MSPs That Become Software Companies: Big Risks, Big Rewards

ARRC Technology, which also owns CharTec. In some ways, CharTec is a BDR (backup and disaster recovery) provider to MSPs. In other ways, CharTec CEO Alex Rogers positions the company as a training house for MSPs. This week, CharTec is hosting its latest “academy” gathering, which offers a range of sales, marketing and technical training to MSPs. Though not exactly home-grown hardware or software, CharTec continues to make noise in the BDR market.

Compuquip is an MSP whose founders also launched BrightGauge, a cloud-based service that allows MSPs to build customer reports. Current integrations include Kaseya, LabTech, ConnectWise, ConnectWise Cloud and Autotask.

ConnectWise started out as an IT service provider in Tampa, Fla. That business still exists, generating roughly 40 percent margins. Around 1996 or so, ConnectWise began to explore the software market. CEO Arnie Bellini and brother David Bellini saw the opportunity to show peer IT service providers how to generate far higher margins. The strategy accelerated in 1998, when ConnectWise hired Linda Catrett Brotherton to write the blueprint for ConnectWise’s software. ConnectWise has since branched out with an investment arm (ConnectWise Capital) that pumped money into CharTec, LabTech Software and Quosal.

Directive is an MSP in Oneonta, N.Y. Nearly 20 years old, Directive a few years ago launched JoomConnect — which integrates ConnectWise with Joomla, an open source content management system. The result: MSPs can link their websites to ConnectWise — to more easily gather, track and nurture business leads. I’ve reached out to CEO Chris Chase for an update. But he’s traveling this week at the CharTec Academy event.

inhouseIT is an MSP in southern California. The company also has an interest in Spam Soap, a cloud-based email security provider that works closely with McAfee. While inhouseIT remains focused on its core market, Spam Soap’s cloud services have attracted thousands of MSPs. And there are signs that some bigger surprises are under development…

Nemsys is an MSP in Toledo, Ohio. The company ultimately gave birth to LabTech Software — the RMM (remote monitoring and management) software provider. Nemsys began to write LabTech’s software because the company had grown frustrated with potential market alternatives. ConnectWise Capital invested in LabTech about two years ago, and the company has been in growth mode ever since. I believe LabTech CEO Matt Nachtrab and some peers still own stakes in Nemsys, which has lifted its own margins in recent years, according to Nachtrab’s recent keynote at Automation Nation in Orlando, Fla.

Network Depot is a successful MSP in the Washington, D.C., area. The company acquired Evolve Technologies, a neighboring MSP, in late 2011. (Evolve CEO Dave Sobel has since joined Level Platforms.) At the same time, Network Depot has also continued to evolve and expand Virtual Administrator — which positions itself as an industry onramp for MSPs. Virtual Administrator’s key partners include Intronis (cloud backup), Kaseya (RMM software), Live Virtual Help Desk, Spam Soap and SonicWall. I’m overdue with a Virtual Administrator check-in, and will look to see how that business continues to evolve and adapt for the rest of 2012 and beyond.

TruMethods: CEO Pica and CTO Bob Penland previously sold their MSP business to mindSHIFT (now owned by Best Buy). Pica and Penland now own a stake in a small Pennsylvania MSP, but their primary focus is TruMethods, an MSP coaching organization. TruMethods is now building the myITprocess cloud platform for its member MSPs. It sounds like a beta will launch soon, with general availability potentially arriving in time for ConnectWise’s IT Nation conference (Nov. 8-10, Orland0).