Investments are fueling the evolution of IT services

IT service providers, and the vendors they rely on, are scrambling to raise capital in anticipation of a major shift in the way IT will be consumed and managed in the wake of the COVID-19 pandemic. At a time when more organizations than ever are willing to rely on external service providers to reduce their IT costs, these providers of IT services need to accelerate their transition to cloud-based platforms.

That shift requires a significant amount of investment: IT tech support provider Electric AI announced this week it has raised $40 million in series C funding to advance the adoption of a managed IT service for small to medium-size businesses (SMBs).

However, it’s not just IT services providers that are looking for funding. The providers of platforms that many IT services providers rely on are also raising capital. Atera, a provider of a platform for delivering managed services, this week announced it has raised $25 million from K1 Investment Management. At the same time, ScienceLogic, a provider of an IT platform employed by both IT services providers and internal IT teams, announced it has raised $105 million as part of an effort to infuse more AIOps capabilities into its platform.

Historically, IT services providers have relied on client/server platforms provided by third-party vendors such as ConnectWise, Kaseya, SolarWinds, and at the higher end of the market, ScienceLogic. In many cases, however, those platforms have proven to be cumbersome not only to master and manage, but also to extend.

Warwick Burns, owner of Warwick Data Solutions in Nashville, Tennessee, opted to rely on Atera’s cloud platform as an alternative to a rival offering from ConnectWise because, as a small provider of IT services, the company doesn’t have the time and resources required to learn and maintain a complex platform. “We learned how to use the Atera platform in a day,” Burns said. “The other platforms are a big clunky mess.”

That issue creates a significant opportunity to usurp the incumbent providers of platforms that are widely employed by IT services providers, Atera CEO Gil Pekelman said. The Atera platform is a cloud-based offering that is designed to integrate remote management and monitoring (RMM) and professional services automation (PSA) capabilities that IT service providers require to manage multiple clients in a way that is more accessible, said Pekelman.

In contrast, rivals are stitching together technologies they have acquired to provide similar capabilities using a legacy client/server architecture that they continue to try to extend, Pekelman said. Atera will employ its latest round of funding to provide additional analytics to the data its platform collects to enable IT services providers to become more efficient, said Pekelman. “Our IP is our software and our data,” he said.

In a similar vein, Augmentt has emerged as a startup focused on enabling IT service providers to manage multiple software-as-a-service (SaaS) applications on behalf of their customers. As organizations have shifted toward relying more on SaaS applications in the wake of the COVID-19 pandemic, Augmentt chairman Gavin Garbutt said it became apparent IT services providers needed a platform designed for the ground up to manage SaaS operations. “There was no RMM tool for SaaS applications designed for IT service providers,” Garbutt said.

Electric, based in New York, has pursued a different tack. The IT services provider has poured significant resources into extending IT management platforms from Kaseya and Jamf to provide services for Windows and Apple platforms, respectively. It developed software to streamline workflow processes using its own automation framework to create a self-service framework through which end customers can provision applications with no intervention required from the IT service provider, said Electric CEO Ryan Denehy.

“We’re providing customers with a more modern experience,” Denehy said.

In the case of Electric, the company made the decision to write software to extend existing backend IT management platforms, while Warwick Data Solutions, in the absence of any in-house software development capabilities, opted for a new platform.

Regardless of the platform, IT service providers will also be at the forefront of modernizing the management of IT using, for example, AIOps. Make that shift will require increased reliance on cloud platforms that make the data required to train AI models more accessible. The decision that business and IT leaders will be making essentially comes down to betting on how long it will take for one IT services provider, compared to another based on the resources they have available, to ultimately move down that path.