TSD Merger: TDM Merges Datatel with Clarus, Eyes a 'Safe Haven' for Partners
TDM CEO Robert Bowling said he wants to preserve the lifestyle element of the channel amid private equity investment.
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Jeffery Ponts, who was executive vice president and chief operating officer at Datatel, said TDM and Clarus have done of good job of moving up-market to midmarket and enterprise customers. Datatel operated more in SMB and midmarket, Ponts said.
Ponts and TDM CEO Bowling said many agents shy away from selling to larger customers unless they have the right “bullpen” at their disposal.
“Very, very few have that skill set to go after an enterprise customer,” Ponts said.
“But we’ve got that, so they don’t have to walk away from that opportunity anymore. As a matter of fact, they can actually market for that that type of customer. So instead of working on a customer that bills $1,000 a month, how about if we go after a customer that’s billing $100,000 to $1 million a month?”
Bowling said TDM and Clarus have differentiated themselves as for how they support agents from customer contract signature to the second invoice.
“We are specialists in the middle. We think that’s one of the most difficult times most customers experience. We put a lot of attention on that middle period,” Bowling said.
Ponts said this middle part of the life cycle can make or break customer relationships.
“With a poor installation, the odds are pretty high you’re going to lose that custome when that three-year term is up, even if everything’s worked fine after after they got all the glitches fixed,” Ponts said. “But if you take care of them from day one, you’re going to keep that customer.”
Many members of the channel are debating which party should take responsibility for pprofessional services like deployment. Some vendors in the UCaaS/CCaaS world are charging end users an extra fee for deployment, while some subagents are getting certified to take on that role. A recent Channel Futures survey found that 61% of agents were offering professional services, with the rest relying on vendors.
But Bowling said there is ample reason for the TSD to fill that gap.
“If you can use good project managers from the suppliers, fine, but even a suppliers project managers pay attention to that supplier’s priorities, not the customer’s priorities. And that’s part of why at times we are managing project managers, because there are customer details that need to be paid attention to, not just supplier details.”
Ponts said Datatel and its agents would have relied more on project management resources from the supplier in the past. He said joining forces with Clarus and TDM can help them in that area, as well as in the discovery and design process.
Datatel brings a sizable base of MSP partners.
Ponts said the company pursued MSPs, at the time lumped into the category of VARs, due to the market opportunities in California. When Ponts co-founded Datatel in 2003, multiple TSDs already were operating in California. Those included Sandler Partners, WTG, and of course, Intelisys.
“There was no there was no reason for me to open up to just go after the traditional telecom agents. So we we immediately went after that [VAR] marketplace.”
Ponts said Datatel has developed a strong skillset for recruiting and enabling MSPs.
“Everybody likes to sign MSPs, but everybody always tells me they don’t get a lot of business out of them,” Ponts said. “I tell them, ‘Well you’re clearly not listening to them about what their actual needs are.'”
Ponts noted that many of Datatel’s MSP partners are small shops of fewer than 10 employees. As a result, they often struggle with accomodating the needs of large customers.
That’s where WheelHouse Solutions, a separate company operating in the Clarus/TDM family, comes into play. WheelHouse provides managed IT services, including VoIP services, geared toward the midmarket and enterprise. Bowling said WheelHouse has installed somewhere in the ballpark of 160,000 UCaaS seats. Datatel’s SMB-focused MSP partners can lean on WheelHouse when up-market opportunity comes their way.
Datatel brings St. Louis-based Clarus a footprint in California and generally in the West. Datatel operates out of Roseville, California, in the Sacramento region.
Ponts is taking on the title of managing partner, West.
How did scale play into the acquisition, particularly when it comes to Clarus’ supplier partners?
Not as much as resourcing the agents, Ponts said.
“I was looking at it from what we can do to support the partner, not so much what we can do to support the vendor when we made this decision,” he said.
Many of the national TSDs have made claims of being the largest in the industry. AppDirect, for example, offers north of 1,000 suppliers. Telarus’ employee base has reportedly exceeded 400.
Clarus, on the other hand, is not attempting to be the largest. Moreover, being the largest would go against their business model, Ponts said.
“They know all of their sellers. They know their people. When a TSB says, ‘I’ve got 8,000 agents,’ what are you going to do with that? We’re not looking for 8,000 agents. We just want [partners] that we can help,” he said.
Bowling noted many suppliers will be happy to see Clarus getting larger. However, the merger also plays into current MDF appetites.
It’s no secret that many vendors in the TSD are looking to shift where their market developments go. Often supplier MDF has to support events that TSDs host, allowing vendors to meet subagents. But a growing number of vendors say they’d like MDF to get them closer to the end customer.
“In the climate of what’s happening with some of the MDF money, [suppliers] are trying to push the MDF money down to the seller, as opposed to the TSB/TSD, and we uniquely bring that mix of being a direct seller and at TSD.”
Many of the Clarus subagents will sell to enterprise customers under the TDM brand, leveraging support from TDM’s alliance sales division.
Ponts said he’ll remain at the combined company following the merger.
He told Channel Futures that both companies have solidly established themselves after two-plus decades of existence. Thus, he said neither needed to merge out of a financial obligation.
“There wasn’t anybody looking for a buyout. We’re looking for a way to expand and be a better solution for the partners that are desperately looking for something,” he said.
He said Clarus won’t need to appease private equity investors or operate on a countdown to a liquidity event.
“People know there’s strength in numbers, right?” Ponts said. “But you’ve got to make sure you’ve gone to the right side. And we think we’re that. Without private equity and without anybody that we have to please down the road, I think we’re going to be that safe haven.”
Ponts described private equity as financial engineering.
“They’re not telecom; they’re not IT; they’re financial engineering. What they want is an ROI.”
And Bowling added that private equity companies investing in TSDs and superagencies will inevitably get their ROI.
“They will get their ROI,” he said, putting emphasis on the word “will.”
“That’s the piece the channel has not been shocked by yet – the full leveraging of a private equity investor who will push to get their ROI, and I don’t know what that means exactly.”
Bowling pointed to a cultural gap that has opened up in the channel, propogated by outside investors.
“Our industry has traditionally been a lifestyle industry. The new money has created an ROI-based channel. And I want to I want to put the fun back in the lifestyle portion of the channel,” he said.
Bowling said Clarus and TDM are open to more M&A but aren’t necessarily seeking it out. Much of it comes down to finding a philosophical and cultural fit, he said.
“We want to create a safe haven for other smaller TSDs that are looking to find a more profitable road map,” he said. “We’re not out beating the street for that. But for people that love the lifestyle of the channel and want to stay in it, we think have a way to help scale and make that happen.”
Bowling added that he sees “a lot of bright days ahead” in the channel.
“There’s a lot of skepticism as you read and hear people talk, but I am still very, very bullish on the channel,” he said.
“And frankly, I think anybody – sellers, especially super sellers – should be bullish on the channel, and I would like to be in the bullpen with them.”
Bowling said Clarus and TDM are open to more M&A but aren’t necessarily seeking it out. Much of it comes down to finding a philosophical and cultural fit, he said.
“We want to create a safe haven for other smaller TSDs that are looking to find a more profitable road map,” he said. “We’re not out beating the street for that. But for people that love the lifestyle of the channel and want to stay in it, we think have a way to help scale and make that happen.”
Bowling added that he sees “a lot of bright days ahead” in the channel.
“There’s a lot of skepticism as you read and hear people talk, but I am still very, very bullish on the channel,” he said.
“And frankly, I think anybody – sellers, especially super sellers – should be bullish on the channel, and I would like to be in the bullpen with them.”
California-based tech services distributor Datatel Solutions is joining the Telecom Decision Makers (TDM) family and merging with Clarus Communications.
The parties did not reveal the financial terms of the deal or the size of the combined company. They said the merger brings together two likeminded groups that did not want to join forces with a private equity investors. Their combined skills will help Datatel’s partner base move up-market with customers and expand and diversify Clarus’ partner base.
Clarus’ Chris Torbit
TDM in 2021 bought with Clarus and WheelHouse Solutions. The latter two merged into the TDM family but remained standalone businesses. TDM functions as the customer-facing technology advisor (agent) business, Clarus is the technology services distributor (TSD) with a back office to support a vendor portfolio, and WheelHouse fills the role of midmarket and enterprise-focused MSP.
Keep up with the latest channel-impacting mergers and acquisitions in our M&A roundup. |
Datatel will roll up under the Clarus brand, but its agents will leverage support from TDM in selling to larger customers. Datatel’s partners, many of which are MSPs, will also turn to WheelHouse for installation and managed services with larger customers.
On the other hand, Datatel gives Kentucky-based Clarus and TDM a presence on the West Coast. Datatel also represents a source of net-new partners through the base of MSPs/VARs it has cultivated since its founding in 2003.
“Our agent program has always been a cornerstone to our company,” Clarus principal Chris Torbit said. “The addition of Datatel agents is validation of our commitment to the program and, more importantly, our agents’ success.”
The transaction brings together two members of the Technology Solutions Exchange (TSX). The TSX helps regional TSDs pool their bargaining power with providers and share best practices.
Providing a ‘Safe Haven’
The transaction occurs as consolidation sweeps across the TSD landscape. The number of TSDs describing themselves national players has shrunk rapidly in the last two years, with Telarus, AppDirect and Avant purchasing companies. Much of the consolidation has occurred with the investment of private equity companies.
Clarus/Datatel’s Jeffery Ponts
The latest Channel Futures agent quarterly survey saw partner confidence in the channel drop, with many citing industry consolidation as a trend that worried them.
TDM founder and CEO Robert Bowling, and Datatel co-founder and chief operating officer Jeffery Ponts in an interview with Channel Futures said they see private equity creating an emphasis on return-on-investment. That emphasis has diminished the “lifestyle” element of the channel that many partners love, they said. But Clarus could function as an alternative to partners that don’t want to place their business with private equity.
TDM’s Robert Bowling
“Without private equity and without anybody that we have to please down the road, I think we’re going to be that safe haven,” Ponts told Channel Futures.
Ponts and Bowling both received recognition from Channel Futures as Top Distribution Leaders for 2022.
Read more of their conversation in the slideshow above.
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