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 MovesYes, 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 ChangesI 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.
Successful Investments, NonethelessSo 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 CompetitionWhen 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 NationFor 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.
Checking the Account BalanceOne 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?