In my weekly newsletter, I wrote a commentary on the evils of Private Equity in the MSP/SMB IT market. You can view it here - https://conta.cc/3LFAu19 - and subscribe, too!
Basically, I believe a great deal of harm is being done to our industry by private equity investors. They are gobbling up vendors who used to be good companies, run by good people, focused on good products and services, and generally providing good customer service.
Note: I am not opposed to private equity generally. But the way it's being used in our industry (and many others) is literally the worst case scenario.
Think of all the great business books you've read about good management, governance, having a clear mission, vision, and a set of values that will drive your company forward. What we're seeing is the opposite of that.
Good investors want to build "forever" companies, not temporary vehicles for generating maximum income in the short term and horrible businesses in the long term.
And the problem isn't about making money, or even making massive amounts of money. It's about being too greedy to build a business with long-term value that delivers a great pay-out over time, and potentially forever.
As we've seen in our industry, the goal of today's private equity investors is to make a huge profit really fast. So all that talk about values and ethics, customer service, and treating people well is irrelevant. These investors don't care about any of the humans involved in any of this. They don't care about anyone in the channel.
- The end user is irrelevant except that they buy "X" widgets
- You, the IT professional, are irrelevant except that you buy and resell widgets
- Your employees are certainly irrelevant
- The vendor's employees are irrelevant
- The vendor's management is irrelevant
Nothing and no one matters except a great return on investment. Economy's bad? Tough: Give us our 20%. Interest rates are up? No one cares: Give us our payment. The competition has better products, better service, and lets partners make more money. Too bad: Make your payment.
None of the elements that make a company great, stable, long-lasting, or good to work with are part of this equation. But it doesn't have to be that way!
There are older, more established companies that buy up small companies and make them even better. Examples include Apple, Microsoft, GE, and Salesforce. They're not perfect, but they don't act like leaches that suck the life force out of the companies they buy and then walk away.
But MSPs (and all ITSPs) are not powerless. Let me propose something that will piss off a lot of people.
Our industry needs to start requiring data portability.
Vendors hate this. They want to make it as difficult as possible for you to retrieve your data in a usable format. It makes them "sticky" because you can't imagine the pain of losing all of your historical data.
But imagine if you could export your data from one PSA and easily import it into another PSA. Then, if a private equity company buys your PSA company and starts destroying everything you love about it, you DO have an option to move to another PSA.
If this were universal across all products and services, the IT service provider could then use customer service, ease of dealing with, and even business values as criteria for choosing vendors.
We'd still have private equity investors, but they would feel pressure to treat human beings like human beings. They've have to consider values and ethics, and stable long-term business practices. Instead of focusing only on how much they can suck out of a company today, they will have to have a legitimate plan to survive in the long run.
Nothing about this is easy, or fast. But it's worth thinking about. Data portability.
You can literally start today. Add the question, "How portable is my data?" to your decision-making process. Ask it of prospective vendors.