Autotask Sells VARStreet Business to VARStreet Employees

Autotask Sells VARStreet Business to VARStreet Employees

Autotask has sold VARStreet to VARStreet's management and employees, ending a 21-month business marriage that never quite clicked. Autotask will focus on international expansion with VARs and MSPs, while VARStreet heads off as an independent company, seeking to help VARs and MSPs to more easily source IT products. Here's why the two companies ultimately went their separate ways.

Autotask acquired VARStreet in March 2010 as part of a one-two punch to help MSPs manage IT services (Autotask) and product sourcing (VARStreet). But the Autotask-VARStreet synergies never fully materialized. Yes, VARStreet showed signs of growth -- doubling the platform's user base within two months of the Autotask deal. But I always had a silent suspicion that VARStreet's platform required far more enhancement than Autotask anticipated. Looking back on our own coverage, MSPmentor should have been a bit more skeptical about the Autotask-VARStreet combo.

The Autotask-VARStreet Timeline

Former CEO Bob Godgart did a lot right for Autotask -- building the company into a $20 million business from about 2001 through the end of 2010. But the Autotask-VARStreet deal never really clicked. By late 2010, sources close to Autotask told me that the company should have done more due diligence on VARStreet before making the acquisition. From late 2010 through the present, Autotask was mostly silent about VARStreet -- continuing to upgrade and enhance the platform but not saying much publicly about the effort.

At the Autotask Community Live conference in May 2011, new CEO Mark Cattini -- Godgart's successor -- barely mentioned VARStreet. Also, VARStreet had only a small presence on Autotask's conference agenda. Check this interview (question number six) from May 2011, and you'll see Cattini tactfully de-emphasizing VARStreet as a core focus.

Earlier this week, Cattini shared additional insights with MSPmentor. I asked Cattini when he realized VARStreet may not be a fit with Autotask. His reply: "As soon as I got here [in December 2010], to be honest, I found it hard to see how VARStreet really fit in with our strategy."

Keeping an Open Mind

No doubt, VARs and MSPs need product sourcing and price quoting tools to speed sales proposals and win more business. Options like VARStreet, CNet's Channel Online, Quosal and QuoteWerks can potentially meet those needs. But Cattini doesn't want Autotask to play favorites; instead, he wants to ensure Autotask's own SaaS platform is open on the back-end (integrating with a range of ISVs and cloud services) and open on the front end (supporting all web browsers).

"The product [VARStreet] has become better and better," Cattini told MSPmentor this week. "But fundamentally we decided that VARStreet didn't fit our long-term strategy of being open. So we're transferring [VARStreet's] ownership in the best, least-disruptive way. We’re handing it back to the guys who think all day about the VARStreet tool."

VARStreet's headcount will essentially remain the same as the tool's ownership shifts from Autotask to VARStreet Inc. According to today's press announcement:
"The new company, VARStreet, Inc., backed by private investors will be led by VARStreet veterans Shankar Gopalan and Shiv Agarwal who built VARStreet’s existing client base and customer relationships, and Vikas Bhir and his team, who have helped create, develop and support the VARStreet service since its inception."
No doubt, VARStreet does have a loyal following among some well-known VARs such as Pomeroy IT. The platform has been around since 1999. I asked Cattini if Autotask lost substantial money with the VARStreet purchase and now sale. His reply: "We’re happy with the transaction."

I've also reached out to VARStreet for their perspective going forward. Meanwhile, VARStreet offered these perspectives on its 2012 strategy. The strategy sounds promising but the company could face intensifying competition, especially since Quosal is now backed by ConnectWise Capital, and QuoteWerks is completing its strongest year to date.

Autotask's International Moves

Meanwhile, Autotask recently raised $6 million to fuel its global expansion strategy. Cattini offered MSPmentor some updates on that effort during our phone conversation this week. More on that later today.
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