MSPs Kite Technology and AIS Merge for Focus and Scale

One of the first MSP mergers of the year involves two trends that are expected to be big in M&A in 2017 -- vertically oriented intellectual property (IP) and using the cloud to scale.

Kite Technology Group, based in Owings Mill, Md., closed a deal effective this week to acquire AIS Technology LLC, based in Germantown, Wis. Terms of the merger weren't disclosed, but the MSP operations will continue as Kite Technology Group. AIS Owner and President Nick Oliver joins Kite as executive vice president and will be a part owner of the 26-employee combined company, along with current Kite CEO Greg DiDio and Kite Technology Founder Jeff Kite.

Both companies have a long-standing focus of providing MSP services to insurance agencies but bring very different business models to that particular vertical.

"Nick focused primarily on the insurance vertical market and a remote service plan," Kite said in an interview Wednesday. That low-touch approach and his high profile at the national insurance agent conferences both Kite and Oliver attend (and where they met in the early 2000s) have resulted in AIS having customers in 22 states, Kite said.

Kite Technology has taken a more high-touch, white-glove experience approach and has also accepted referrals, resulting in about 45 percent of the former Kite Technology's business being non-insurance agency clients, he said. "Because we were interested in both insurance and non-insurance clients, that sort of led us to focus geographically, so the Mid-Atlantic has been our base," Kite said. "Most of our clients are within a one-hour reach, but we have some Long Island, and northern New Jersey and a lot of central Pennsylvania, down the Delaware corridor."

While AIS has the remote-services approach, Kite says the firm he founded 24 years ago has been building infrastructure that could take AIS' services to the next level.

"What we brought to the deal was [this.] Through our involvement in HTG for eight years now, and Connectwise building best practices -- all of that whole HTG way, if you will -- we have grown our company 22 percent per year average over the last six years. We've done a really good job on operational maturity, and we have the ability to scale our operation. Nick has the reach and the national footprint. We think we can each bring that together and do a much better job of serving clients in a much broader base."

Among those resources poised to help the whole operation grow is an already segmented help desk operation. Kite's corner office sits between the I-Team, which is focused on insurance-industry clients, and, he jokes for want of a different letter rather than a marker of priority, an A-Team focused on non-vertical clients.

As every solution provider with a strong vertical business must, Kite Technology will need to address anew the question of how strongly to prioritize its vertical business versus other types of customers.

"We actually have a sales summit planned for two weeks from now. We are going to do a two-day deep dive where we're going to look very closely at where do we take this now that we're all together," Kite said. "I can tell you that my intention is to maintain a dual-pronged strategy, where within our geographically reachable market, to me that's a comfort zone of one to two hours, I'm comfortable serving clients outside of our insurance vertical niche. I believe that we're going to continue to reach clients and grow that business. And I know for sure that we are going to be intentional about expanding what Nick has done in that remote-only-type service model to an even broader national market."

Meanwhile, as many channel executives predict that IP will become even more important for the tech channel in the year ahead, the Kite-AIS business is an example that IP isn't just for coding ISVs.

"It's much more than an IT understanding of the insurance agency," Kite said when asked about the company's core IP. "We also provide consulting. We have, I think, six staff now who have been full-time employed inside an insurance agency. We know what it takes, understand the complexities."

Keys are knowing how insurance agency employees live in the browser and the big insurance company Web pages and knowing the peculiarities and browser versions or settings that make each site work best, as well as helping clients navigate support for the crucial line-of-business applications like AMS360, Applied TAM and Applied Epic.

As the Kite-AIS deal just a few days into 2017 demonstrates, combining vertical expertise and spinning up a strong cloud/remote support model is one way that growing MSPs will be grabbing for the brass ring of national scale in 2017.

Posted by Scott Bekker on January 04, 2017