It is not surprising that M&A is a subject for MSPs to talk about given the changes in the industry. “We are seeing more – there is a lot of cash coming in, and the venture capital firms are keen to invest,” IT Lab CEO Peter Sweetbaum told the Managed Services Summit in London on September 18.
In a presentation on buying and growing in managed services, the veteran of nine deals himself looked at the issues. It is not a one-dimensional picture, he told several hundred MSPs. In the case of IT Lab, the desired outcome was to reach a level of a £100m business, starting with a standard MSP.
“We needed to get to the top of that plateau – so we had to move up market, become more relevant to clients, more strategic. Signing contracts with SMEs for a few hundreds of pounds a month is not going to get you to £100m. The final piece is value-add is though capabilities and experience – through intellectual property, and be something different,” he said.
"It is the combination of all those things, together that gets you to the top," he says. And not just the elements, but the ordering and timing, and how these things happen, he explained.
But a word of warning for some in the industry: “M&A is not a proxy for a poor sales and marketing strategy; if you cannot grow organically and don’t have that sales and marketing strategy fueling your growth, you need to rethink. M&A is additive, not a solution. We’ve seen buy and builds in this space that have been crushed by the weight of debt – there was no vision and they paid the price.”
And don’t underestimate the costs of growth: “What we are seeing and what we all need to realise is that vendors are changing the model. We have to keep up with Azure, Dynamics and Office365. Our clients do not have the skills and capacity to keep up with the likes of Microsoft and its monthly, weekly, sometimes daily, release cycles. At IT Lab we have to keep up with that- it is a challenge for us and we have to invest to keep up.”
Not every MSP can do that, he concluded.
Peter Sweetbaum will be presenting again at the Managed Services Summit North, in Manchester on October 30. Agenda here
Register here
