Claranet aims for dominance in managed services
Claranet, a privately-owned, UK-headquartered managed service provider (MSP), this month announced three new acquisitions in Western Europe that will take its annualized revenue to around £310 million (US$390 million), up from £220 million (US$330 million) in 2016. It is acquiring ITEN in Portugal, a leading Portuguese channel partner, with a strong focus on HP, HPE and Microsoft; cloud, DevOps and application management provider Oxalide in France; and UK managed security provider Sec-1. These are just the latest in a run of acquisitions over the last three years. Claranet now has a presence in seven European countries: France, Germany, Netherlands, Portugal, Spain, the UK and, most recently, Italy. In December, it expanded outside Europe for the first time, acquiring leading Brazilian AWS partner CredibiliT. In May 2017, French private equity firm Tikehau Capital acquired an undisclosed stake in Claranet for £80 million (US$103 million), providing a major cash injection to fund Claranet’s ongoing expansion.
Claranet’s strategy is to become a dominant European provider of managed services in cloud, applications, hosting, networking, security and DevOps. It has grown to become one of Europe’s largest MSPs in an increasingly competitive space. Demand for managed services, both in Europe and worldwide, has encouraged new start-ups, established MSPs, telco service providers, channel partners and public cloud providers to enter this sector. With the development of cloud and automation, the MSP channel is also fracturing into many small cloud and managed services providers with niche capabilities, often vertical- or technology-specific. But Claranet’s acquisition strategy, uniting these disparate skills across Western Europe under one umbrella, gives it an increasingly dominant position against these competitors. It has won large blue-chip customers, including Airbus, retailers Harvey Nichols and Lush, Unicef and Peugeot.
Claranet: growing from networks to managed cloud services
Since its founding in 1996, Claranet has grown from a networking and Internet services specialist to providing managed cloud, hosting, network and communications services. It now has around 7,000 customers across a wide range of verticals, including retail, finance, healthcare, manufacturing, media and the public sector. It has 37 data centers across Europe and is an important infrastructure customer for many of the large data center vendors. For example, it is Nutanix’s largest EMEA customer. Claranet has focused its vendor partnerships to serve a clearly-defined business strategy. Like many legacy MSPs, Claranet has partnered with the three largest global cloud service providers (AWS, Azure and Google). Adding public cloud to its on-premises and hosting offerings is vital as end customers increasingly adopt hybrid IT models. Claranet finds itself competing with the new breed of service partners that have built their models around public cloud, such as Nordcloud, Cloudreach and Reply. But the smaller cloud-only resellers are unable to offer their customers the same breadth of services. To offer complex data and application migrations across a customer’s business, including the management and billing of these services requires significant investment in technology, sales and engineering skills. Claranet’s acquisition strategy has given it this breadth. Its purchase of UK-based Sec-1, a managed security services partner, is an example, strengthening Claranet’s security capabilities, especially given the greater importance placed on security due to recent news headlines and the upcoming EU GDPR.
But these investments also bring risk. Any debt will need to be serviced with continued new customer acquisition. At the same time, vendors offering automation, remote monitoring and management platforms to their partners are increasingly commoditizing some of Claranet’s capabilities.
Claranet also sells through indirect partners as it seeks to drive scale and reach and has a partner program for different types of IT partners, depending on their business model. It offers three types of partnership: “Collaborative”, “Referral” and “Wholesale”. “Collaborative” partners are at the core of the program, choosing from a portfolio of software, infrastructure and platform services to which they can add their own before delivering the package to end customers. These agreements can also include technical support and training from Claranet. “Wholesale” partners are like classic resellers. They typically resell Claranet networking and hosting services, managing the sales process and owning the end-customer relationship (including billing), but do not add their own services to the solution. “Referral” partners receive a simple financial benefit for referring Claranet to end customers.
Claranet and the growth of the MSP landscape
As infrastructure, platforms and software are delivered as cloud services, so the rise of the subscription model (in a large part driven by Microsoft’s shift to a cloud-first strategy several years ago) has allowed for a more predictable approach to IT budgeting for end customers. Vendors have begun offering partner programs (or elements within those programs) that reward partners for their managed services capabilities. For example, security vendors, such as Sophos and Kaspersky, have added MSP-specific rewards to their partner program portfolios, as have enterprise vendors, such as NetApp, while IBM has been investing in its MSP community for some time and many other vendors are looking to do the same.
Claranet’s biggest threat comes from the growing competition it faces as the market shifts to services-led models. This competition differs significantly by country and region. In Europe as a whole, it comes from a growing and diverse group of managed and cloud service providers, as well as large telco service providers, systems integrators and established resellers building out their services divisions, all of which have invested considerable resources in developing their infrastructure and capabilities. Claranet’s plan for 2017, as shown by its three most recent acquisitions, is to bolster its presence in its current markets, through organic growth and acquisition, while continuing to integrate the considerable number of recently purchased companies, before it considers future expansion into new markets. It must at the same time invest in marketing its brand, building its reputation and establishing its differentiation in this increasingly competitive landscape, if it is to avoid being drawn into an aggressive price fight.