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IT services companies: Reliam, Converge Technology point to M&A trend

Acquisition-minded ventures are building IT services platforms, as Reliam's buyout of managed cloud services provider Stratalux demonstrated this week; other IT channel news.

A handful of acquisition-minded ventures are busily buying up regional IT services companies and cloud consultancies.

Most recently, Reliam, a Los Angeles-based consulting and managed service provider (MSP), working in conjunction with private equity firm Great Hill Partners, acquired Stratalux, which is based in El Segundo, Calif. Reliam offers managed services in support of public clouds, such as Amazon Web Services and Microsoft Azure. Stratalux, meanwhile, offers consulting and managed services for AWS environments.

Great Hill Partners funded the deal through an add-on investment into a parent platform company spanning the two MSPs. That private equity firm made its initial investment in Reliam in November 2017, a transaction covered in an earlier Market Share column.

Simon Anderson, CEO at ReliamSimon Anderson

Simon Anderson, CEO at Reliam, said the parent operating company, for the time being, is generically called Cloud Platform Inc. He said that name will stay until a common, unified brand is selected. He said Cloud Platform Inc. has 100% ownership in Reliam and Stratalux. Other deals are in the company's plans.

"We have more capital to apply to acquisitions and will announce another shortly," Anderson said. "Geography and [public cloud platform] competency will be big factors."

Anderson said the venture is focused on providing public cloud expertise to enterprise and midmarket customers.

"We deliberately don't do hybrid," he explained. "This is a choice not because hybrid is bad or wrong, but because we believe the public cloud is the best execution venue for most workloads and, therefore, the biggest market. It is also based on the fact that we want 100% of our technical team to be certified on AWS and/or Azure and GCP [Google Cloud Platform]."

Converge Technology Partners' M&A activity

Manufacturers want broader coverage from national partners like Converge that can scale their brand and make investments for growth.
John Floresexecutive vice president of marketing and strategic alliances, Converge Technology Partners

Converge Technology Partners Inc., meanwhile, is assembling a national platform of IT infrastructure firms with a regional focus. The company, based in Toronto, earlier this month acquired Key Information Systems Inc., or KeyInfo, a regional systems integrator and managed hybrid cloud provider in Agoura Hills, Calif. Key Information Systems is the fourth company Converge has acquired in the last six months. Converge plans to merge the cloud businesses of KeyInfo and another acquisition, Corus360.

John Flores, executive vice president of marketing and strategic alliances for Converge Technology Partners, said there are a number of synergies between the companies' cloud offerings, including business recovery as a service, disaster recovery as a service, IBM iSeries PowerCloud and the ability to provide disaster recovery rack space for clients.

As for merging the cloud operations, Flores said he anticipates "significant progress to be made within the next 90 days, including a rebranding effort, enhanced pricing tools and marketing."

Flores said the acquisition trend among IT services companies and cloud consultancies stems from customer and vendor demands, as well as the need for smaller service providers to transform in an evolving industry.

Converge believes "clients want an integrator that can provide the full lifecycle of IT services," Flores said. "Manufacturers want broader coverage from national partners like Converge that can scale their brand and make investments for growth."

In addition, the IT industry's pace of change compels smaller, regional partners and integrators to transform their businesses from a data center and hardware focus to a broader portfolio of service that may include managed services, cloud, AI and blockchain.

Blockchain is one focus of another consolidation effort among IT services companies: Fusion Agiletech Partners Inc. and its plan to create a North American Microsoft consulting partner. Fusion Agiletech Partners, based in Toronto, earlier this year acquired Quisitive LLC with the goal of creating a national-scale company specializing in such fields as blockchain and Agile development.

Quisitive this week said it has appointed Kevin Castillo as vice president of sales. Castillo comes to the company with sales experience with Hitachi Consulting, Microsoft and IBM.

Study finds uptick in unified communications adoption

A new report published by Intermedia, a cloud communications and collaboration vendor, has found strong adoption of communication and collaboration products among SMB customers.

The study, conducted in partnership with SMB research firm Techaisle, polled professionals at companies with between 10 and 99 employees. Forty percent of respondents said they are purchasing some form of communication and collaboration technology today, an increase from the 32% that were doing so two years ago.

"We [are seeing] that SMBs embrace many more aspects of unified communications now than they had before," said Irina Shamkova, senior vice president of product management at Intermedia, based in Mountain View, Calif. Intermedia focuses on selling to the SMB market through the channel, providing both branded and private-label options for its partners. The company has about 6,500 active partners today.

Shamkova noted the research suggested that SMBs are in parallel with characteristics of larger organizations' complex environments. For instance, the surveyed SMBs reported an average of 2.4 office locations, and 91% of respondents said they have mobile employees, making communications and collaboration tools an important aspect to doing business.

The study sought to identify the top communication and collaboration products used by SMBs. At the top of the list was productivity software, cited by 77% of respondents; followed by file and document management and sharing, cited by 75%; and web conferencing, cited by 72%. Other top technologies were video conferencing and instant messaging, cited by 69% and 65%, respectively.

Respondents also indicated the factors affecting purchasing decisions for communications and collaboration products. Reliability of the technology topped the purchasing criteria at 63%. Fifty-seven percent noted price as an important factor, while 50% pointed to features, 47% to quality and 35% to support.

Shamkova said the increasing adoption of unified communications bodes well for channel partners, as SMBs continue to struggle with internal IT support. The study found 44% of SMBs were staffed with full-time, in-house IT personnel, which Intermedia said presents a large opportunity for IT services companies to act as trusted advisers for the majority of organizations.

Verizon data breach research sees a role for partners

The 2018 Verizon Data Breach Investigations Report, published this month, reinforced the important role that channel partners can play in the SMB security space.

The report found that ransomware has grown as the most prevalent type of malware attack, a reality to which many channel partners will attest. Besides ransomware, Verizon said social engineering remains an issue, as well. Verizon pointed specifically to pretexting and phishing as attack methods used successfully by malicious actors.

"We can do a much better job having an understanding of what is occurring and [be] much better in our ability to detect a compromise -- and maybe detect something before it  becomes a full-blown data breach," said Marc Spitler, senior manager of Verizon security research.

Detection is an area in which channel partners can play a role, he said, especially for those SMBs that lack in-house cybersecurity resources, such as security operation centers. For an SMB, partnering with a security expert is "going to be an essential component to being able to try to detect [compromises] in a timely manner. I consider it a success if you are able to detect a potential compromise before it becomes a high-impact data breach."

Other news

  • Skuid, a codeless cloud application platform provider, appointed Mark Nation as its vice president of global alliances and channels. Nation joins Skuid from SAP, where he was vice president of global operations.
  • Xerox expanded its roster of resellers with the addition of UBEO and Kelley Imaging Systems. Xerox said it added more than 50 document technology partners in the U.S. and Western Europe to its partner program in 2017 and expects to sign a similar number of partnerships in 2018.
  • Morpheus Data said it signed U.K.-based managed services provider Exponential-e as a partner. The MSP will partner with Morpheus, Pivotal and Dell Technologies to build its cloud services, Morpheus said.
  • Anexinet Corp., a digital business solutions provider, said it has achieved Advanced Consulting Partner status in the AWS Partner Network.
  • Kobiton, a company that provides a cloud-based platform for testing mobile applications on a range of devices, said it is partnering with Checkpoint Technologies and Propelics as part of a broader channel effort.

Market Share is a news roundup published every Friday.

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