Kaseya & Datto - it's time for small MSPs to rethink their vendors

By now you have seen and heard much about Kaseya acquiring Datto in a $6.2 billion deal creating a behemoth provider of MSP software, IT management, data protection, business automation and cybersecurity technologies.  

The implications for MSPs of this kind of mega-merger was a topic I covered in some detail in Episode 28 of our Infinite Scale podcast: Death by a thousand cuts - why MSPs should choose vendors wisely. One of my key concerns for MSPs was that vendor consolidation is leading to a deep homogenization in the industry. While innovation should abound in this very entrepreneurial industry, what we're now seeing is that everything's a little bit "samey samey". This latest link up between Kaseya and Datta will just exacerbate this. What this leads to is further restriction in the way that you can deliver for your customers which leads to further commoditization which leaves price as the only differentiator!  

Another concern is that, like any concentration within a market, there is the potential for customers to effectively be held hostage. Locked into long contracts with products that are no longer serviced properly or shut down and/or no ability to negotiate effectively on price - particularly if you are smaller. Not a good position for any MSP to be in when the cost of labor and doing business is on the rise. 

Don't get me wrong, there's lots of great things that big vendors can provide - because of their scale, customer base and capacity to invest. The question is - as a smaller MSP - how much should you leash yourself to one eco-system or vendor? There's so much that is unpredictable when you're small and growing. How fast will you grow? What market forces will suddenly appear that either disrupt or further your growth plans and opportunities? And of course, we now have a classic example of how vendor consolidation can all of a sudden change the way you do business. 

Make your independence your goal 

So, what can you do to maintain your independence and your uniqueness? Whether you are just looking to sign up or already locked in with vendors, this piece of news is a good time to reflect on actually what you really need in your MSP and what you can't live without from your vendors. They do an incredible job of making you feel like you're missing out if you don't buy their ticketing system, their RMM tool or their documentation software. It still surprises me how often I come across MSPs with little to no revenue but a deeply polished stack of under-utilized products. 

So, if you're a smaller MSP, have a good think about what it is that you actually need. I would say that all you really need is a telephone and a simple ticketing system and get out there and sell. Customers will buy from you not because of your tool stack but because of you and the problems you can solve for them. If you're small, it's good to take the point of view that every tool you buy needs to be paid for by your customers. So, if you add a tool - you should increase your price to protect your margin. Consider this and then see if it's worth potentially upsetting a client relationship with something that they don't see adds more value. In other words, limit the number of tools that you buy.  

Of course, if you have already gone down the path of building out a stack - take a good hard look at your utilization and the time it is either saving you or costing you to manage and operate it. Consider its impact on your bottom line. If you didn't have to service the cost - what would your margins look like? How would it impact the way you allocate your time? Whatever the outcome, think about what your exit strategy might be when it comes to your vendors. Make sure you really know what they can hold you to and particularly when it comes to mergers or takeovers. 

Ultimately the goal is to set your MSP up to maximize your independence, your profits and the time you can spend selling.