IT services mergers: Pace accelerates as partners look to scale

Merger and acquisition activity is heating up across a spectrum of partner companies, from business-process-outsourcing providers to systems integrators; more news from the week.

The pace of IT services mergers and acquisitions has accelerated of late, with a number of companies seeking to shore up gaps in their portfolio of offerings and link up with strategic partners to fuel growth.

In the cloud-consulting space, Wipro Ltd.'s agreement to acquire Appirio signals continued consolidation among born-in-the-cloud service providers. But that pending transaction, valued at $500 million, is one of about a half dozen IT services mergers in the mix.

The recent wave of deals includes Sutherland Global Services' move to acquire Nuevora -- a deal that brings together a business-process-outsourcing provider and a big-data-analytics firm. Sutherland, based in Rochester, N.Y., said the purchase will advance its capabilities in big data. Nuevora will operate as a wholly owned subsidiary of Sutherland.

Phani Nagarjuna, chief of analytics at Sutherland and Nuevora's founder and CEO, said analytics is becoming pervasive amid the rise of big data, but businesses are struggling to make the connection between their analytics efforts and business outcomes.

"The challenge the organizations are facing is to bridge the chasm between analytics and action," he said.

The combination of Sutherland and Nuevora, Nagarjuna said, will address that gap, noting that Nuevora will be able to embed analytics into the business processes Sutherland manages for its customers.

Initially, that integration will take place in the area of customer lifecycle management. Nagarjuna said both Sutherland and Nuevora have been focusing on that particular process, which includes customer acquisition, up-selling and cross-selling, and customer retention.

But Nagarjuna said the Nuevora platform is horizontal and can be applied to other use cases and business processes. He pointed to supply chain management and logistics as additional opportunities for embedding analytics in business processes.

Here are some other IT services mergers and acquisitions underway or closing:

  • Berkshire Partners LLC, a Boston-based investment firm, has agreed to purchase a majority stake in Masergy Communications Inc., a Plano, Texas, company that provides managed services, managed security and hybrid networking to its midsize and enterprise customers. The Berkshire Partners' partnership will help Masergy in the next stage of its growth strategy, according to a Masergy statement.
  • Solution provider Carousel Industries completed its buyout of IT services firm Atrion Inc. According to Carousel, the company now has more than 1,400 professionals in 27 U.S. locations. Atrion was rebranded as "Atrion, A Carousel Company," and it will maintain its locations in Rhode Island and New Jersey.
  • Red River, a solution provider headquartered in Claremont, N.H., acquired Accunet Solutions, a Boston-based systems integrator and IT consulting services provider. Red River, which specializes in government agencies, said Accunet will help the company penetrate new markets, including the healthcare, life sciences and financial sectors. The acquisition will bolster its geographical reach, as well, the company said.

DH2i looks to boost channel partnerships

DH2i, a provider of Microsoft Windows Server application portability and management technology, has formalized a partner program for selling DxEnterprise, its container management software. The company said DxEnterprise can help differentiate partners' Microsoft SQL Server offerings.

"[Research firm] Gartner estimates that it costs about $6,800 per year, per OS, just to manage Windows Server operating systems. ... What we really think is that containers have the promise or potential to slow this trend and help some of these people get these costs under control," said Connor Cox, business development and marketing manager at DH2i, based in Fort Collins, Colo.

The DxAdvantage Partner Program provides incentives, sales tools and marketing collateral, and opportunity registration. Partners can also access sales and technical training, with technical training being especially important for selling DxEnterprise, Cox noted.

"Oftentimes, these deals are very technically led, so it's absolutely crucial to have [technical staff] ... become champions and advocates for us in these organizations," he said.

DH2i currently has nine registered value-added resellers globally, as well as a distributor agreement with Synnex. Cox said recruitment efforts will be selective.

"I want to get to a point where I have strategically placed resellers around the globe in a way that there isn't just a bunch of people fighting over a small amount of margin and not adding a whole lot of value."

He added that the company is aiming to be "100% channel-driven" by the end 2017.

Other news

Here's a look at highlights from the week:

  • Channel partners are still ambivalent about the cloud, according to CompTIA's Sixth Annual State of the Channel report. About 40% of the companies polled for this year's edition of the study cited cloud computing as the No. 1 reason to be optimistic regarding the channel's future. However, a third of the channel companies surveyed identified cloud computing as one of the main reasons for viewing the future with pessimism. Many channel partners have struggled to build a business in the cloud.
  • Also in the BDR space, Datto took the wraps off product updates during its conference for managed service provider (MSP) partners in the EMEA region. The updates include a BDR offering that the company said combats ransomware and a geographical backup replication capability that spans Datto's EMEA data centers. Datto this year opened several European data centers, including facilities in Iceland and Frankfurt, Germany, according to the company.
  • The MSPAlliance is offering new payment options for MSPs going through the organization's MSP/Cloud Verify program. The payment options include monthly billing, which will help MSPs with cash flow, according to MSPAlliance. In addition, MSPAlliance has launched a Slack community channel for MSP/Cloud Verify members.
  • Cyberbit has expanded its Cyberbit Range security training and simulation platform to include virtual and physical SCADA training, which a company spokeswoman said has been of particular interest to managed security services providers. The updated platform also includes customizable dynamic range modeling, cross-functional executive training and new attack scenarios, such as ransomware variants, according to Cyberbit.
  • FinalCode Inc., a file security platform vendor, has tapped DNA Connect as its distributor for Australia. The move follows the opening of FinalCode's regional office in Singapore earlier this year and the appointment of Pacific Tech Pte Ltd. as its distributor for Southeast Asia.

The Market Share is a news roundup published every Friday. 

Next Steps

Read about an earlier spike in tech acquisitions

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