MSP software landscape shifts amid consolidation, new tools

An evolving MSP software market offers service providers wider choices for running their businesses. Will they embrace platform consolidation or consider other options?

The MSP software market is evolving with platform consolidation, seemingly limitless product integrations and emerging tool options for channel partners.

Software providers aim to cover a wide swath of functionality through in-house product development, acquisitions and alliances with other technology companies. Software for MSPs, two decades ago, initially focused on the remote monitoring and management (RMM) of systems. Since then, the scope has grown to include quoting, billing, project management, backup and disaster recovery, and cybersecurity. Today, the demand for cloud management has opened the door for non-traditional software suppliers to approach MSPs.

The vendors' technology roadmaps are important for services providers, which rely on software to run their businesses and support customers. Developments in recent weeks capture the spirit of the changing software times for MSPs:

  • In platform consolidation, MSP software provider Kaseya said it has completed 191 integrations between Kaseya and Datto products and modules since the companies combined. Kaseya, based in Miami, closed its $6.2 billion purchase of Datto in June 2022. Company officials discussed Datto integration and product strategy last week at DattoCon, an annual partner event.
  • ConnectWise, an MSP software provider with headquarters in Tampa, Fla., last month acquired Wise-Sync, which offers a payment processing platform. Prior to the deal, Wise-Sync had integrated with ConnectWise Manage, a professional services automation (PSA) With the acquisition, Wise-Sync's payment processing technology now integrates with ConnectWise Sell, an automated quote and proposal offering.
  • Atera, an RMM and PSA provider based in Tel Aviv, last week unveiled integrations with Veeam Software, a backup, recovery and data management company; ThreatLocker, an endpoint security vendor; and Domotz, which provides network monitoring software.
  • In the cloud management category, SaaS Alerts, based in Wilmington, N.C., earlier this month pulled in a $22 million investment from venture capital firm Insight Partners. SaaS Alerts monitors SaaS applications including Microsoft 365, Google Workspace, Salesforce and Dropbox.
  • OpsRamp, an AIOps provider that offers multi-cloud management, continued its push into the MSP market. The San Jose, Calif., company last week listed Virtual Service Operations, LiquidIT, Pinnacle Technology Partners and WinWire as recent customer deployments.

MSP software consolidation: a mixed blessing

Mergers and acquisitions involving the largest MSP software players has been among the most visible industry trends. Mega deals such as Kaseya-Datto and smaller add-on transactions, such as ConnectWise's Wise-Sync purchase, have expanded IT platforms for MSPs.

"MSP software consolidation is having a major impact on the landscape," said Marty Flaherty, executive director at GP Bullhound, a technology advisory and investment firm specializing in software.

Building out a software platform for MSPs has its advantages. Software customers, in general, are looking to consolidate the number of vendors they use, Flaherty said. "There are so many tools and they all have their unique capabilities, their unique quirks and things you have to get trained on," he noted, adding that maintaining multiple tools becomes expensive.

In addition, consolidation lets users "go toward a single pane of glass, where you can manage your operations, view alerts and manage services," Flaherty said.

MSP evolution graphic
MSP software, which emerged at the industry's onset, is broadening to include options from the cloud management field.

Flaherty, however, also acknowledges that customers may experience uncertainty amid acquisitions. "There are definitely always concerns about whether or not the acquirer will run the business in the same way, whether it's going to focus on a particular end market in the same manner, and whether or not they'll invest to keep the products fresh on the on the leading edge," he said.

Kaseya leadership has stated its plan to invest in Datto's products, which commits the company to maintaining Datto and Kaseya as dual offerings.

Tool integration as a selling point

In general, MSP software platform vendors view breadth of capability and expanding integration as benefits for their service provider customers.

Holly Pateman, senior vice president of product marketing at Kaseya, pointed to the company's IT Complete platform as a differentiator, noting it provides workflow integration among software modules. IT Complete's modules include RMM, PSA, security, compliance, backup and documentation.

Pateman distinguished between API integrations and workflow integrations. The latter, she said, are deeper linkages that provide a more "seamless experience" for users. The company is currently implementing workflow integrations between IT Glue (Kaseya's documentation offering), Datto Networking and payment processing systems into Autotask PSA, she said. Datto purchased Autotask in 2018.

Also in the works are a dozen new supplier integrations and workflow integrations with Datto Commerce, a quoting and procurement system for MSPs.

MSP software consolidation is having a major impact on the landscape.
Marty FlahertyExecutive director, GP Bullhound

Jake Varghese, executive vice president and general manager of business management at ConnectWise, said MSPs expect platform providers to offer the key capabilities they use every day -- along with a unified and secure user experience. ConnectWise's Asio platform brings together the company's MSP software portfolio.

"[MSPs] also expect a table-stake set of integrations to be available," which tightly interweaves the ConnectWise platform with service providers' existing tech stacks, he noted.

The multiplicity of products and the incremental costs associated with additional management and security surface areas has become a pain point for MSPs, Varghese said.

"We hear from a majority of MSPs that they are frustrated by tool sprawl," he said.

While Atera pursues its own set of integrations, it also cites IT automations as a feature attracting more MSPs. The company's automations let MSPs create rules and set schedules to execute repeated processes. Atera said the share of its customers applying automations in 2022 has grown 20% compared with last year.

"Working in an automated environment translates into greater efficiency," Atera CEO Gil Pekelman said. MSPs that use IT automations manage 80% more clients than those that don't on average, he noted, citing an Atera analysis.

Non-traditional tools expand options

Traditional MSP software players state their case on broad product sets, integration and efficiency features. But companies from outside that market segment offer tools with a different orientation.

SaaS management vendors offer one example. Dave Sobel, host of The Business of Tech podcast and a former MSP owner, cited Augmentt, SaaS Alerts, Nuvolex and Nerdio as up-and-coming companies in this market. "I expect them to become the tools of the future," he said.

That's because the SMB market, where most MSPs make their living, gravitates toward the cloud in general and SaaS offerings in particular. SaaS management, monitoring and reporting are the features most needed in that market, according to Sobel, who has software experience with vendors such as Level Platforms and SolarWinds.

AIOps companies are also in the new-tools mix. OpsRamp has found success with MSPs moving up market to work with larger customers.

How one MSP handles myriad tools

1901 Group, a Leidos company and MSP, wouldn't deny that service providers have more software tool options than ever before.

The company has brought together 20 commercial and open source tools to run its business, said Paul Wilkinson, chief growth officer at the Reston, Va.-based company. 1901 Group's software platform spans IT service management (ITSM), IT operations management (ITOM), cloud management, application lifecycle management and cybersecurity. AIOps cuts across the company's tool roster as a horizontal capability.

Multiple-tool integration, versus relying on a single product vendor, is how 1901 Group addresses customers' complex IT environments.

"We have taken a hybrid approach," Wilkinson said.

ServiceNow serves as the center of 1901 Group's tool universe, he noted. The SaaS platform provides ITSM, ITOM, performance analytics and cloud governance among other features. Other components include ScienceLogic's IT infrastructure management platform, cloud-native tools such as AWS' CloudTrail, and specialized tools that play niche roles.

"Most of the MSPs who use Kaseya, N-able [or] ConnectWise are fundamentally catering to the SMB space, offering traditional desktop support and break/fix models through RMM, with PSA tracking the hours that the teams are spending," said Varma Kunaparaju, co-founder and CEO at OpsRamp.

MSPs in the mid-market and larger enterprise sectors need to shift from a desktop orientation toward distributed data centers and hybrid- and multi-cloud approaches, he added. "Automation needs are completely different for this set of MSPs."

Flaherty also sees room for software providers -- in addition to the traditional vendors -- that offer innovative licensing approaches, address MSPs' specific use cases or focus on vertical markets. He cited RealVNC, Pax8, Vade Secure, Splashtop and Huntress as examples.

"There is a really interesting tier of companies beyond the large consolidators that have some pretty compelling business models and technology and use cases," he said.

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