Will 70,000 Resellers Ever Automate Their Businesses With PSA Software?

When The VAR Guy woke up this morning, he noticed that the PSA (professional services automation) software landscape looked slightly different. Autotask has a new CEO and founder Bob Godgart is shifting to a new role as Autotask seeks more SaaS revenue growth. Plenty of media pundits applaud Godgart for his 10-years of leadership at Autotask. But the CEO change also represents an inflection point for the next-generation IT channel. Simply put: Roughly 12,000 MSPs and VARs run PSA software to automate their sales, marketing, help desk and customer relationship tasks. The big question: When is the rest of the North American IT Channel going to adopt PSA and business management software to manage operations and drive growth? Hmmm…

Some pundits think there are roughly 80,000 to 120,000 solutions provider in North America — ranging from basic resellers to sophisticated MSPs and emerging cloud services providers (CSPs). Generally speaking, the leading MSPs have adopted PSA and RMM (remote monitoring and management) software to automate in-house business tasks and remote technical support. In the PSA market, companies like ConnectWise, Autotask and Tigerpaw Software come to mind. Each of those three PSA providers is growing. All totaled, the trio likely has about 10,000 to 12,000 PSA customers, The VAR Guy Estimates.

Crunching the Numbers

Best case scenario: The PSA industry has huge room for growth, since there are roughly 70,000 to 110,000 North American channel partners that aren’t running PSA yet. Still, the PSA industry isn’t new: ConnectWise launched as a Tampa, Fla., solutions provider in 1982 and introduced a PSA product around 2000. The VAR Guy is checking to see when ConnectWise officially started building PSA software. Meanwhile, Tigerpaw has been around since 1984. And Autotask launched in 2001. Best estimates: ConnectWise generates $25 million to $40 million in annual revenues, Autotask roughly $20 million and Tigerpaw under $10 million.

Now let’s do some quick analysis:

Hmmm… Something doesn’t add up. Generally speaking, the PSA software platforms are mature and they work. Yet the vast majority of the IT channel remains in denial — working with pen and pad or spreadsheets to run their businesses. The horror. The horror.

Solid Start, Bigger Encore?

So what’s it gonna take for the rest of the IT channel to automate their businesses? Will it ever happen?

For PSA to go channel-wide, some myths have to die. Including:

1. Myth One – PSA is only for MSPs: Sure, the most successful MSPs run PSA and RMM in tandem. But resellers who want to stick with project work — without shifting to a recurring revenue model — can still benefit from PSA. After all, PSA allows resellers to measure the profitability of each project, while tracking trouble tickets and other break-fix services. Sure, the PSA vendors remain committed to growing the MSP market. But watch for PSA software companies to push into new verticals (health care, financial services, etc.) to connect more deeply with VARs working in those niches.

Fact is, many of the same faces keep showing up at dozens of MSP conferences. PSA software companies are seeking new channel faces at vertical market events.

2. Myth Two – PSA is too expensive for small resellers: Take a look around. Both ConnectWise and Tigerpaw are offering year-end promotions (for on-premise software)  that may include tax write-offs for new customers. Also, the SaaS and hosted models promoted by Autotask and ConnectWise, respectively, can eliminate up-front financial commitments. Even without seasonal discounts or special pricing in place, the entire goal of PSA is to (A) automate your business to (B) make your company more profitable. Sometimes you gotta spend a little to get a lot.

3. Myth Three – Actually, there is no myth three. But two myths seemed a little short for a myths list. So The VAR Guy inserted this filler for dramatic impact.

CEO Change Is An Inflection Point

No doubt, folks like Autotask Founder Bob Godgart, ConnectWise Co-founders Arnie and David Bellini, and the Foxall family at Tigerpaw Software deserve credit  for helping 10,000 to 12,000 VARs and MSPs become more profitable.

But today marks an inflection point in the industry. Autotask is changing CEOs so that Godgart can focus on innovation and incoming CEO Mark Cattini can focus on business growth. Translation: This is really a search for growth opportunities.

Over the next few months, The VAR Guy expects each of the PSA players to both broaden and narrow their messages. By going broad, the PSA companies will attempt to get the entire IT channel to automate their businesses. But you’ll also see narrower messages that target specific verticals — such as VARs working in health care.

In the meantime The VAR Guy is scratching his head: PSA solutions are proven. But for some reason, less than one-tenth of today’s solutions providers have gotten the message. What are 70,000+ resellers waiting for?

Sign up for The VAR Guy’s Weekly Newsletter, Webcasts and Resource Center. Follow The VAR Guy via RSS, Facebook and Twitter. Follow experts at VARtweet. Read The VAR Guy’s editorial disclosures here.