SolarWinds (NYSE:SWI) CEO Kevin Thompson described the $120 million N-able Technologies buyout today during an analyst call. What does Thompson think of the managed services space, and what will happen to N-able employees? Here are the details revealed during the call. 

  • SolarWinds knew it wanted to acquire a remote monitoring and management company to move into IT management of small businesses. It looked at several companies that provided an RMM platform to MSPs as part of its acquisition process, according to CEO Thompson. Thompson: “We believe the RMM market is underserved by the vendors in the RMM market today,” Thompson said.  “We will be building on N-able’s momentum in the RMM market.”
  • SolarWinds does a relatively small business with MSPs today because its technology is not multi-tenant.  Thompson described it this way: “Today we serve the high end of the MSP market. We sell to one company that is serving another big company. We can manage things from a central location, but it's point-to-point and not multi tenant.”
  • “Our percentage of business with MSPs is very very small today. This opens up a market we have really not been serving in the past. We didn't have a great way to get there in the past, but now we do.”
  • SolarWinds/N-able will immediately stop selling perpetual licenses.  Here’s why: N-able had been pushing perpetual license sales harder because they provided more cash up front for reinvestment in the business, but the company’s leaders knew that a cloud-based model was the ultimate goal and that’s where they wanted to go. They just couldn’t do that while at the same time reinvesting in the company at the rate they needed to. The classic: How do I move from a capital sales model to recurring revenue model problem.
  • Thompson said N-able’s current sales and marketing approach works well, and over time SolarWinds will add in its own expertise to help N-able scale these efforts.
  • Thompson: SolarWinds has been watching the RMM business for the last four to five years. Now there’s more money in it, which made buying an RMM company more attractive. Also, the market “is served by a fragmented set of companies…N-able has emerged as the leader.”
  • Thompson, responding to an analyst question about why to sell to a managed services provider instead of directly to a small business customer: N-able made the decision to sell through the MSPs and “we think that’s the right decision. It allows you to touch one MSP, and they can touch 10, 20, 100 or 1000 businesses. We don't see any need or reason to change that go to market strategy.”
  • N-able’s retention rates have been good, and that’s one of the reasons SolarWinds executives think they are the best vendor in the market. “We really think it differentiates them from competitors in the space.”
  • SolarWinds will not ask N-able reps to cross-sell SolarWinds products: “You can only ask a rep to sell in one way, subscriptions or licenses,” Thompson said.
  • Thompson said there are key points of pain that MSPs need to solve today and SolarWinds can extend its competitive advantage to bring key features to N-able’s operating model.  However, he did not elaborate on those features.
  • SolarWinds will retain almost all of N-able’s employees. The company will not initially create cost synergies. Because of that N-able will not add to earnings

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