and endpoint detection and response capabilities to MSPs. Last month, Continuum augmented the security suite with the addition of managed detection and response (MDR) services. The new capabilities aim to provide MSPs with the ability to deliver fully managed MDR services designed to automate correlation and threat identification across the IT ecosystem to quickly identify cyberthreats and disrupt attacks.

The acquisition of Continuum, also owned by Thoma Bravo, was the most impactful of the many announcements made recently at ConnectWise's annual IT Nation Connect event in Orlando. ConnectWise says the deal represents a significant step toward its vision of making its platform the control center for MSPs, providing everything MSPs require to run their business and deliver managed services.

ConnectWise says Continuum complements its existing offering more than it overlaps, enabling it to serve a broader range of MSPs. From those that are only looking for platforms, tools and technologies to MSPs that need outsourced expertise or turnkey capabilities, ConnectWise believes its breadth of services, tools and resources can enable MSPs to build profitable, efficient businesses regardless of their business model and skill set. ConnectWise plans to operate Continuum as a separate business under its current brand and management while the company develops a full strategic plan. While MSP partners should see some minor benefits from the acquisition in the short term, ConnectWise indicated that partners could expect to see more benefits in early 2020.

ITBoost


Privately held ITBoost was founded in 2016 by CEO Ali Peracha, CTO Omer Khawaja and CFO Raza Rafiq. The Dallas-based company offers a cloud-based platform designed to boost and maximize productivity and efficiency for IT service providers through documentation, password management, customer feedback and business intelligence capabilities.

The addition of ITBoost follows recent similar moves by some of ConnectWise's main competitors. In December, Kaseya announced it had acquired IT documentation platform provider IT Glue. In April, SolarWinds acquired Passportal, a provider of MSP-focused password management, documentation and privileged client knowledge management tools. ConnectWise says it has already begun working on the integration of ITBoost with its platform so partners can quickly benefit from deeper integration and automation with the IT document tool.

Webinfinity


ConnectWise also announced a new, strategic partnership with Webinfinity, a portal and partner relationship management company. ConnectWise says the goal of the partnership is to simplify the overhead MSPs are burdened with when working with technology and service vendors. According to ConnectWise, MSPs and TSPs struggle to maintain the many touchpoints and complexities that vendor partner programs and interactions impose, resulting in inefficiencies and lower margins. These challenges become magnified as technologies increasingly shift to being delivered as a service. Revealed as ConnectWise Engage, the company says the new capabilities will centralize touchpoints for areas such as deal registration, co-marketing, training and enablement, multivendor support issues, SKU management, and communications.

TSP-ISAO


Last year, the US Department of Homeland Security issued an alert warning MSPs that they are prime targets for advanced persistent threat actors seeking to exploit the trust relationships they have in place with their customers. Because SME-centric MSPs often have direct and unconstrained access to their customers' networks, attackers that can successfully compromise an MSP can potentially have full access to all of the MSP's customers with minimal effort.

In response, ConnectWise has launched the Technology Solution Provider Information Sharing and Analysis Organization, inviting service providers, technology vendors and competitors to join. According to ConnectWise, the TSP-ISAO will provide services to help members accelerate the maturity of their cybersecurity and compliance programs. Powered by Perch Security's threat intelligence platform, the collaborative effort will provide members with threat intelligence, education, benchmarking, best practices and impact analysis. The group's formal launch is scheduled for January 1.

Competition


Amid a flurry of mergers and acquisitions among MSP platform providers, the battle for SME-centric MSP market share is heating up. Earlier this year, Kaseya, one of ConnectWise's chief competitors, announced it had completed a new investment round worth over $500m to fuel growth and innovation. Kaseya has made several recent acquisitions to expand its portfolio including backup and disaster recovery vendor Unitrends, assessment and compliance vendor RapidFire, cloud-to-cloud backup vendor Spanning, security vendor ID Agent, and managed services documentation vendor IT Glue.

Other traditional rivals, including SolarWinds, Datto (Autotask), HarmonyPSA, NinjaRMM and Barracuda Networks, have all made investments to expand their capabilities and services portfolios while also growing their vendor partnerships and integrations.

The move into security services will expose ConnectWise to another intensely competitive space. Security service providers such as inSOC, Opaq Networks, Pax8, CyberBit, Cylance, CyberArk, Arctic Wolf, Security On-Demand, Sophos, BitDefender and Webroot are aggressively targeting MSPs with their security service offerings.

SWOT Analysis SWOT Analysis

Strengths

Weaknesses

ConnectWise's scope of services, scale and open platform approach have proven to be successful for the company. The addition of Continuum and ITBoost should further increase the platform's value to MSPs and provide the SOC and NOC services many MSPs need to compete and grow their businesses with security services.

ConnectWise may find it difficult to fully serve MSPs with varying degrees of maturity, capabilities and needs. A small, local, five-person MSP with dozens of customers has vastly different demands than a national MSP with hundreds of employees managing hundreds of thousands of endpoints.

Opportunities

Threats

Streamlining the delivery of managed services with an on-demand marketplace, similar to that of PAX8, seems to be a natural addition for ConnectWise as it rolls out its partner relationship management capabilities.

Competition for services targeting SMB-centric MSPs is as intense as any market in the technology space. As ConnectWise works though integrating its new acquisitions and partnerships, it will need to move quickly but cautiously as MSPs tend to have little tolerance for any disruptions or changes that negatively impact their margins or ability to serve their customers.

Source: 451 Research, LLC