The planned merger of IT service management vendor Autotask and data protection and networking vendor Datto is a testament to how strong the managed services provider business has grown and its prospects for future growth, said executives of the two companies.
Vista Equity Partners, the San Francisco-based investment firm which has owned East Greenbush, N.Y.-based Autotask since 2014, on Thursday unveiled the acquisition of Norwalk, Conn.-based Datto with an eye towards merging the two into a single MSP powerhouse.
Since both companies are privately held, no financial details of the transaction were provided. The acquisition and merger are expected to be finalized by year-end.
The final name of the combined company has yet to be determined. However, it will be led by Datto CEO Austin McCord.
The two companies are successful and respected providers of technology to MSPs, said Patrick Burns, vice president of products at Autotask.
"We are both bringing complimentary tools, complimentary customers, and complimentary geographies together," Burns told CRN. "The MSP business is a massive market. And this is Vista recognizing the market's growth."
Peter Rawlinson, Datto's chief marketing officer, said both the IT industry and Vista have seen how important the MSP market has become, and that bringing the two companies together becomes a force multiplier for reaching MSPs.
"The MSP market isn't as well known as, say, the VAR market," Rawlinson said. "For a company like Vista to invest in Autotask and Datto, it shows solid commitment to this business."
Both Autotask and Datto are profitable and growing companies, although neither executive would provide financial details about the companies.
The two companies approach the MSP business from two different perspectives, Burns said. Autotask specializes in tools including professional services automation, or PSA, and business services automation, or BSA, while Datto has full-scale disaster recovery, business continuity, and networking services that MSPs can offer their customers, he said. "So we have the platform for MSPs to run their business and the tools they can deploy to customers," he said. "We're highly complementary to each other."
Datto has a much larger overall business, while over 50 percent of Autotask's new bookings are from international customers, giving the new combined company a wide global footprint as well, Burns said.
Burns said that more acquisitions are possible to fill out the combined company's capabilities. "However, we're not ready to talk about it yet," he said. "Our investors are ready. And both companies have experience with acquisitions and with the integration of new technologies. So we'll be looking. But we're not in a huge rush. We'll be thoughtful."
The merger is a great way for the two vendors to better compete in the MSP market, said Mark Calzone, president of Ash Creek Enterprises, a Stratford, Conn.-based MSP which partners with both Datto and Autotask.
The two companies, along with such competitors as Continuum, Kaseya, and ConnectWise, all offer different takes on the MSP business based on the products and services they provide, Calzone told CRN.
"Only time will tell how the competitive landscape shapes up," he said.
Datto has done a good job with acquisitions, particularly that of networking technology provider Open Mesh, Calzone said.
"I had not heard of Open Mesh before the acquisition," he said. "But at June's DattoCon conference, they gave each attendee an access point to test for free. We have been testing, and it is good technology at a good price point."
Autotask also has a good acquisition record, and just recently rolled in CentraStage, a provider of RMM (remote monitoring and management) tools it acquired in 2014, he said.
Calzone said that he was not surprised to see Datto and Autotask merge.
"Other have gone through mergers in this market," he said. "ConnectWise and Continuum are constantly augmenting their existing products and services with acquisitions when needed. It's a good thing. These companies know they need to bring in new services to compete and be better than the next company."
Burns and Rawlinson declined to discuss how the combined company compete with such competitors as Continuum, ConnectWise, or Kaseya.
"We know who the obvious competitors are," Burns said. "But we know this combination, and what we are bringing to the market. We don't obsess over our competitors. And as this market evolves, the competitive landscape changes."
Except for some limited tactical positions, no reduction in force is expected after the merger closes, Burns said. Indeed, parent company Vista is planning on growth, he said.
"We need good people to grow," Rawlinson said. "It's doubtful we'd be downsizing now."