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Build IT Live 2022: IT By Design MSP Market News

Kam Kaila, partner and president, IT By Design

Sunny Kaila, CEO, IT By Design

Several hundred MSPs are set to attend this week’s Build IT Live 2022 conference, which overlooks Manhattan, New York. Big themes for the manage services provider event — hosted by IT By Design — will surely include:

  • Talent acquisition, development and management;
  • cybersecurity; and
  • MSP M&A strategies, among other areas of discussion.

Check this blog each day for official news and hallway chatter. Here is the latest…

6. MSP Valuations Revisited: We’ll be meeting with several M&A insiders to discuss MSP valuations. The context: Within the IT channel, some pundits position MSPs as “recession-proof” because of their predictable monthly recurring revenues. Generally speaking, operationally mature MSPs are well-positioned to navigate a recession. The good news as of July 2022: MSP and MSSP valuations have held up well — despite plummeting SaaS company valuations on Wall Street. Why’s that?

  • Generally speaking, MSPs and MSSPs have always been valued based on their EBITDA (earnings before interest, taxes, depreciation and amortization). Sure, there are additional valuation metrics. But M&A in the MSP market has largely been a profit-based conversation for more than a decade.
  • Meanwhile, SaaS companies until recently were largely valued based on their annual recurring revenue (ARR) — and many SaaS investors ignored bottom-line profits.

Still, the overall managed IT services sector certainly is not recession proof. The evidence: Even in a healthy economy, roughly 25 percent of MSPs are break-even or losing money each quarter, according to Service Leadership Inc., a ConnectWise business. Certainly, those money-losing service providers could face cash-flow pressures if their customers cut per-user head accounts or scale back recurring services.

On the flip side, some pundits argue that MSPs can benefit during a recession. The thesis: As mid-size and enterprise businesses scale back their own IT hiring, they’re more inclined to outsource IT services to MSPs and MSSPs. The thesis makes sense and may give some high-performance MSPs a lift. But we don’t think a recession would cause an overall tidal wave of IT outsourcing opportunities.

We’ll gather and share the latest perspectives from the conference.

John Pagliuca, CEO, N-able

5. Cloud Revenue Opportunities… And…: N-able CEO John Pagliuca and Senior Director David Weeks will describe cloud revenue opportunities. This is a rather interesting session, considering Pagliuca rarely takes the stage at third-party events. Could N-able and IT By Design be exploring a deeper relationship? hmm…

Rob Rae, SVP, Datto

4. Kaseya-Datto Post-Deal: Datto Senior VP Rob Rae will be on hand to help MSPs define their cyber resilience strategies. Rae knows his way around a stage and an open microphone. We doubt that he’ll touch on some of the recent Kaseya-Datto town hall controversy — but you never know.

3.The Expansion From Services to Software: IT By Design is perhaps best known for its talent pool, NOC and help desk services, and pure focus on MSP partners. But at last year’s event, CEO Sunny Kaila and President Kam Kaila described how the company was also developing software. One key example involves Team GPS, a cloud-based platform that helps MSPs to manage their employees; job performance and satisfaction; workforce culture; and overall business planning. We’ll poke around for updates on that effort during this year’s event.

Kevin Blake, CEO, ICS

Arlin Sorensen

ConnectWise VP Arlin Sorensen

2. MSPs and Employee Equity: Amid all the MSP M&A activity, some employees are wondering how they can potentially profit from company exits. ICS CEO Kevin Blake and ConnectWise VP Arlin Sorensen will provide answers during a discussion about equity plans, stock options and profit sharing.

1.MeetChannelE2E: Email Joe Panettieri if you’d like to potentially meet at the conference. In your email, please include a quick bullet list of what you’d like to potentially discuss at the event.


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