Are Master Service Providers Profitable? Isn't it time MSPs Asked?

 

I have always believed the Master Service Provider business model to be unscalable in providing the MSPs who use them a differentiator. I also believe Master Service Providers have financially unsustainable models without continuous outside investment dollars.

However, If everything is perfect with the Master Service Provider deliverable, it would be an excellent service to the industry for all Master Service Providers to share the financial numbers highlighting their success. I am sure I am not the only one questioning this.

I wanted to share some thoughts on the importance of profit. And ask the MSP community have they seen the financials of those; they trust outsourcing to? Master Service Providers may be successful and profitable. The question is, what if they are not?

It seems as some businesses get sold with little celebration and some have big celebrations. Is the lack of celebration an indication there is nothing to celebrate? I was thinking of the fanfare, which followed the ConnectWise sale to Thoma Bravo. Remember all the great press congratulating Arnie Bellini. Remember the numbers. Not only were they massive, but the world was also made aware of just how successful Arnie and his team at ConnectWise were. ConnectWise was indeed honored, and they definitely deserved all of their accolades.I still say, Congratulations ConnectWise! Job well done!

So, where were the celebrations when Thoma Bravo bought Continuum? There were no revenue numbers yelled from roof tops, and there were no leaders highlighted exiting with millions of dollars. Did Thoma Bravo simply bail out Continuum's previous private equity partner from a questionable investment? It does seem as Thoma Bravo had a plan as we recently witnessed Continuum sold to ConnectWise.

However, again, this second sale of Continuum, still no balloons or real celebrating. Still, no revenue or profit numbers shared. Of, course private companies don't have to share their numbers, and Private Equity is a great place to hide when investments are stalled in reaching their acceptable ROI. It does seem as a decade of investments is long time to go without hitting the home run, and if they did hit a home run no one in the stadium knows it.

Why is this observation of mine important to MSPs? Well, if the reality is, Continuum after a decade in multiple private equity relationships was not profitable enough to brag about or is somehow ashamed of its financial track record. The MSPs on their platform should take note and question why? Bottom Line MSPs should know the level of Continuum's success.

Any organization can grow in size and have massive customer bases if they are void the responsibility of healthy financials and get continuous outside cash infusions. It does seem as Private Equity throws money at things banking on what I call "A hope it works out platform." Was Continuum another hope it works out platform? or, was Continuum a massively successful company?

I think the MSP community members who depend on master service provider platforms. Should demand to know the financial details of the Master Service Providers they trust servicing their end-users technology infrastructures.

MSPs should perform due diligence on their Master Service Provider. It's the answers to questions that are the keys to understanding options.

ConnectWise is a hugely successful business on its own. If Continuum was not, how long will ConnectWise invest in a failing business model? Or, how will ConnectWise change Continuum's model for it to be financially successful? All business leaders realize anything that can't stand on its own will suck the life and profit of the supporting company. I don't see the new ConnectWise leadership destroying what Arie built by dumping money in "A Hope it works out platform."

All MSPs must understand the stability of the Master Service Providers they use. The market is propped up with Private Equity, and it seems there are some investments made on hope over market realities. Unprofitability is the sign the business model is broken. I don't think it's out of line to ask the questions. If Continuum is profitable along with revenue growth, it seems the market would be well served knowing that. And of course, the market should also be aware of any threats to Continuum's stability. Or, the changes ConnectWise may make to bring stability to Continuum if needed.

In these times of buyouts and Private Equity Investments, MSPs should not only question their deliverables, but they should also examine those partners they outsource services of their end-users to.

All MSPs are asked to provide their credit information by every product manufacturer, software provider, and yes, sometimes even the Master Service Providers they outsource. Maybe it's time MSPs demand the credit information on the Master Service Providers they hire.

This due diligence, I suggest is not just regarding Continuum. Any Master Service Provider MSPs outsource to, should share their financial results. Keep in mind the Master Service Provider entity's numbers must be separated from parent companies who own them.

It does not matter if ConnectWise is profitable; it matters if Continuum was on its own. I would say the same regarding Collabrance, which is a Master Service Provider wholly owned by Great America Leasing. If Collabrance is not profitable as a stand-alone entity after nearly a decade, is their model broken? If Collabrance is profitable on its own Its MSP partners should also know that. If its not, what will happen if Great America, through market pressures involving their core deliverable of leasing, needed to adjust cost. Would they continue feeding Great America's profits to Collabrance?

"In business, one's hoped-for outcome will be challenged by market realities"

Maybe both Continuum and Collabrance standing on their own are rock solid profitable businesses. If they are both will welcome the conversation and appreciate the opportunity to share that with their MSP partners. If they are not profitable, the dialogue will allow the industry to understand the facts to the condition of the Master Service Provider deliverable. Maybe it's time to reinvent a better way? Or, is there a better way already?

MSPs the customers you service are responsible to you. If your Master Service Provider goes away, how will you respond? Unanswered questions are where surprises are found. All MSPs will be faced with challenges over the next few years. It will be essential to understand all options and equally important to understand as much as possible of the Master Service Providers to whom you outsource.

Isn't it time the industry's MSPs asked more questions? 

“Status Quo is the Killer of all that will be invented.”

 Ray Stasieczko

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