7. Another M&A: SunGard has acquired Hosting 365 Ltd., a Dublin, Ireland-based cloud computing and data center services company. Hosting 365 operates from two secure data centers in the Dublin area. The company was recently named as Ireland’s 25th fastest growing technology company in the Deloitte & Touche Technology Fast 50.

6. Hardware as a Service: Is it for real? Reminder: We’ll be covering HaaS in-depth during our March 24 webcast. The discussion will cover everything from HaaS sales pitches to business models and approaches to financing.

5. Managed Print’s Next Move: Small and midsize businesses (SMB) of less than 1,000 employees are the fastest growing segment of the managed print services market, according to research conducted by Photizo Group. I guess I’m somewhat surprised — but not shocked. I don’t see much opportunity in really small businesses (50 seats and under…) but I can see how an SMB with 1,000 employees and shared multi-function printers would want an ongoing, flat-fee MSP relationship.

4. Two Audits Worth Noting: Long View Systems, which landed near the top of our 2010 MSPmentor 100 report, recently passed its SAS 20 Type II and PCI audits. Why do such audits matter? Here are some answers.

3. Microsoft Cloud Meets the Channel: Microsoft Channel Chief Allison Watson described Microsoft’s cloud strategy for partners on March 10. I understand how partners — especially ISVs — can potentially profit from Windows Azure. But I’m still trying to understand how partners can make healthy dollars from BPOS (Business Productivity Online Suite). More than 7,000 partners have signed up to resell BPOS. But I’d like to hear from partners who say they are profiting from BPOS — especially since some VARs seem to be opting instead to work with hosted Exchange options from Intermedia, Rackspace and others.

2. Ingram Micro Seismic Meets the Cloud: I hear the Ingram Micro Seismic partner conference (June 7-9, Dallas) will have a day devoted to cloud strategies. Do I expect cloud hype at the event? Actually, no. Take a closer look at the distribution industry and you’ll discover that Ingram and Tech Data are quietly waging a global SaaS war. So far, the Seismic team hasn’t gone international. But I think it’s safe to expect some strategic surprises at the Seismic conference.

1. The Deal that Didn’t Happen (Yet): Sure, CA Inc. purchased Nimsoft for $350 million this week. But I’m told another MSP software provider has been in M&A negotiations — off and on — four about six weeks now with a rather large IT company. The pending deal hasn’t happened yet because the potential buyer is taking a closer look at the potential seller’s accounting practices. Memo to MSPs: Make sure you’re keeping good, accurate financial records.

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Check out the Apple Store and you’ll see how the iPad plugs into an optional keyboard. Of course, the iPad-keyboard combo is more expensive than most PC netbooks and notebooks. I think the iPad will start off as a digital newspaper and magazine readers, before evolving into a full-blown business productivity tool.

Consider the math: Right now, the iPad offers up to 64GB of storage. I suspect Apple will double that figure in a year or so, and double it again by about 2013 or so. At the same time, thousands of new applications will pour into the Apple App Store — helping the iPad to gradually shift from homes into executive offices, before finding a potential place with more traditional office workers.

Of course, the story may not play out that way. But I do wonder how many MSPs will purchase the iPad for personal and business use. And I wonder how many MSPs will be prepared when your first customer asks for an informed opinion about the iPad.

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According to the spokesman, All Covered targets customers with 10 to 100 employees. And so far, All Covered has about 2,000 customers across the U.S. On the acquisition front, the All Covered says:

“We’ve been on a roll recently, having smaller competitors come and join forces with All Covered.  In the last 12 months we’ve integrated the clients and employees from nine such companies, ranging in size from 3 to 35 employees…We’ll have another one to announce shortly.”

So, what type of business does All Covered typically acquire? One recent example involves MainBrain of Baltimore, Md. That deal, completed in January 2010 but announced in February 2010, allowed All Covered to expand its presence in the Baltimore, Delaware and Northern Virginia areas, according to a press release.

This joining of companies greatly increases All Covered’s presence in the Baltimore, Delaware and Northern Virginia areas. MainBrain’s many clients add to the list of over 2,000 All Covered clients located in 20 other major metropolitan markets nationwide.

In the days ahead, I hope to connect with All Covered Chief Operating Officer Todd Croteau to learn more about the company’s M&A strategy.

Money Matters

In the meantime, it remains difficult to describe what type of valuations MSPs are fetching. As you may recall, I’ve blogged multiple times stating that MSPs seem to be selling for about 2X their annual recurring revenue, and 1X traditional revenue. Using that formula, an MSP with $2 million in recurring revenue and $3 million in standard revenue would fetch about $7 million (that is, $2 million X 2, added to $3 million X 1).

Still, plenty of readers are debating me on the valuation topic. One reader tells me my formula is far too high — with MSPs not fetching such a high price premium. Others say MSPs should  focus more on EBITDA (earnings before interest, taxes, depreciation and amortization) to help compute a proper valuation.

Either way, I’ll ask All Covered’s Croteau for his thoughts when we connect.

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Here’s why: hospitals face uptime concerns as medical records transition from paper to electronic form. Patient safety depends on keeping records available. It’s a situation that raises the profile of disaster recovery.

But many hospitals are in a bind. IT budget constraints make it difficult for them to build out redundant data centers. Another obstacle: hospital IT departments have few people to dedicate to developing and testing disaster recovery plans. A managed DR service, however, provides a workaround for healthcare organizations.

Halifax Health, a hospital system in East Central Florida, chose this direction, working with SunGard Availability Services. Halifax had been using LTO 2 tapes for backup and contracted with a third party to transport the tapes off site. In the event of a major data loss, the tapes were delivered to a SunGard facility for data recovery.

Halifax now uses SunGard’s Secure2Disk recovery solution. This approach places an EMC Data Domain disk storage system at the customer’s site and a second unit at SunGard’s Philadelphia facility. The replication of data to the SunGard site eliminates the need to handle tape and speeds up recovery time.

SunGard’s personnel, meanwhile, are on hand to assist with DR tests and, in the event of an emergency, restoration.

“We are not a heavily staffed IT organization,” said Kevin Noel, manager of IT risk at Halifax Health. “If we had to do a recovery of a significant portion of the data center, we realized we wouldn’t have enough staff to work on tier one [applications] and send people to the recovery center in Philadelphia.”

SunGard also helps out with developing recovery scripts that document how to rebuild Halifax’s servers and bring its Meditech EHR system up. Noel said going with a managed service for that particular function works out well.

“We are very taxed with what the staff can do internally,” Noel said.

With documentation in hand, SunGard recovery personnel can handle the recovery chores without the hospital’s IT representatives having to be there.

In a recent DR test involving the Meditech EHR, data and systems were recovered within a 24-hour range, Noel said. An earlier test using tape took more than 60 hours.

Souvik Choudhury, senior director, product management – recovery services at SunGard Availability Services, said Halifax represents one of a number of healthcare customers pursuing DR services. He said recovery was an afterthought for such organizations 5 years ago, but now the conversation has changed amid the digitization of medical records.

“You really have to have a robust recovery strategy,” Choudhury said.

The Halifax case shows that installing EHRs, as grueling as that can be, isn’t the end of the service story. If you have a managed DR service to pitch, healthcare organizations may be one place to go.

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First, my usual advice: Don’t launch a blog. Instead, spend a month or two writing draft blog entries in Microsoft Word or your preferred word processor. Can you update the journal once or twice a week? Is the content any good? Answer yes to both questions and you just might be ready to launch a blog.

But what should you write about? Here are some obvious topics for MSPs:

1. New hires or executive promotions
2. New customer wins; even if you can’t mention the company by name, you can provide clues about company size, vertical market focus, technology deployed, etc.
3. Business milestones: Years in business, offices opened, acquisitions, number of customers, seats remotely managed, new geographies covered, etc.
4. Technology partnerships
5. Certifications earned — thought you need to be sure to lead with your own company brand, and talk about your company expertise rather than the vendor’s technology
6. Special offers or promotions for your customers
7. Upcoming events, business travel
8. Anecdotes from recent meetings
9. Reactions to industry news: Got a unique perspective on Microsoft, Cisco, etc. — share it. Don’t just “repeat” the news. Offer your company’s perspective on the news and what it means to your customers.
10. Create a top 10 list.

That’s all for now. Time to grab some dinner with my sons. For a change, I’m home and my wife is traveling. But our sales and editorial teams will be back on the road real soon. There should be plenty of content as we blog live from six conferences from March 22 through April 30, 2010:

• Novell BrainShare
• NetSuite SuiteCloud Partner Conference
• Autotask Community Live
• Ingram Micro VTN
• HP Americas Partner Conference 2010 (anybody got a link?)
• Cisco Partner Summit 2010

I look forward to seeing you on the road. And online. If you follow any of the tips above please send me a link.

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First, some background. In case you missed the news, CA Inc. on March 10, 2010 acquired Nimsoft for $350 million. The privately held Nimsoft develops unified monitoring software for corporate IT managers as well as managed services providers. So far, about 300 MSPs have jumped on the Nimsoft bandwagon. And in 2009, Nimsoft started promoting cloud monitoring software as well.

The CA-Nimsoft deal raises all sorts of questions about the MSP software landscape. But it also answers a few questions as well: CA and Nimsoft managers boldly stated to MSPmentor that “MSPs are the channel of tomorrow.”

If true, how come big IT titans like Microsoft and Cisco have mostly ignored the MSP market?

Microsoft: Ready to Write a Check?

Actually, the tech titans are taking notice. Sources say Microsoft considered — then abandoned — three separate MSP software acquisitions in 2008 and 2009.

In one case, the potential seller was seeking a price premium that Microsoft considered excessive. In a second case, Microsoft could not agree with the potential seller on executive retention agreements. And in the third case, the potential seller suffered a surprise revenue shortfall that soured Microsoft on the potential deal, sources say. All three potential moves involved separate companies, the sources add.

But Microsoft continues to poke around the managed services market. The software giant spent considerable time at the MSPAlliance’s MSPWorld conference in 2009. And Microsoft has longstanding partnerships with a range of RMM (remote monitoring and management) tool providers, and PSA (professional services automation) providers.

Will Microsoft open its wallet and actually buy an RMM player? At this point, sources say such a move faces two hurdles:

• First, Microsoft’s channel team must re-convince Microsoft’s executive management team that the MSP software space is large enough to warrant an investment.
• Second, Microsoft’s executive management team must decide whether systems management and monitoring is core to Microsoft’s business.

For more than a decade, Microsoft has dabbled in systems management. The company’s Systems Management Server (SMS) from the 1990s was met with mixed reviews. And the more recent Systems Center platform has had reasonable success with corporate IT folks. But Microsoft has mostly watched as IBM Tivoli, HP OpenView, CA and BMC battle in the enterprise management space.

The big question: Will Microsoft continue to sit on the MSP software sidelines?

Microsoft, MSPs and the Cloud

That depends on whether Microsoft connects the dots between MSPs and cloud services. Earlier this week, Microsoft Channel Chief Allison Watson outlined Microsoft’s cloud channel strategy to The VAR Guy.

The conversation touched on the fact that some VARs are worried about aggressive pricing in the SaaS market. But the conversation also lacked any major emphasis on MSPs — and their potential role in Microsoft’s cloud strategy.

At some point, I think the light bulb will turn on in Redmond. Instead of winning over skeptical resellers, Microsoft should be fine tuning its cloud strategy for MSPs that already understand recurring revenue business models. When that day comes, Microsoft will open its wallet and start buying up management tool providers. My prediction: 2011.

Cisco Gains Momentum

Meanwhile, Cisco hasn’t made any big MSP software acquisitions. But the company has revitalized its managed services partner program. Overhauled in September and October 2009, the partner program now allows MSPs to leverage NOCs (network operation centers) from other certified Cisco MSPs. That subtle move has prompted dozens of Cisco MSPs to either (A) build their own NOCs or (B) partner up with those who have NOCs.

Certainly, more titans are preparing MSP moves. Lenovo has been particularly active in recent months, signing a partnership with Kaseya and planning additional RMM and PSA relationships. The executive who led Lenovo’s MSP moves — Stephen DiFranco — recently made the leap to Hewlett-Packard. So you can bet HP is planning some MSP moves of its own.

Lingering Concerns

Still, I don’t want to paint the managed services software market as some sort of nirvana. Some software providers are extremely successful. Others are merely hanging on. Separating the leaders from the followers can be challenging, since most of the major MSP software providers are privately held.

Plus, MSPs themselves have had hit-and-miss performance. The best MSPs are wildly successful. But plenty of traditional resellers have tried to hype themselves as MSPs — only to stumble badly with the recurring revenue business model, or shut down entirely.

Next Moves

Nevertheless, I remain a glass-half-full type of guy. CA’s $350 million buyout of Nimsoft offers further proof that the MSP market is strategic. The tools — from a range of vendors — work. Success or failure has little to do with technology, and much to do with business execution.

I certainly expect the MSP software buying spree to continue. Citrix Systems and CA, two recent MSP software buyers, are pretty big names in the software market. But bigger names will be making strategic moves. It’s inevitable.

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Since Storage Guardian only charges by volume, there’s no additional software licensing fees for virtualizing a database, according to their press release. That means that MSPs catering to small businesses have a more cost-effective way of backing up an SQL Server 2008 deployment to the cloud.

Powering the backup provider’s SQL platform is Asigra Televaulting technology, which Storage Guardian says handles incremental backups with automatic truncation; integrates open and ‘hot’ SQL Server backups within network backup routines; support for rollback restores; and automatic validation and test restore options.

This is, of course, a pure marketing move: Storage Guardian gets to crow about their compatibility with the upcoming SQL Server 2008 Release 2 while pressuring rivals, some of which have hidden software license fees.

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According to AppsOnCommand’s website, they can host any Windows application — among the examples given are Microsoft Office and Quickbooks — and make it accessible to a client through a “generic” website branded with your logo. You handle billing; they handle backups, monitoring, and management.

Like all browser-based SaaS applications, AppsOnCommand is more-or-less platform independent: an iPhone can log in as well as someone running Ubuntu. They say that once the software is hosted, they have no contact whatsoever with the client: the MSP handles basic support, escalating complex issues to AppsOnCommand as needed.

If it works as advertised, this is a good solution for smaller providers who want to offer the flexibility and scalability of SaaS but have customers who rely on a few key Windows applications.

The trade-off, of course, for that lack of complexity is that they can’t offer the same scale or scope of applications as Amazon EC2, Windows Azure, or the aforementioned Google Apps Marketplace. But if you’re dealing with a small business, how big it scales doesn’t matter nearly as much as how well it works.

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In some areas I paraphrase thoughts from O’Malley (executive VP of CA’s Cloud Products & Solutions Business Line) and Read (CEO  of Nimsoft) because the conversation was moving pretty darn fast. But here are the highlights…

Topic 1: Target Market Segments – Including MSPs

MSPmentor: CA says the deal focuses mostly on managed services providers, cloud computing and emerging enterprises. But Nimsoft has successfully competed against BMC, IBM Tivoli, HP OpenView and even CA in some enterprise accounts. Will CA position Nimsoft against those large rivals in enterprise accounts?

O’Malley: Gary has been successful at replacing OpenView and Tivoli for those customers who have difficulty [with those platforms]. We do see an opportunity in mega-global top 4000 accounts to go after replacement opportunities. Gary will also train the salespeople who sell to mega accounts to sell Nimsoft… But our primary Nimsoft focus is to target new customers in emerging enterprises, MSP opportunities and cloud [monitoring] opportunities.

Read: Chris is spot on. Particularly in the MSP space, traditional competition like the BMCs and IBMs are nowhere to be seen. Nimsoft competes with Kaseya and open source platforms and all sorts of different things. What CA realized was the MSP as the channel of tomorrow. That’s something we’ve talked about for many years. Nimsoft has never really employed traditional VARs. We think MSPs are the channel of tomorrow, and that only increases with MSPs focused on the cloud. CA was the first company to share this vision with us. When I sat down with them it was like I was hearing myself speak.

Topic 2: The Negotiations

MSPmentor: When did CA inquire about buying Nimsoft?

O’Malley: November [2009]. As we performed our due diligence, we were seeing more and more MSPs becoming the IT organizations for companies. We think that trend will grow and grow over time…We believe strongly that MSPs will be the deciding factor on how IT management functions will be consumed.

Topic 3: Internal Reaction at Nimsoft

MSPmentor: Gary, when did Nimsoft’s staff learn about the negotiations and how did they react?

Read: Since CA is publicly held, we had to remain silent. We looped in the executive team and some engineering leaders to explore the synergies. The reaction from the executive team and from the engineering team as we went through the process was the same. First it was a raised eyebrow. But as they met the folks from CA, they realized “oh my God, when can we get started?”

For the broader staff, we told everyone this morning under NDA [a non-disclosure agreement]. And it was the same type of reaction. The majority of folks, and all the comments I’ve heard, indicate that the employees are very excited.

We’ve talked to employees internally about the cloud changing the game. But what you come to realize is that no one company has all the tools.

Some companies have huge strengths and challenges. Our strengths were in our products, our model and our understanding of the market. But our challenge was scalability. We were growing and hiring as fast as we could. But we needed to move even faster. This deal retains the positives of Nimsoft — the technology, the people and the products. But now we can do so much more in an expansive way. There’s still a lot of execution for us to get there.  But in my opinion, when you look at the leaders of tomorrow, the first box has just been filled in. It’s CA and Nimsoft.

Reality Check

I realize O’Malley and Read sound very bullish. Of course, all couples are happy on their wedding day. On paper, CA and Nimsoft have plenty of synergies in the IT management space. And they’re different enough to ensure Nimsoft’s MSP and emerging enterprise focus potentially complement’s CA’s enterprise heritage.

But this is the honeymoon period. I’ll be curious to see if CA — and the Nimsoft veterans working at CA — can maintain their upbeat perspectives and execute on this acquisition.

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Participants in the call included William McCracken, CA chairman and CEO; Nancy Cooper, executive VP and CFO; Chris O’Malley, executive VP of CA’s Cloud Products & Solutions Business Line, and Gary Read, Nimsoft president and CEO — who is joining CA. Among the highlights of the call, which I’ve paraphrased…

CA’s Perspective

From the CA executive team:

• The deal is expected to close before March 31.
• The deal adds a “high growth revenue stream” to CA.
• Nimsoft has delivered double-digit revenue growth in every quarter since 2004.
• The deal “broadens CA’s reach into the managed services market.”
• Nimsoft has 300 MSP partners, including hosting and cloud partners.
• Nimsoft represents a key opportunity for CA to address IT monitoring across public and private clouds.
• Nimsoft had $32 million in revenue for calendar 2009. Company was cash flow positive in each of the company’s most recent 4 quarters.
• Majority of Nimsoft’s employees will remain with CA after the transaction.
• We believe it enables us to achieve three goals: First, it expands CA’s market reach in emerging enterprises, MSPs and emerging global markets. Second, it gives CA expanded monitoring solutions. Third, it expands CA’s cloud strategy.

Nimsoft’s Perspective

From Nimsoft CEO Gary Read (who will remain with CA). Here again, I mostly paraphrase:

• We wanted Nimsoft to be a standard for emerging enterprises and MSPs.
• In the last couple of years, as cloud has been accepted as the architecture of the future, we’ve pioneered new methods of delivering IT services.
• We were concerned that Nimsoft, by itself, could not keep up. That’s why the CA deal makes so much sense.

Again, please note that the bullet points above are paraphrased from the phone briefing. Keeping up with the conversation — word for word — was challenging at times. But I think I captured the essence of the briefing.

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