Cybersecurity Providers Facing Partner Anxiety Amid M&A Frenzy
Partners are concerned even when there's no indication of M&A on the horizon.
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Netenrich’s Justin Crotty said the M&A frenzy has been going on a long time and “I’ve never see this kind of capital over the last 10 years.”
“The impact is the smaller companies get rolled up into these big private entities in platform plays,” he said. “There’s a lot of debate whether the products and the services decline after that happens and what’s left. And for the MSPs and MSSPs that they serve, is it a good thing or is it not. We don’t really judge that. But this is not stopping. Is it good for MSPs and MSSPs is the question. And sometimes I think some are not affected, and other times you’ve got switching out tooling and people migrate to other platforms, and it can be disruptive to the partners that are consuming those services and products.”
NTT Application Security’s Matt Lantinga nfinds himself once again dealing with M&A.
“I know I can speak from experience when we got purchased by NTT,” he said. “It basically blew up a lot of our channel. Suddenly we were competitors so it made it very difficult for us because NTT Security is a reseller. So some of our biggest, strongest channel partners suddenly looked at us as competitors and we were able to save some of the relationships at the rep level. I mean, a lot of this isn’t necessarily at the executive level. If your reps are making the right connections, even though we have this sort of, ‘Hey, you may be a competitor, we have an overlap,’ we’re able to preserve a lot of those relationships and a lot of that business. But I know there were a lot of questions that we suddenly had to answer because of who acquired us.”
Sophos’ Scott Barlow said he’s still fielding questions two years after Thoma Bravo acquired Sophos for nearly $4 billion.
“And I think when we went through our acquisition, it’s all about communication, right?” he said. “So I know we can we always say communicate, communicate, communicate, and we did that right. But I fielded a lot of questions. In fact, I just got off a call right before this meeting where they still want to know, ‘… what are we going to see change here in the near future?’ And you just need to be open and honest with your partners to communicate with them. All partners want the same thing. They want protection. And as long as you maintain that in your programs, you should be good.”
Even though Netenrich hasn’t acquired or been acquired, Crotty said he’s still fielding questions of whether it could head in that direction sooner than later.
“We have a lot of partners during the sales cycle that’ll ask us, ‘What’s your plan; what assurances can you give me?'” he said. “There’s nothing nefarious happening, but it could happen. But I think that communication with the partner of, ‘We’re going to take care of you,’ is important. Partners have been with us for years, but they’re starting to … they’re almost getting gunshy in many cases. ‘What is your plan if you get bought? What’s going to happen? How do I protect the access to technology or the IP that I build on top of it? How do we handle that?’ So it’s an interesting pre-sales conversation that typically happens. I mean, it’s almost 90% of cases now.”
With longer deals, partners want some sort of written protection in there, especially as it relates to IP that they may want to build on top of platforms, Crotty said.
“But they also want to know, ‘Hey, are you in it for the long haul?'” he said. “‘If I make a big investment and we do this together, we want some assurances that you’re not going to cut and run.'”
Trellix’s Kristi Houssiere agreed it’s all about communication. In January, McAfee Enterprise and FireEye emerged as a new company under the name Trellix.
“We split off [from Mandiant] and we no longer compete with our partners,” she said. “When Mandiant was part of our business, we did because they ran services, pretty well-known services, and it was the services business that our partners wanted to be in as well. But communication is key. Where are you going? What are you doing? How is this going to impact my business? And I think it’s about predictability. Transparency, yes, but predictability. They’re building a business on us. And I am grateful for it because I need them more than ever. But if I’m not predictable for them … then I might as well pack up and go home. So ensuring that we’re going to be predictable, simple to do business with and communicating transparently is ultimately what makes a good partnership.”
Malwarebytes‘ Brian Thomas said partners need to be kept up to date on what’s happening after an acquisition is final.
“Communication needs to be done, but I also think timelines, especially for the MSP audience reaffirming or almost bolstering as the vendor, the migration strategy, if they choose to have one,” he said. “And what that timeline looks like because these acquisitions, as everyone knows, they take time. We aren’t actually going to see the Datto-Kaseya relationship form until early next year. And I think the timeline is also key in defining migrations, a migration strategy with the partner as the vendor, if that’s what they choose to do.”
Malwarebytes‘ Brian Thomas said partners need to be kept up to date on what’s happening after an acquisition is final.
“Communication needs to be done, but I also think timelines, especially for the MSP audience reaffirming or almost bolstering as the vendor, the migration strategy, if they choose to have one,” he said. “And what that timeline looks like because these acquisitions, as everyone knows, they take time. We aren’t actually going to see the Datto-Kaseya relationship form until early next year. And I think the timeline is also key in defining migrations, a migration strategy with the partner as the vendor, if that’s what they choose to do.”
There’s no denying the almost nonstop M&A frenzy among cybersecurity providers.
Just last month, Barracuda Networks announced it’s being acquired by global investment firm KKR in a deal reportedly worth $4 billion. To close out April, Synopsys announced it’s acquiring WhiteHat Security, which rebranded to NTT Application Security last year, for $330 million in cash. And Tenable is scooping up Bit Discovery for $44.5 million.
And of course, while not pure-play security, there’s Kaseya’s massive acquisition of Datto.
So where does this M&A whirlwind among cybersecurity providers leave partners? How do channel leaders make sure they’re not left with the short end of the stick?
Our cybersecurity roundtable at the Channel Partners Conference and Expo addressed this topic. This is the first in a series of articles highlighting various topics addressed by the roundtable.
Panelists included:
Scott Barlow, Sophos‘ vice president of global MSP and cloud alliances.
Jon Bove, Fortinet’s vice president of channel sales.
Justin Crotty, Netenrich‘s senior vice president of channels.
Kristi Houssiere, Trellix‘s senior director of global channel strategy and operations.
Matt Lantinga, NTT Application Security‘s vice president of sales and global strategic accounts.
Joe Sykora, Proofpoint’s senior vice president of worldwide channels and partner sales.
Brian Thomas, Malwarebytes’ vice president of worldwide MSP and channel programs.
See our slideshow above for more from the roundtable about M&A among cybersecurity providers.
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