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Zenith Infotech Spins Off Managed Services Business Unit (UPDATED)

UPDATE: This entry has been updated throughout with quotes and details from an interview with an investor involved in the deal and an executive from the new company.

Zenith Infotech announced Wednesday that it is spinning off its managed services unit, which is one of the largest remote management and monitoring (RMM) businesses in the industry.

The new company is called Zenith RMM, LLC and is backed by a "sizable growth equity investment" from Boston-based Summit Partners, according to a news release on the deal. Zenith Infotech will be a shareholder of Zenith RMM and Akash Saraf, managing director and CEO of Zenith Infotech, will serve on the board of directors for Zenith RMM.

Summit Partners will provide two directors for Zenith RMM's board -- John Carroll and Jason Glass.

In an interview with RCP Wednesday afternoon, Glass confirmed that Summit Partners has a majority stake in the new company. Glass described Zenith Infotech's stake as a "large minority owner" but declined to provide percentages.

In a statement in the release, Carroll introduced Michael George as CEO for Zenith RMM. "Michael is recruiting a world-class management team and, as a very customer and market-centric executive, he will quickly engage Zenith RMM's partner community to discuss the company's strategies for accelerating growth -- including an elevated channel enablement program and expansion of the company's leading platform for managed service providers," Carroll  said.

According to George's LinkedIn profile, he has served as CEO of three firms that have been sold to larger technology companies. Interlynx Technology was sold to ProAct Technologies in December 2000, Bowstreet was sold to IBM in December 2005, and OAT Systems was sold to Checkpoint Systems in June 2008.

Asked about Summit Partners' exit strategy, Glass said, "We look to go build a business that can be sustainable over the long term," and added that Summit Partners was "really kind of indifferent" to whether it takes "four, six, eight, nine years."

"Our strategy is to invest in growing companies in markets with big opportunities. We think about ourselves as long-term investors," Glass said. He said Summit Partners' view of the MSP market, which Zenith entered in 2005, is that it's still growing quickly and that Zenith has a differentiator in the critical RMM space with its SaaS front end and its Network Operations Center (NOC) on the back end.

Zenith says 3,000 channel partners, serving 400,000 endpoints, use its RMM platform. The spinoff company now owns the NOC, which is based in India. The new company also has more than 600 employees, indicating that the majority of Zenith Infotech's current workforce went to Zenith RMM.

Steve Ricketts, vice president of marketing for Zenith RMM, described the deal as a "real win" for Zenith's existing partners for two reasons.

"Partners are looking for a very strong platform, and dedication to the space. The investment will allow us to increase development and accelerate new capabilities," said Ricketts, citing plans to expand the RMM platform with increased automation, support for mobile devices as endpoints, custom reporting and more support for virtualization.

He said partners will also benefit from a stronger U.S. presence. "We're increasing resources on sales and marketing. We'll have a strong focus on product management," Ricketts said. He added that there would also be more communication with partners about product roadmaps.

While U.S. headquarters for Zenith Infotech were outside Pittsburgh in Warrendale, Pa., Zenith RMM will be headquartered in Boston, where CEO Michael George, members of his new management team and Summit Partners are based. "We will continue to have a strong operation in Warrendale," Ricketts said.

Zenith Infotech's remaining product lines are the MirrorCloud business continuity solution and the SmartStyle private cloud package.


Posted by Scott Bekker on September 28, 2011