The 10 Biggest Channel Stories Of 2019

Several of the top items in this year’s list of top channel news could have won the No. 1 spot in other years, but the 2019 news cycle was dominated by ransomware attacks that show little sign of slowing down.

The Year Of Ransomware

Several of the top items in this year’s list of top channel news could have won the No. 1 spot in other years, but the news cycle was dominated by ransomware attacks that show little sign of slowing down even as MSPs apply multifactor authentication, backup and disaster recovery tools, and the latest detection and response solutions on their networks.

But it wasn’t all bad news.

The influx of private equity cash into the channel shows experts that it is an area worthy of investment with room to grow.

Whether it was Thoma Bravo’s acquisition of ConnectWise earlier this year, which led to the merger of that company with rival Continuum, or Apollo Global Management’s $5.4 billion planned buy of Tech Data, the channel is awash in private equity dollars looking for a home.

Get more of CRN's 2019 tech year in review.

10. Changes At The Top

A number of the nation’s largest technology firms saw new leaders take up residence in the corner office this year, with Accenture, CDW and ServiceNow, among others, all adding new CEOs.

Chris Leahy will soon complete her first full year as CEO of CDW, notching another year of growth for the giant solution provider. Meanwhile, Mike Lawrie is out at DXC Technology with former Accenture group CEO Mike Salvino taking over. Accenture lost beloved longtime CEO Pierre Nanterme to cancer earlier this year, and Julie Sweet was named the company’s new top executive. HP welcomed new CEO Enrique Lores, who walked in with a plan to turn around fortunes for the printer and PC maker. It wasn’t the only printer company making changes at the top, with Lexmark announcing that Allen Waugerman—who has been with the company since it began in 1991—would be its new CEO.

Meanwhile, the hottest cloud software property in tech switched captains in October with ServiceNow CEO John Donahoe making the move to become CEO at Nike, while ex-SAP CEO Bill McDermott moved to lead the IT service management standout. Former Xerox spin-off Conduent and CEO Ashok Vemuri parted ways in August, making way for new CEO Cliff Skelton.

Finally, MSP and channel thought leader Michael George stepped down as CEO of Continuum when that company was acquired by ConnectWise—the two share the same private equity owner.

9. Conduent’s Falling Fortunes

The company was successful in its plan to divest a billion dollars in assets, but turmoil at the top, lawsuits, problems with toll collection devices that turned into a probe by U.S. lawmakers, as well as troubled sales numbers have led to a sharp decline in the company’s performance.

In April, a board member appointed by Carl Icahn resigned via a public letter that lambasted the CEO and board. A month later, during an earnings call, CEO Ashok Vemuri announced he was resigning in August. The company appointed chief operating officer Cliff Skelton (pictured) as interim CEO, then suspended the search for a replacement. During his first earnings call Skelton said Conduent was mulling a sale of assets, up to and including the company itself.

During his next earnings call, he said 2020 “has to be” better.

“Q4 is not going to be better in terms of new business signings … 2020 is going to be better,” Skelton told investors after the company posted a $16 million loss on a 15 percent decline in sales for its third quarter ended Sept. 30. “It has to be. You will start seeing a turn in 2020.”

8. DXC Technology’s Fits And Starts

One of the largest business process outsourcing companies in the world, DXC has yet to hit its stride.

Under CEO Mike Lawrie the company completed the spin merger in 2017 that created DXC from CSC and HPE’s Enterprise Solutions, but its stock has lost value, and a revolving door at the executive level has not given it stability. The changes near the top came to a head in February when former DXC executive Stephen Hilton, once a part of the company’s succession plan, sued his former company, accusing Lawrie of having a “toxic” management style, having no true revenue goalposts for managers, and of having him lose millions in stock options.

The suit was dismissed by both sides months later, and then Lawrie stepped down in September, making way for former Accenture group CEO Mike Salvino.

The company did have some good news this year, acquiring digital strategy and software engineering firm Luxoft in January, and when an arbitrator ordered HPE to pay DXC $666 million to settle a dispute over leased property that was carried over in the spin merger but wasn’t properly accounted for.

But over the last year the stock price has swung from a high of $69.45 to a low of $26.02. On Dec. 16 shares ended the day trading at $37.02.

7. Cognizant Exits Content Moderation Business

Cognizant Technology Solutions said that it’s laying off 6,000 employees as it exits the controversial content moderation business, where the work it did for its most high-profile client, Facebook, landed it in the spotlight.

The plan to exit the business in 2020 was unveiled by Brian Humphries, CEO of the global solution provider, during the company's third fiscal 2019 financial analyst call.

Along with a plan to exit the content monitoring business and layoffs, the company will attempt to sell the business, and set aside $5 million to invest in technologies to automate the monitoring of web content for clients.

Cognizant is ranked No. 6 on the CRN 2019 Solution Provider 500 list.

Cognizant had reportedly signed a contract with Facebook worth $100 million per year to scrub violent, obscene and hateful content from the social media platform.

6. Private Equity Dollars At Play

Private equity dollars have flooded the channel this year with midsize to large MSPs popping up as takeover targets for Wall Street-backed money managers.

Whether it was Thoma Bravo’s acquisition of ConnectWise earlier this year, which led to the merger of that company with Continuum, or Apollo Global Management’s $5.4 billion planned buy of Tech Data, the channel is awash in private equity dollars looking for a home.

In August, Buchanan Technologies—No. 417 on the 2019 CRN 2019 Solution Provider 500—which is based in Grapevine, Texas, with offices in Mississauga, Ontario, was purchased by Lightview Capital, a New Jersey company founded in 2012 that works in the midmarket space.

Private equity group Pensare Acquisition agreed to buy Houston-based solution provider Computex Technology Solutions for $65 million in a move that Computex CEO Sam Haffar said will open the door to “grow exponentially.”

London-based private equity firm BC Partners announced its plans to purchase Presidio for $2.1 billion, just two and a half years after the Cisco solution provider powerhouse completed its initial public offering.

5. HP, Xerox Merger Talks

There’s never a dull moment for Xerox, which this year set its sights on acquiring HP in what one analyst called a case of “the minnow swallows the whale.” Xerox—with about $8 billion in annual revenue—is a fraction of the size of HP, which notches about $55 billion in revenue each year.

The two companies have reportedly held talks since August, with both sides complaining that the other is holding up due diligence. HP said it is not interested in Xerox’s last offer of $22 a share, with $17 of that coming in the form of cash and the rest in Xerox stock.

Both Xerox majority shareholder Carl Icahn and Xerox CEO John Visentin are now taking their case directly to HP shareholders and urging them to push a merger.

HP has geared up for a proxy war and hired longtime Icahn nemesis Wachtell, Lipton, Rosen & Katz as its lawyers. Along with publicly rejecting Xerox, HP penned an open letter that called into question Xerox’s earnings potential as well as its projected $2 billion in cost savings.

4. ConnectWise Merges With Continuum

The deal heard round the MSP world happened in October when ConnectWise CEO Jason Magee was joined on stage by the company’s past leader, Arnie Bellini, and Continuum CEO Michael George to announce that the long time, friendly competitors were at last coming together.

“What took us so long?” George quipped at the time.

The acquisition not only brought together rivals that have each staked out ground around leading MSP tools—with Continuum’s four AI-enabled SOC outposts around the globe and ConnectWise’s industry-leading PSA—but it also marks the end of George’s run as CEO of Continuum.

Magee will lead the combined organization moving forward, which will boast 2,000 employees, 16 offices and more than 30,000 MSP customers around the world. As first reported by CRN, Geoffrey Wilson, who was the chief finance officer at Continuum, will now take on the job of chief operating officer at the new company.

3. Google Cloud Makes Moves Under New CEO

Former Oracle executive Thomas Kurian (pictured) grabbed the reins of Google Cloud with gusto this year, pledging to double down on go-to-market investments, including channel partner programs and sales.

The new CEO of the third largest cloud provider is targeting enterprise customers to narrow the gap with No. 1 Amazon Web Services and No. 2 Microsoft Azure. He had a formal introduction at the Google Next ’19 conference in April in San Francisco, where he unveiled a new open-source partnership program and the general availability of the Anthos hybrid and multi-cloud platform, which has capabilities extending beyond customers’ on-premises data centers and Google Cloud to competitors’ third-party clouds, such as AWS and Microsoft Azure.

Google Cloud also launched a new channel partner program on July 1 that’s designed to make it easier for channel partners to engage with the company and better highlight their expertise to customers. The Google Cloud Partner Advantage program consolidates 16 partner programs under one umbrella and will trigger Google Cloud’s first recruitment efforts to increase its partner ecosystem.

The program focuses on six industries aligned with Kurian’s enterprise push (financial services, health care, retail, manufacturing, the public sector, and communications, media and entertainment) and five solution areas (infrastructure, data management, business analytics, packaged applications, and productivity and work transformation).

2. Distribution Consolidation

While all eyes were on Ingram Micro earlier this year amid nonstop rumors that its parent company, China-based HNA Group, was shopping the distributor, it was Tech Data that ended the year with a transition in place.

Apollo Global Capital swooped in with a $5.4 billion offer in November, and even upped its bid to $145 a share when legendary investor Warren Buffett tried to outspend it. The deal will leave longtime CEO Rich Hume in place, but will take the company private at closing, which is expected in the first half of 2020.

“This investment by funds managed by one of the world’s leading global alternative investment managers will afford us additional resources to accelerate our ability to bring to market the technology products and solutions the world needs to connect, grow and advance,” Hume said. “The transaction will enable us to build on our success, making Tech Data a growth platform and enabling us to further differentiate and expand our end-to-end solutions and provide our channel partners with unparalleled reach, efficiency and expertise.”

The deal was financed through Citi, J.P. Morgan, Wells Fargo, Barclays and RBC Capital Markets. Bank of America Securities is serving as financial advisor to Tech Data, and Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel.

1. MSPs Targeted By Ransomware

2019 was the “Year of the Hacker” as ransomware targeted at MSPs and their end users emerged as a business-killing, government-freezing and extremely costly criminal enterprise that saw nearly every corner of IT planning its defenses after numerous high-profile attacks against some of the biggest names in tech.

A breach at Wipro was made through a ConnectWise tool that had not been patched, which led to attacks on dozens of Wipro customers. But that was the opening of a refrain that played throughout the year, as ConnectWise, Kaseya, Continuum, Webroot and NinjaRMM all had their partners’ credentials stolen and used maliciously. Nearly all of those platform providers mandated multifactor authentication.

To pay or not to pay the ransom became a hotly debated topic among solution providers, and the role of cyberinsurance came under closer scrutiny as that was seen as both a way to protect a network but also as a possible enabler of criminal networks.

The most notorious of these attacks with an MSP as the vector happened in Texas when more than 20 towns were infected with ransomware that was seeded by a single MSP with an on-premises version of a ConnectWise tool. But even large MSPs were not immune. Master agent IT By Design was hit by a ransomware attack that spread to eight of its customers.

The attack against ITBD—a former MSP that now provides NOC, SOC and staffing services to over 250 MSPs in North America and the U.K.—hit on June 18 and was contained within 48 hours, but not before several clients were impacted.

In a statement to CRN that provided additional details, ITBD said it was able to stem the attack before it spread to a large number of its MSP customers.

“Fortunately, ITBD’s strong cybersecurity protocols allowed us to detect and quarantine the ransomware with only eight total clients affected,” ITBD said in the statement. “A short 48 hours later, 96 percent of affected systems are restored, and our clients are operational with minimal to no data loss."

The top security minds say the worst is not behind MSPs with ransomware expected to make more problems as well as more headlines in 2020.