Wanted: More Vertically-Focused MSPs

Technology Capital Investors, a New York-based investment firm that has already made several MSP and cloud acquisitions, is making a public plea to bring more vertically-focused MSPs into its fold.

It's a bold strategy for TCI, which most recently acquired Savid Technologies in February. The reasoning is simple, said Sam Attias, managing partner at TCI: service providers with expertise in a specific vertical market are easier to scale, easier to manage and more valuable.

"In our industry, the number one challenge is scalability. What causes that is the nature of the service we provide. It's labor intensive and customizable. The second part is what's required for sales and marketing, which is generally more than the $1 million to $2 million a service provider can put in and risk. It can't be funded by the business. It needs outside investment," Attias said.

Hence, TCI is looking to attract vertical MSPs looking to grow and grow fast, he added.

"What happen with vertical MSPs is they standardize processes and refine more than a general MSP. That in and of itself creates a scalable model," Attias said. "They're more valuable, they scale faster -- and it might sound counter intuitive to focus on less, but in this case less is a lot more. There's more referral business, you build a brand for yourself, you're in a smaller community and can ride momentum rather than the guy in Wichita, Kansas, that builds your IT."

But there's a problem with TCI's plan, Attias admits. There just aren't that many vertically-focused MSPs out there.

"We're looking to bring in someone on the legal side, health care, different finance verticals, insurance," Attias said. "It's a little more difficult to search for. There are a lot of service providers who say they're vertical, but really it's two clients that make up half their book type of thing."

Attias believes the market as a whole is starting to crave more vertically-focused specialists, and he advises all MSPs to develop a niche expertise.

"We can try to build out these competencies in house, but it's not the same as having an organization that's been out there five to 10 years and knows regulatory compliance, how to make [customers] happy and all that wonderful stuff," he said.

Next: Adding Cloud For More Reach

TCI typically acquires a majority stake, and the former owners continue to run the business, said Attias, TCI’s managing partner.

"That's generally our model. We have a common end goal with different [stakes]," he said.

The company's most recent acquisition, Savid, is focused on security and compliance, and TCI continues to build out the offering and is scaling the business to existing clients from TCI's other companies, Attias said.

"What also works very well for us is we have our full cloud offering. One thing we do as we bring on vertically-focused MSPs is tailor them to make them more relevant, to make them more functional for that customer base. Given we have a cloud platform, it makes a national offering a lot easier," he said.