The deal finally happened. ConnectWise Capital has invested in LabTech Software, a remote monitoring and management (RMM) software provider located in Toledo, Ohio. Official news is expected to surface in the next 24 hours or so. At first glance, it's a relatively small deal. But I think the ConnectWise-LabTech relationship has key implications for the overall MSP software industry. Here's why.
First, I'll give you the straight news. Then, some of my own opinions.
The news: ConnectWise Capital is funding LabTech Software, a "unique Managed Services software application for remote monitoring, management, and automation." Financial terms of the relationship, slated for Feb. 19 announcement, aren't expected to be disclosed.
While ConnectWise specializes in PSA (professional services automation) software, LabTech is a relatively small competitor in the RMM (remote monitoring and management) market, where larger names like IT Control Suite, Kaseya, Level Platforms, N-able , PacketTrap and Zenith Infotech compete (just to name a few).
According to a prepared statement from LabTech CEO Matt Nachtrab:
“LabTech is the only remote monitoring, management, and automation tool developed BY a managed service provider FOR managed service providers. Our affordable, agent-based solution quickly transforms solution providers into managed service providers with the flip of a switch. Field Technicians become NOC technicians in 15 minutes because we are the only solution that emulates what technicians do in the field. We understand our Partners because we are also an MSP. We let our Partners purchase the number of agents they need to start, and add as they grow.”Read between the lines and Nachtrab is saying few things. First, his statement parallels ConnectWise's frequent "We are you!" mantra. And perhaps I'm reading a bit too much into it, but Nachtrab's closing line about adding agents as you grow seems to be a counter-punch to some MSP software providers that have bulk licensing requirements.
Balancing ActLooking ahead, ConnectWise will need to balance the LabTech deal with a range of RMM and API (application programming interface) relationships -- involving IT Control Suite, Kaseya, Level Platforms, N-able, PacketTrap, Zenith Infotech and plenty of other companies.
Is that balancing act possible? In some cases, yes. Examples of healthy "coopetition" are everywhere in the software market.
- Microsoft, for instance, has its own database (SQL Server) but the software giant's Windows Server team also maintains healthy database relationships with IBM DB2, Oracle, MySQL and many other emerging open source database providers.
- And in the MSP market, N-able balances a multi-year endpoint security relationship with Panda Security, even as N-able continues to integrate with Symantec and other third-party security products.
Using the Right WordsBoth ConnectWise and LabTech are quick to say they will continue to work with a range of software partners.
During a phone call this evening, ConnectWise CEO Arnie Bellini confirmed the ConnectWise Capital-LabTech relationship. But Bellini was quick to mention ConnectWise's continued commitment to RMM partners, and the broader ecosystem of 300 companies that plug into ConnectWise.
"I care about our business relationships," said Bellini. "You can count on us to keep our APIs open and to build on our RMM partnerships. We see LabTech as an opportunity to address some emerging vertical opportunities, but that won't impact our commitment to our RMM partners."
LabTech's Nachtrab offered a similar prepared statement:
“LabTech currently integrates with ConnectWise and all leading PSA solutions, and will continue to support and improve these interfaces."
Reality Check 1: LabTech's PSA RelationshipsNow, let's dive into some of my personal views.
I concede: It's hard to believe a ConnectWise-funded business (LabTech) will work hard to integrate with folks like Autotask and Tigerpaw.
Autotask announced integration work with LabTech in October 2009. And Tigerpaw counts LabTech among its MSP integration partners. Will those relationships move forward now that LabTech is hitched to ConnectWise Capital? I've got emails into both Autotask and Tigerpaw seeking comment. If I hear anything I'll let you know. And I'll check back with LabTech in a few months to see whether those third-party PSA relationships are holding up.
Reality Check 2: ConnectWise's RMM RelationshipsOn the flip side, I believe ConnectWise will work to maintain close relationships with a range of RMM players. Why? The answer is pretty simple: ConnectWise views its PSA platform as a business-level operating system. And operating systems require third-party applications to thrive.
If ConnectWise doesn't maintain ongoing relationships with a range of RMM providers, it could prompt numerous folks to work even more closely with Autotask (which has a very healthy ISV and partner ecosystem of its own) or Tigerpaw. Either way, you can bet numerous RMM providers are on the line with Autotask this week, making sure their relationships are solid.
Early Partner ReactionStill, RMM providers aren't pressing the panic button over the ConnectWise-LabTech relationship. I've got notes out to multiple RMM companies. Here's what I've heard so far.
Zenith Infotech VP Maurice Saluan had no immediate comment, but a second source at Zenith Infotech says it's "business as usual" in terms of the Zenith Infotech-ConnectWise relationship.
N-able CEO Gavin Garbutt's reaction was similar. "I don't see anything wrong with what ConnectWise is doing with LabTech," said Garbutt. "Arnie isn't out to declare world domination. There are more than 1.1 billion devices in small business. And less than 10 percent of them are managed."
Garbutt and Bellini, in separate conversations, were quick to note that business deals can sometimes trigger Blue Ocean opportunities (where companies define and build new markets), rather than Red Ocean strategies (which involve bloody battles for shrinking profit pools).
I'll strive to speak with more RMM providers in the days ahead.
Chess Match?Ultimately, I think ConnectWise is in discovery mode. That is, ConnectWise Capital is making business moves today based on how they think the MSP software market may consolidate in three to five years. And part of that consolidation conversation involves a quiet chess match between ConnectWise... and Kaseya.
In January 2010, MSPmentor told readers about emerging coopetition between ConnectWise and Kaseya. Yes, the two companies continue to cooperate on a range of integration efforts. I don't expect that to change -- especially since thousands of MSPs run ConnectWise and Kaseya in tandem.
Still, the rise of Kaseya 2 (a new management platform with some PSA capabilities) is a potential market inflection point (at least for me...). And I think the ConnectWise Capital-LabTech deal is a potential countermeasure to that inflection point.
Long-Term ViewToday, multiple RMM vendors are competing successfully in the managed services market. But multiple scenarios could unfold over the next few years...
- Scenario A: One to three RMM providers could gain dominant market share. If Kaseya somehow grabbed an absolute dominant position (while offering customers some PSA functionality), then ConnectWise will want to have countermeasures in place. That's where LabTech enters the picture.
- Scenario B: One (or more) major technology companies -- say, Microsoft, Cisco Systems or Citrix -- could step in and start buying RMM software providers. Here again, ConnectWise may want some RMM expertise in order to better understand larger competitor motivations.
Was I surprised by the ConnectWise-LabTech deal? Not really. The rumors started back in October 2009. And by December 2009, I was keeping an eye on LabTech's back yard (Toledo, Ohio -- see tip 3 here).
To Be Continued...And remember this: Just when you think you understand the rules of the MSP game, somebody steps in to change them. By this time next week, I think somebody will open their wallet to change the rules of the MSP game yet again. In fact, I can practically guarantee it...