Vendor acquisitions not good for existing clients

Vendor acquisitions not good for existing clients – please prove me wrong…

Kaseya has announced their acquisition of Datto for $6.2 Billion. Kaseya is a leader in the Managed Services software space and also less favourably was breached in 2021, Datto for their part is a leader in the managed backup and recovery market for MSP’s in their own right.

So what is the problem…

The problem with this acquisition and the many others that have happened prior and will continue to happen; is that after the dust has settled, one party loses, that is the customer loses.

In almost every acquisition that has occurred in the huge and seemingly endless software market, there are clear winners in that the software vendor has another ‘Patch’ to add to their list of product badges on their website, as well as a bunch of new customer logos.

After the badge collection and sorting has completed, the real work needs to start:

1. Determine the added capabilities in the acquired portfolio
2. Compare with existing portfolio
3. Either cross out competitive product or move forward with both solutions
4. Merge and reduce back office where function is duplicated
5. Reduce development as much as is possible across portfolios based on non-core soultions
6. Re-price the cheaper solution set to match with the more expensive solutions

Next, my experience is that in the worst cases the follow on from the above is:

• Some products will stop being developed
• Software license prices will increase and this can be mild or exponential
• Product integration marketecture promises will likely be ‘parked’
• There may or may not be clarity in the product portfolio
• There may or may not be rationalisation in the products
• There will be reductions in development resources (even without restructure), many key people will leave

Depending on the software being acquired, it may or may not be a challenge for the organisation who has relied on the product up to now. The acquiring company may decide to continue the technology for a period of time or may simply sunset it, if the acquired technology is easily replaced and is not storing a lot of data then there may be a smaller impact, deploy new clients and continue operating.

If the software being end of life’d is your corporate email archive from the past 10 years, or you CRM system with all your customer data etc etc then the path forward is not so simple. If one is lucky then the acquiring company may provide a migration strategy, or if one is not so lucky then you may escape with your data and no way to access it moving forward.

Summary

There is no way to determine whether software companies will be acquired or not, no crystal ball of upcoming acquisitions, otherwise I would not be writing blog posts!

My recommendation is to always seriously evaluate the software company before you make a purchasing decision and include in your evaluation:

What is the Difficulty of migrating away from a technology decision if required 1-3 years in the future if needed, will the organisation have derived enough value in this time after consideration of implementation and training costs.

Software acquisitions are not going anywhere, there will be many more consolidations in the industry and all acquiring companies seek to get value from what they acquire, hence the price increases and ‘sunsetting’ of products making customers move across to more profitable software tools.

There will also be many more ‘disappearances’ where software companies, especially in cyber security become swallowed up by the whales because they can not gain enough investor capital from the market to stay afloat.

Caveat Emptor

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