Many predictions have been published in the last 3 weeks. One channel media outlet interviewed a handful of Agents for predictions for 2025. I address some of those here. (I wrote about my thoughts on 2025 here, but here are some more thoughts.)
TSBs.
When it comes to the PE M&A, that is something we have been discussing since 2021 on our weekly Thursday calls. In 2024, one super agency was up for sale, but no takers, probably due to the fact that the initial investment was sold as “building a software platform” but quickly pivoted to just rolling up TA agencies.
One of the super-agencies and one of the TSBs had their debt extended from 2025 to 2026, but at 11% variable interest rate on at least $14.9M, it begs the question, how long can they pay the interest? This is a senior secured debt. They get first dibs at the 2 revenue streams: MDF and commissions.
Adam at Telarus has made comments in the last 15 months about consolidation of the TSB’s. Since Columbia Capital invested in both Telarus and Bluewave, it makes sense they might merge. It also makes sense that Columbia might want to buy another TSB (Avant perhaps) and merge it with Telarus.
Why Avant? I don’t see AppDirect giving up its model with the long term investors they have. Sandler isn’t for sale. I don’t see E78, Amplix or Upstack moving in 2025.
But Bridgepointe has over $20M in debt due in 2027, so look for a move by them in 2026.
I see a management shake-up coming at Upstack in 2025.
If Avant doesn’t change hands or merge, there will be a C-Suite shake up there as well.
This is the thing with Private Equity, they are there to extract every penny out of the business, even if that means killing the host.
AGENTS.
While my friend, Nick at ATC, predicts the end of life of Agents, I don’t. Telecom is just way to complicated. Companies don’t have anyone that understands it. In 2024, direct customers of mine re-engaged me more often then ever before, because of copper retirement, TDM costs, Microsoft Teams projects and network design changes.
IT staff already have a full plate. Handling telecom is too ugly a project for them to tackle if they have a Trusted Advisor to lean on.
In 2024, getting vendors to respond was more difficult than in 2023. I don’t know if that is due to less employees or a shift in priorities or what, but it was difficult to get the attention of vendors.
I have noticed that products have more requirements from vendors like minimum spend and require more pre-sale investigation. That’s another reason why I think Agents are still alive. Telecom is broken. “Solutions” are complicated. Quite a few moving parts. Batteries not included. Complex means buyers need a translator. That is the Trusted Advisor. I don’t see this changing any time soon.
As Partners age, will they retire? When I look around, I tend to think no. The payout to sell your receivables is lower than riding it out. Selling your commissions (because truthfully that is the only business asset) is like a reverse mortgage or selling your $300K life insurance policy for $30K. (Saw that commercial 9x on Sportscenter this week.)
We are seeing quite a few “retired” partners coming back. This is due to partners not using a competent lawyer during the M&A deal. If you are selling for $2M or more, $10K in lawyer fees to insure you have a solid contract is a no-brainer. Signing the boiler-plate contract that the acquiring company sends you is stupid! Yet partners did sign and then did not get what they thought and now they have to get back on the hamster wheel.
MSPs
Recent numbers suggest that MSPs in North America shrank from 61K to 42K according to studies in 2024. The 3 factors could be: M&A, retirement and business closing. Running an MSP is more complex than it was pre-COVID. Remote workers, mobile devices, SaaS, UCaaS, security, insurance, compliance and end users is an exhausting amount to tackle.
Market share for RMM is now Kaseya, ConnectWise, NinjaOne and HaloPSA, according to an analyst.
If MSP numbers are declining and I would imagine VAR numbers are as well, wouldn’t that mean the number of partners is declining at a time when the TSBs are saying everything is growing?
CONFERENCES
In 2025, two things I will be watching: conference attendance and CompTIA. CompTIA got bought by private equity. The revenue generating certificate/training side goes with the name to PE. The non-profit trade association gets the name GTIA and has to figure how it survives.
Informa merged with TechTarget to go public in 2024. That means no more fudging the attendance numbers. And so far the Expo Only pass for CPExpo in Vegas is not free! So what happens to attendance? We shall see.
Last year, conferences grew in number. There are 1 to 3 shows every single week in IT & Telecom. They can’t all survive. We are in Peak ROI times. Buyers want to know what the return will be on every purchase. With hotel room rates and air fare much higher, can the show ROI a $1800 trip (3 nights hotel at $400 plus $600 airfare)? It could when it was $900 (3 nights hotel at $200 plus $300 airfare).
In 2024, most pundits blamed the election on the slow down in sales, yet December did not see the bump in sales that was suggested. If it was the election, then Q1 2025 should be pretty active for IT & Telecom sales. If it wasn’t the election and it was other reasons, then Q1 will be shaky. Either way everyone will be watching sales numbers and estimates in Q1 to set the tone for the year.
A lot of tech hype has hit the market from AI to SASE to SD-WAN to UC+CC. Most tech is NOT adopted right away. The curve suggests that it will be a few years before that happens.
There was a contraction from buyers who moved to the cloud but won Buyer’s Remorse when the bills came due.
There is a lack of concrete outcomes and benefits from newer tech that is being pushed.
Companies last did a hardware refresh during COVID. 2025 will see the next wave of hardware being refreshed in the form of PCs/laptops, firewalls, and more.
AI!
I was involved with one AI project in 2024 and the company scrapped it for internal reasons.
Except for cost saving reasons, I don’t see what companies would use AI for. In fact, most of the hype around AI is about getting rid of humans. Just so you know, when you get rid of humans on one side, you get rid of humans on the other. In other words, when you take humans out of the equation, you lose customers. Period.
I see AI for cybersecurity. That is for performance. But other than for cost savings, I don’t know where AI goes next. Not to get go off too much but we already see GPT being used for homework, emails, blogs, ad nauseum. We see it in art. I didn’t know we wanted AI to do the creative and humans to stop being creative!
SIDE THOUGHT:
In what year do you think we get Rocket Money for Business? While consumers pay for too many apps that they don’t use or know about, businesses do that at an alarming rate. Apps have tackled the licensing piece, where the software can tell you how many licenses you pay for. I think if SMB gets an easy app to see how much SaaS they pay for, the SMB SaaS market starts a decline.
That’s all the thoughts for the day.
TSB Investments
- Telarus – Columbia Capital – 2020
- Upstack – Berkshire Partners – 2021
- Avant – Pamlico Capital – 2021
- E78 Partners – Further Global Mgmt – 2021
- Bridgepointe – Charlesbank Capital – 2022,
- Bluewave – Columbia Capital – 2022,
- Amplix – Gemspring Capital – 2022