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Managed Services Acquisitions Are Coming

As a handful of SilverBack Technologies partners have demonstrated, there is money to be made in managed services. Big money, relatively speaking, if you do it right. The managed services platform vendor, based in Billerica, Mass., recently honored eight of its partners for hitting the $10 million annual revenue mark. And the vendor says it […]

Written By: Pedro Pereira

Jun 16, 2006

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As a handful of SilverBack Technologies partners have demonstrated, there is money to be made in managed services.

Big money, relatively speaking, if you do it right.

The managed services platform vendor, based in Billerica, Mass., recently honored eight of its partners for hitting the $10 million annual revenue mark. And the vendor says it expects a couple more partners to soon join these “800-Pound Gorillas,” as SilverBack has designated them.

If you’re Hewlett-Packard, Cisco or IBM, to name a few big-name vendors, you might be watching these companies with a strategic eye. Granted, these “gorillas” look more like marmosets than giant apes in the King Kong-sized world of multibillion-dollar vendors, but they offer a view into a probable future.

As more VARs, integrators and service providers adjust their business models to offer managed services, it won’t be long before companies start multiplying the revenues of SilverBack’s gorillas by many factors. If the managed services model is to deliver on its promise of profoundly transforming how the channel does business, exponential revenue growth is inevitable.

And that’s why vendors such as HP, IBM and Cisco, whose efforts in managed services have been tepid at best, need to be watching what platform vendors such as SilverBack, Kaseya, N-able Technologies, Cittio and Level Platforms are doing.

Large vendors cannot afford to sit out the managed services game, and they know it. They most likely are watching the intrepid little platform developers and trying to figure out which one is the best acquisition target.

As this point, it doesn’t look like the big vendors have developed anything that rivals the systems the managed services platform vendors are placing in the hands of channel companies with which they quickly set themselves up to remotely monitor and manage their clients’ computing environments.

So what the big vendors most likely will do is buy into the market.

Of course, if you ask any of the platform vendors today if they would sell, they will do backward flips and stand on their heads to prove they have no interest in being acquired. Any other answer would be foolish, of course, since admitting that you are willing to sell to the first set of deep pockets that knocks at your door would send out the wrong message to partners and customers alike.

Nevertheless—and here I have to rely on past IT market trend observations because I haven’t completed my mind-reading course yet—I would venture that the prospect of a sale sits somewhere in the backs of the minds of most of the platform vendors’ top executives.

Click here to read about Cittio’s “slingshot” approach to managed services.

Managed services remains a relatively small portion of the overall IT channel, and the field of platform vendors is getting crowded. Some of them won’t survive as independent companies, and it won’t be long before we see a consolidation of some kind. And that combination is sure to involve one of the industry’s acquisitive powers.

Watch what HP, Oracle and CA do. It wouldn’t surprise me in the least if one of the first acquisitions involved one of these companies.

The big vendors cannot afford to continue sitting on the sidelines as managed services becomes a way of life for an increasing number of channel companies. A lot of those companies have partnerships with these vendors, and those relationships could be in jeopardy eventually unless the vendors find a way to play in this space.

Pedro Pereira is editor of eWEEK Strategic Partner, contributing editor to The Channel Insider and a veteran channel reporter. He can be reached at ppereira@ziffdavis.com.

Managed Services Acquisitions Are Coming

Pedro Pereira

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