Mergers and acquisitions mostly fuelled by private equity and venture capital are driving consolidation of Managed Services Providers or “MSP’s.” This is common in maturing markets as services become more standardized and owners either choose to cash out or merge with regional or national players. A lot of Johannesburg based IT providers have been sold recently which has created disruption and uncertainty for providers large and small as well as for their clients, pretty much everybody on both sides of the table.
Several factors are behind this new state of disarray. Providers backed by private equity and venture capital are focused on rapid growth to satisfy investors and capital markets. And most of the time this new customer acquisition mindset tends to proliferate at the expense of client satisfaction. Instead of focusing on 50-100 clients in a single geographic footprint, many have clients in 5-20 different markets. This makes for an impersonal mass market play focused on larger scale financial rewards versus an owner-operated journey which is typically more motivated by passion and making a difference in the local community.
Mergers are hugely distracting and create many challenges including but not limited to the difficulty of integrating disparate platforms and systems from multiple purchases, employee and client cultural compatibility, planned and unplanned employee turnover, fee structures, and contract terms. This takes time and complexity is inevitable.
And don’t overlook the negative impact on the quality of service, the strategy piece, response times, and easy access to a real person at the other end of the phone. Larger providers usually employ rotating resources in a call center located out of the province or even out of the country. They also tend to have expertise which is a mile wide and only an inch deep compared to many owner-operated boutiques whose expertise is much more focused.
In a big company environment, client turnover is a given. But it’s less of a concern to well-funded larger providers because they’re marketing machines who bring in a steady stream of new clients to offset the inevitable churn and burn.
There is also cause for concern when using a smaller provider who is being courted for a sale. Owners tend to tune out knowing they will be selling to the highest bidder. And they don’t always sell right away. Recent transactions in Johannesburg were 3-5 years in the making. That’s a long time to stick with a company that has lost its passion and stride.
If these concerns pertain to you, you may want to explore partnering with a local company who is independent by design and plans to stay that way. Multi IT & Telephony Solutions can offer stability to your business operations by applying strategy and budgets to a proven IT process based on standards and best practices to improve performance and reduce risk. Our standards-based approach may seem like good old-fashioned common sense, however, this guiding principle is not universally adopted or advocated by most of the companies in our industry which makes Multi IT & Telephony Solutions an ideal alternative for growing organisations who want a strategic partner who serves as a true extension of their team. Contact Multi today online or give us a call in Johannesburg on 011 435 0450, Cape Town on 021 879 1950 and Durban on 031 331 0735