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December 11, 2023
A little more than a week after the Insight-SADA deal hit the news, analysts are digging deeper into the reasons for the transaction.
To put it succinctly, it’s all about giving Insight Enterprises more digital transformation heft as the longtime value-added reseller continues to bolster its software, cloud and services portfolio.
Even though services, including cloud, so far only account for about 15% of Insight’s reported sales, they already amount to almost half of Insight’s gross profits, wrote analysts at channel-centric research firm
Canalys (a Channel Futures sister company) on Dec. 8. Insight still sees about 57% of its total sales coming from hardware, but that number is declining. As such, the Arizona-based company appears to be planning − and moving − ahead.
“Insight expects growth rates of services and the cloud to be double that of hardware over the next few years, and contribute an even greater share of profits,” Canalys experts said. “The acquisition of SADA will boost that further.”
Without a doubt, acquiring cloud service provider SADA, which has teamed only with Google Cloud since 2019, brings Insight targeted capabilities via the world’s third-largest public cloud computing provider (which, incidentally, just went live with what could prove a ChatGPT-4 and Amazon Q killer).
In short, Canalys analysts wrote: “With SADA, Insight quickly catapults itself as a Google Cloud star, and positions itself as the clear-cut frontrunner among primary competitors, CDW and SHI, as the partner with the most specializations and competencies across all three hyperscalers’ partner programs.”
To that point, Insight now holds an equal amount of Google Cloud competencies as rival SHI, according to Canalys. Both VARs have 10 specializations with the provider; SADA added eight to Insight’s existing two.
But Insight outpaces its two rivals when it comes to certifications with Amazon Web Services, and Microsoft and Microsoft Azure, per Canalys’ assessment. The Arizona-based company has earned four AWS competencies so far and 21 specializations with Microsoft. CDW has three with AWS and two with Microsoft. SHI, meantime, has two AWS certifications and three from Microsoft.
“Insight has already started to develop a substantial AWS business, but has lagged in building its Google Cloud practice,” Canalys wrote. “… Specialization has clearly emerged as one of the most important factors determining a customer’s choice of partner to support cloud deployments.”
The Insight-SADA pairing comes as the VAR pursues a multiyear strategy, Canalys analysts wrote.
“Insight aims to become a top ‘Solutions Integrator,’ a new breed of channel partner that combines its established hardware resell business with extensive systems integration capabilities,” they explained. “By leveraging SADA, Insight will be able to offer customers a broader range of cloud services.”
Infusing its cloud practice with a Google Cloud-only partner further allows Insight to deliver “a more holistic multicloud experience,” they added.
As such, consider what, specifically, SADA contributes to Insight:
Six Google Cloud Partner of the Year awards.
850 Google Cloud-certified professions.
Ten Google Cloud specializations.
3,000 new enterprise and public-sector customers.
Six areas of advanced Google Cloud services expertise, including consulting, deployment, cost optimization and managed services.
But there’s more to the motivation behind the Insight-SADA combination.
First, Canalys said, SADA will accelerate Insight’s financial performance. The cloud MSP reported 2022 gross profits of $200 million on net revenue of $251 million, which “is expected to significantly contribute to Insight’s bottom line,” analysts wrote.
Over the next year alone, Insight is looking for SADA to furnish between $50 million and $60 million to its operating performance.
Second, Insight gets to expand its delivery capabilities in India, a hotbed for finding tech professionals who can provision throughout the globe. SADA has an office with more than 200 Google Cloud specialists in Trivandrum.
“This will boost Insight’s ability to support cloud customers both in India, and globally,” Canalys wrote. “This builds on last year’s acquisition of Hanu, an established Microsoft cloud partner headquartered in India.”
Speaking of Microsoft, Canalys analysts said the SADA acquisition indicates that Insight understands the importance of branching out beyond its heavy focus with Redmond. Indeed, buying SADA “represents something of a deviation from Insight’s recent M&A strategy,” analysts said. They referred to the purchases of Microsoft experts vNEXT (based in France) in 2020), Hanu (based in North America and India) in 2022, and Amdaris (based in the UK) last year as primary examples.
While Microsoft remains Insight’s largest vendor, analysts noted, the VAR “has clearly recognized the importance of balancing its Microsoft focus, particularly in cloud where customers will increasingly rely on partners who are able to support a multicloud approach,” analysts wrote.
On the whole, Canalys concluded about Insight-SADA, “Insight is taking a big bet with this acquisition.”
“At a closing price of $410 million, this deal represents the second-largest acquisition in Insight's history, just behind the $581 million purchase of PCM four years ago. However, with a potential earnout of $390 million for SADA management over three years tied to performance, this could make it Insight's largest investment. This substantial acquisition underscores Insight's commitment to its five-year strategic plan. It sends a clear message to both vendors and customers about Insight's dedication to leadership in the cloud-native space, and its intention to deliver advanced cloud solutions to its global client base.”
And given Insight’s intention to offer more cloud computing, services and software, it would not be a surprise to see the company buy an AWS MSP within the next year or so, further solidifying its hyperscaler capabilities.
Contributing Editor, Channel Futures
Kelly Teal has more than 20 years’ experience as a journalist, editor and analyst, with longtime expertise in the indirect channel. She worked on the Channel Partners magazine staff for 11 years. Kelly now is principal of Kreativ Energy LLC.
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