Merger Creates Largest North American MSP

The managed services space welcomed a new juggernaut this week when Netifice Communications and MegaPath Networks announced the completion of a merger that creates a company with more than $125 million in revenue and more than 18,000 customers.

The new company, to be called MegaPath, specializes in providing virtual private network (VPN) solutions and other managed IP services. Netifice chairman and CEO Craig Young and president and COO Jim Cragg will continue in their respective roles with MegaPath. The combined company will be headquartered in Costa Mesa, Calif.

The two companies merged to better expand their market reach in the SMB and enterprise arenas, particularly in vertical markets such as retail, manufacturing, health care, financial services and insurance. They plan to provide managed IP data, voice and security services, and to create service bundles for SMBs. The SMB push will involve increases in marketing and sales distribution budgets and initiatives.

Dan Foster, MegaPath's senior vice president of sales, says the merged company's resellers will play a key role in developing new business opportunities.

"Our channel partners are a critical part of our strategy because they give us a breadth of customer reach, and they also bundle our services with their own solutions," he says.

Apart from carriers such as AT&T and MCI, Foster says the company's biggest competitors are "do-it-yourselfers" who think they can deploy and run their own services. This is a common obstacle any MSP must clear when convincing would-be customers of the value of using managed services instead of trying to do something in-house.

"When companies try to add applications to their networks, they realize how much other functionality must added as well, and we can do it in a way that saves them money," Foster says. "If you can get them to try a service, show them how turnkey it is and how much cost avoidance they can get, that's when they tend to get interested."