Leading MSPs + Cloud Services = Higher Valuations?

When Computer Services Inc. earlier today disclosed plans to acquire HEIT, it reinforced a familiar trend: A growing number of top MSPs (managed services providers) are starting to promote themselves as cloud computing experts -- perhaps to raise their company valuations. In some cases, MSPs are completely repositioning as cloud services providers (CSPs) -- though HEIT doesn't go quite that far.

HEIT is a familiar, dominant name in the managed services market. The company has rapidly emerged as one of the top MSPs serving the financial services vertical. But more recently, you'll find cloud computing all over HEIT's company description.

Words Matter


Back in 2009 HEIT described itself as follows:
"HEIT provides best-in-class IT performance, compliance, and security managed services to help financial institutions improve profitability and efficiency, reduce risk, and mitigate security threats in the face of market contraction, margin compression, and increasingly complex regulatory environments."

But in today's CSI-HEIT announcement, HEIT described itself as follows:
"HEIT provides cloud-delivered IT performance, compliance and security managed services to help financial institutions improve profitability and efficiency, reduce risk, and mitigate security threats in the face of market contraction, margin compression and increasingly complex regulatory environments"

At first glance, the new HEIT description includes a small, subtle mention of cloud computing. But that small change is part of a big trend across the IT channel. mindSHIFT, another leading MSP, in July 2011 rebranded and repositioned around IT outsourcing and SMB cloud services.

Simple Math?


I could be wrong but I sense the following trends emerging:

  • When VARs transformed into MSPs, recurring revenues provided peace of mind and also raised MSP valuations.

  • As MSPs push into cloud services -- or transform completely into CSPs -- the hope once again is to increase company valuations.

  • Building and promoting cloud services also has emerged as a way for MSPs to attract potential suitors.


I don't know if CSI paid top-dollar to acquire HEIT. But I do know this: HEIT offers high-demand services (managed and cloud) in a strategic vertical market (financial services). I suspect that's a formula for a high valuation. And I suspect MSPs and CSPs will increasingly pursue similar formulas for success.

 
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