Technology Capital Investors, a New York-based investment firm, has named Jacob Kazakevich, president of cloud provisioning platform company OS33, as a partner as part of its plan to accelerate plans to invest in the cloud and managed service provider markets.
Technology Capital Investors now has investments in at least six MSP-related businesses with the goal of increasing that number to several dozen, said Sam Attias, managing partner and founder of TCI.
"We're really focused on acquiring and growing MSPs and hosting companies," Attias said.
The firm's portfolio includes OS33, External IT, Avazpour Networking Services, D&D Consulting, ETCI and Hostnet, according to TCI's Web site.
Interestingly, TCI does not plan a traditional roll-up of several smaller organizations into one mega company. Instead, each company it buys or invests in will continue to run as a stand-alone entity to maintain its regional brand, Attias said.
"The ultimate vision for TCI for three to five years is several dozen investments where the MSP is dominant player in their area or on their way," Attias said. "
"We're not looking for returns that are driven year by year. We're not focused on financial wizardry. We want to grow to a certain size and have companies play off each other in four or five different verticals," he said.
Attias believes the MSP and cloud markets are ripe for consolidation, and with big players like Amazon, Google and IBM looking to play a much larger role touching small businesses in that space, the time for small MSPs to amass scale is now.
"Everyone is looking for high-margin, recurring-revenue businesses," Attias said. "I speak to MSP owners every day who say they get calls two or three times a week from people looking to invest. It's a topic on everbody's mind."
Attias feels many MSPs don't have the proper resources to ensure quick and meaningful growth. "I generally don't think it's best for MSP owners to want to stay in the industry. What MSP owners need to realize is that consolidation and big money is coming to their sector and it will change their business model. They need to factor that into their two-, three-, and five-year strategies," he said.
The migration of many clients to a cloud-computing model will drastically change the way MSPs have to do business, Attias said because the IBMs and Microsofts of the world will be able to get closer to SMB customers.
"They went halfway down the field to provide infrastructure and the MSP took them the other half down to the goal line. Because the nature of the goal line is changing, they need to touch the end client or bring them 70 to 80 percent down to the goal line," Attias said. "And because of that the margins of the business will change. They need to position themselves accordingly."
Meanwhile, Kazakevich said he's joining TCI's board to spread the word to his MSP customers of the coming changes to their businesses.
"It's a feeding frenzy. On one side, larger MSPs have more leverage to gain clients and opportunities. On the other side, it's about what kinds of services portolio you can offer to clients," he said. "Onsite monitoring and management tools are getting old. The ability to add cloud-based services is significant and allows them to compete and maintain profit margins."
