Last week's private equity purchase of ConnectWise is the perfect example of how M&A in the MSP and MSP tools space is showing no signs of slowing. The start of the year reflected this trend for Medford, Oregon MSP Core IT Powered by Kelley.
In January the firm, formerly known as Core Business Services, was bought out by legacy print provider Kelley Imaging Systems. The MSP is currently in the thick of managing all the challenges that come with M&A, according to Scott Anderson, SVP of Core's IT division and former president and CEO of Core Business Services.
With the firm "head down in integration" in preparation for a 1 April merge date, Anderson told CPI that, despite being the acquired firm, Core boasts a much larger IT team than Kelley does.
"Although we were the acquired company, from an IT perspective we were the larger of the IT units so everything from our clients' perspective and even our team's perspective is pretty much the same and we're servicing our customers the same way," he said.
However, from a sales perspective, things look very different. Anderson was Core's main sales rep, who oversaw a handful of account managers. But Kelley's sales team is much larger, numbering 70 field sales reps, which effectively means 70 more people selling the MSP's services.
"The focus is really on how we scale Core across Kelley's footprint now. [This] is a different story when they've got 70 sales reps out in the field, so we're really looking to grow that division," Anderson said.
Kelley operates 21 branches in the Pacific Northwest, specifically Oregon, Washington and Montana, Anderson pointed out, which is 19 more offices than Core operated before being acquired. This means a much-expanded footprint to consider for the Core team in terms of potential new business and what type of new business that is.
"The big piece we're working through is the go-forward delivery strategy," Anderson explained. "So that involves tech stack and offerings to scale - because we can support our offerings both with and without local presence. Kelley's footprint goes all the way into Montana; we didn't have a lot of IT resources out in Montana at Core. Plus what are we selling to the Montana market? It's more point solutions today, whether it's a phone system or end-point security or similar, versus, say, all-in managed services where we're putting feet on the street."
Another impact of the merger is the obvious: office space and overall number of staff. Anderson notes that Core used to operate out of two offices but, when incorporating Kelley's IT staff with Core's, this runs to three offices housing the IT operations, with other IT employees scattered among the rest of Kelley's offices, plus remote workers. Alongside this, the changing face and culture of the firm's office environment is having an impact on staff, he noted.
"In our main office in Medford, we now have copier people taking up desks, so from the cultural side, coming from an organization that had mainly just me [focused on sales] and some sales reps, we never really worked alongside [service staff] or other sales reps."
Next-generation security will be a key growth driver this year in the MSP's offering. Anderson describes the addition of security as "pretty much mandatory at some level" for all new clients, and an upsell/cross-sell opportunity in legacy clients. The MSP is seeking to secure 20 percent of its net-new recurring revenue in security services in 2019, Anderson said.
Meanwhile, like all MSPs, the SVP said Core will be managing the challenges that come with the continuing changing face of service providers in 2019. Anderson noted that team members in today's service providers need to be able to understand customers' business objectives, as well as design technology solutions.
"I think the MSP industry as a whole is continuing to evolve in that an MSP doesn't provide that same level of value today. So we're trying to combine the consultancy approach as part of our managed services offerings, instead of just helpdesk and such. We're really just trying to provide strategic solutions, and that's a tougher thing to do because it takes the right people on the team to be able to understand the business objectives and then design technology solutions to drive those forward."
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