June 01, 2017
[Podcast] A DattoCon17 Preview with Webroot
In this episode of the podcast, I got a chance to sit down with Datto’s VP of Business Development, Rob Rae, and George Anderson from Webroot to discuss what partners can expect to see at DattoCon17 next week.
Kevin Williams: Hello, and welcome to this episode of the Data Partner Podcast. My name is Kevin Williams, one of the videographers here at Datto. Today we're joined by George Anderson from Webroot, and our very own Vice President of Business Development, Rob Rae. Gentlemen, thank you both for joining us today on the podcast.
Rob Rae: Thanks, Kevin.
George Anderson: Thank you.
Kevin Williams: Now, today we wanted to go over what partners could expect to see at this year's DattoCon in Denver. Now, Rob, this year's keynote title for DattoCon is Less BS, More Money. Could you give us an idea of why we chose this topic?
George Anderson: I think I choose the topic.
Rob Rae: It sounds like a George Anderson topic. There's no doubt about that.
George Anderson: Yeah, it does, doesn't it?
Rob Rae: What I can share is, and actually, George is right. It's a topic of a lot of the presentations that we're doing these days, a lot of the conversations that are happening. From my perspective, and George, I'll get your perspective, times are good in the MSP market.
It wasn't that long ago where I was actually at this, it's called Channel Masters. It's training for vendors on how to engage and work with the channel. It was really super cool because what happened was, I jump into this room and there's a whole bunch of other vendors in there, all the big ones. All the ones that you expect, the Intels, the Hitachis, the Ciscos of the world, IBMs, HPs, and their entire marketing team and their executive team are sitting in this room. They're trying to figure out what is going on in the reseller space because the space is shrinking, whereas the MSP space is starting to grow. Those are very good signs, obviously, for channel companies like ourselves and Webroot, here.
The entire event, it was two days worth of training, was these vendors trying to understand the MSP business model, because they've been built over the last 20 plus years based on a reseller model and the MSP model's completely different. So they can't quite understand how to change everything to a recurring revenue model, how to incorporate cloud into this stuff, how to train the MSPs on this, allowing the MSPs to maintain control of the relationship where the MSP becomes the customer and not the ultimate end user. They don't get this stuff.
So not only are we looking at this going, "Hey, times are really good in the MSP space." There is growth everywhere. Datto was still growing phenomenally quickly worldwide. I'm starting to go over to emerging countries like Australia, who's doing a pretty good job incorporating managed services programs and then even Southeast Asia, they're starting to talk about recurring revenue models. This is something that is growing and growing and growing. I think for us to lead the way, organizations like Webroot and ourselves and do this No BS, Let's Make More Money, the opportunity is now. So I actually love the title, George.
George Anderson: Yeah, I think we chose it for some reasons. We're, obviously, in a very competitive marketplace as an endpoint security vendor. We've done extremely well with the MSPs because we've focused, and that's been our main focus but I think the other side that comes into this is that we see lots of other people really spreading what we call FUD, the typical security, Fear Uncertainty Doubt-type thing, also making claims and making some outrageous claims. We've seen some pretty low things happen. People go into organizations and say, "You know, we do a better job than Webroot. Here's the test." When we manage to see the test data because MSPs are pretty good at sharing stuff with us as well, we see. They had that all switched off. How can they be testing if they got that switched off?
So there's a whole lot of funny things going on, and we're just trying to really say when you get past all that, and there's a whole lot of that sort of gamesmanship going on, there's a whole lot of things about the signature lists and file lists and you name it in the industry, but basically, in the end, you're looking for something that works and does the job and is highly automated and makes you lots of money. The presentation is taking that, and it's also really trying to explain to people who already even use Webroot why we've been so successful. I still have partners that say to me, "This thing is like magic. How the heck do you do it?" I have other people that say to me ... An MSP the other day said to me, "Well, actually I'm not so sure. I might be changing from Webroot because I don't think you do anything against ransomware." I sort of went, "What?"
The whole reason we got together and got going in the first place with MSPs was all around ransomware. We almost feel like it's time to, I wouldn't say reinvent ourselves, but just remind people about why we've got where we've got and the fact that all these other guys are still playing catch up football and why that's the case. To me, that's just to cut through that clutter, that sort of noise that's out there. I think people are confused, as well.
Rob Rae: I think so too. I think there are a couple of things that have catapulted this. You mentioned it right at the beginning there where you were talking about how you hedged your bets and made a bet on the MSP channel. That's in your entire business model. With Webroot, we, in essence, did the same thing. We believe that our growth and our profitability is purely because we made that decision. We all made some bets, and those bets are paying off. They're paying off well right now to the point where Datto, as an organization, we just got our first billion dollar valuation about a year ago. We've only been in business ten years. That's phenomenal growth, especially when you're talking about the MSP space.
There's was a time, and you and I have been around in the vendor community for a long time, but there was a time where vendors dismissed the MSP model. There was a lot of people that were betting that it wasn't going to work, that this wasn't a thing, which this was just a temporary measure, only because profitability and product had gone. This is a sign, again, of really good times. I think it's a sign of the business model sticking. If anything, we're probably going to see significant growth as we see small businesses throughout the world outsourcing, no longer wanting to touch their IT, feeling more and more comfortable with recurring revenue and recurring revenue for outsourced IT. These are the things that get me super excited because there is no shortage of end users starting to demand this stuff. I think that's a brilliant thing.
The other indication for me, and we'll talk a little bit about DattoCon here, DattoCon, and I'll pat myself on the back here, it sounds self-serving, but it's become an iconic event. It is the second largest IT event for the managed service providers in the world, and it's a backup conference. I remember when we started this back in 2013, this is our fifth year here in Denver. Everybody was saying, "Why would I go to a backup conference? If you take a look at, "Why would I go to a backup conference?" The common response was, "Well, cybersecurity is one of the fastest and hottest topics that are out there." Organizations such as Webroot and Datto have emerged out of this as viable solutions to help prevent and protect in the cybersecurity world. There's this new world of how things have changed. I think that's probably where your confusion comment comes from.
George Anderson: Yeah.
Rob Rae: I think the second part of it is; this is the most profitable area that MSPs have got. You're probably making it on the security side because people are willing to pay more for security. A lot of MSPs, although they'll do an entire package, everything is included in my MSP offering, and it's taking it all or leave it, backup is still the cornerstone, and backup is still the most profitable part of it, along with the other security streams.
George Anderson: I think for us, the way we view it, we've started with an endpoint; we've just actually launched a new product, which is DNS protection, which is like a domain-layer type thing. We've been out speaking to lots of MSPs; we even segment our MSP market space quite a lot. There are different types of MSPs out there, and they're going in different directions. We're trying to help them move in those directions and do the things that they want to do and help them make money doing it. We see even the MSP space becoming far more sophisticated even than it was just a few years ago and becoming far more multi-dimensional. A lot of people are looking at security as one of the main ways actually to differentiate themselves. Also, they're being asked, I think you rightly pointed out, Rob, they're being asked to do more and more and more. These companies that have been using them for a few years are saying, "Well, actually I'd like you to do this now," and "How can I help do this?" The MSPs are starting to have to look around and say, "Well, actually I don't know how we're going to do this." We're trying to work with them to come up with the answers.
Rob Rae: I think there are a couple of aspects of that. It's crazy interesting, and it's why I love being in this space because of how quickly it changes and especially if you're with a company. Our two companies are innovators. I think that's what puts us ahead of the pace, right?
George Anderson: Yeah, true.
Rob Rae: Is the fact that we're constantly evolving our product and our service and even our prices to, in business models, like you just talked about, to adapt to what the MSP model looks like. Innovation is critical. The other piece, too, is education. I've seen you present, you've seen me present. We spend most of our time just educating and helping the entire community move forward. I learned something today, believe it or not. I'm down at the CMIT owners conference in San Antonio, and Webroot is down here, as well. But I actually learning something today where I have an MSP that has actually set up a Bitcoin account where, if they run into an end user that comes across ransomware, and they don't have a Bitcoin account because it takes you time, it takes some time to transfer some money, he actually has a Bitcoin account where you can come and leverage. He will pay the actual ransom, he'll bill it back to you, of course, but only if you buy his MSP offering.
This is where the security aspect of all this has allowed the channel to get even more creative in ways of offering those IT services, and just services in general rather than the traditional sales. It's super cool to teach stuff like that when you're thinking about the changes and the ever-flowing piece of what it is we're dealing with today. It's different. And again, it goes back to the fear that we're barely getting the channels to understand this. Imagine the confusion at the end user level, where they just don't purely understand what is going on. I think that's where the education piece is critical.
George Anderson: It's funny that you mention that. It's something we've looked at and I think we still are looking at. We've not launched or announced anything, but it's, for us, a very key area. There's a payback, obviously, for MSPs for security user education and that comes in them having fewer incidents. The incident level is quite high. We co-sponsor a lot of other well-known security companies, as well. A CyberEdge report that runs each year.
George Anderson: It's a global report.
Rob Rae: Fantastic report.
George Anderson: Yeah, a good report. 61% of people affected by ransomware globally last year. That's the size of the problem. 54% refused to pay the ransom and got their data back, which was good, probably [inaudible 00:11:43] or something very similar. 32% paid up, and 13% refused and lost their data, as well. Maybe it wasn't that important to them, or they felt they could get by without it. Ransomware on it's own is a big area, but there is no, going back to the less bullshit thing, there is no magic solution for that. I've had people stand up and say, "Well, I've got this vaccine," we've got various other people saying, I've got “Intercepts" or whatever. Trying not to mention trade names here.
There's a whole lot of promises made about these things, and really, 100% guarantee of it is just impossible because as soon as the hacker or somebody gets hold of it, they will test for a way around it and find a way to defeat that. You're just building the walls up the whole time, so you've got to have multiple strategies for it. That's why people at Webroot and Datto work together because we're complementary technologies.
Rob Rae: Yeah, and it's tough to enlighten the end user that way where they believe if they get anti-virus, anti-spamming, anti-malware, they're protected when it's not. It's tough to go, "Hey, here is a solution that is going to protect you from 99.999% of everything that's coming through but you're getting attacked 10,000 times an hour, so something is going to get through." You and I, Webroot and Datto, have done a lot of events together. I know a lot of our partners have done MDF events together where they'll have you come on and present the front end in talking about how you protect on the front end then Datto comes on and does the back end and it paints the whole picture of security with the customer there being in the middle protected, whether it's something that's attacking the front door or whether it actually does come in through the back door, you still have the ability to get it out. It's been a wonderful story.
I know I looked at our MDF rates in 2016 and we had over 400% return on investment on our MDF programs, so my MDF funds for 2017 have gone up significantly. We did 147 MDF events with partners in 2016. We're planning to do a lot more than that in 2017 because, again, I think the education piece and making all the end users aware is critical. There are resources and tools and marketing things that both your company and our company's doing for the channel out there to get that message out.
George Anderson: That's true. There are lots going on in event side which I think is so necessary. As you said, I think education is a large part of it. When we go to DattoCon, obviously a lot of our users are at DattoCon too, so we're sometimes preaching to the choir but that's not really the thing, it's just, an event like that, you let yourself get next to those people, speak to those people face to face, we might have phone calls with them rather than that. It's nice to do that. It's also great to have people come up and say, "Well, hey, you've not done that very well," or whatever. You get feedback, good and bad. For us that's invaluable because we want to be seen as listening to what the MSP wants and requires and to be telling us when we do something great or do something badly, we want to know equally. At least that allows us to correct it. We're listening to that.
From a vendor perspective, a very different attitude to the old vendors sort of, "Shove it through the channel and just sell it to somebody and I'm not really too worried after that."
Rob Rae: It's a massive change. It's a massive change, and I think it's a great thing. We look at our business, and I'm sure you guys do the same thing, where we look at our business and go, "Look, we're doing wonderful things for our customers, the MSPs. If the MSPs aren't buying our product, at least we're making our competitors accountable for what they're doing and pushing them forward." We look at this as a way to push the entire channel forward by coming up with innovation, and lower prices then go to market strategies and sales tools and all those wonderful things, forcing everybody to raise all tides together here.
Let's talk a little bit about DattoCon. It is June 5th through the 7th, 2017. Denver, Colorado. I'm very excited about it. The agenda is complete. Everything's coming together really nicely. We've sold out on sponsorships. I think we're going to have about 42 different sponsors there. We're going to have 1000 MSPs from all over the world there. About 900 seats have been sold, so I only have about 100 seats left so if anybody is listening to this and they're on the fence about DattoCon, you have to act fast because we are going to sell this out.
Some cool things: obviously we have a lot of fun while we're there, there's a lot of cool dinners and drinks and receptions and pre-days and everything that goes along with a great conference. We have our keynote speakers which, of course, is Adam and Jamie from the Mythbusters, which are super cool interacting guys. They do a fantastic presentation. I've seen a few of them now as we're leading up to this event. It's really interesting and relevant for our customer base. Of course, we've got our diamond sponsors, which includes you.
George Anderson: Yep.
Rob Rae: Webroot is going to be on the main stage in front of all thousand of our partners there. What are you planning on talking about? You got something special you're launching there? What are you guys going to do?
George Anderson: We've got quite a few special things coming up. Whether I'm going to be in a position to announce them or not, I don't honestly know. It's from that perspective. We'll also be addressing the DNS protections because we've still really got most of our MSPs on trial on that just now. We set up a system to compete with another vendor who's actually in that space. We're trying to bring something better to the marketplace than that vendor is offering, which is always a difficult thing because you're playing catch up because they've obviously got quite a few years' lead on you. But we feel with the technology we have in place that we would probably more than ideally placed, better than anybody else in the whole security industry, to offer this service. For that reason we decided to go ahead with it and also the MSPs were asking about it. That will be pretty big for us.
Another interesting area for us is, and it's a very leading area and an area that people may are not so aware of, is behavioral analytics. We acquired a company called Flowscape last year which is a specialist in this area. They've been doing a lot of work with smart cities, and you'll see a lot more announcements around what they're doing in that area. For us, the real interest was an MSP space and finding some holistic way to, very early on in attack cycles, be able to stop them and not just be relying on the end point, not relying on DNS or any of those things. They're part of the layers but this way of having a more global view of that. Most of the organizations doing that sort of thing are large enterprises. They're people with large security teams, lots of investments in SIMS and CMs and several other technologies.
I think our innovation is, how do we take something as powerful as that and make that available to the MSP space and automate it and do a whole lot of other things with it, so we're pretty flat out working on that area too. I'm not sure if we'll be announcing a product at DattoCon. We might be mentioning it, but that's the sort of things we're working on. We're looking at more and more things and more and more extension of our platform for MSPs to enable them to do more and more in the security space and to offer, in a sense, very high end, very powerful services to the customers. The end point was designed that way. It was designed for small businesses that haven't got a time and effort to be able to manage an endpoint. How do we automate that altogether? How do make that get by all the things that traditionally IT was pretty poor at and give them something that's going to work for them?
We're on that track with lots of things and that's really our way ahead. That's definitely going to be a part of what's on. It's not very far away now, when you think about it.
Rob Rae: No, it's not. It's less than a month now.
George Anderson: We always believe that this thing of ... Especially with security and efficacy and profitability go hand in hand. If you're not doing the job, you're not making a profit for your partners so I think we're just going to reemphasize the fact about how well we do that job and why we do that job so well because we've not been great at sometimes explaining to our MSPs a lot of the stuff that goes on under the hood. I think we're maybe trying to, maybe not give them the detail, but give them at least a lot more information about why and how we design things they way they are and why they work the way they are and why we feel that's a very, very good way of doing things.
Rob Rae: It's funny you say that because we've started doing the same thing where I'm finding that a lot of my presentations are focused on profitability and profitability is going to come through two ways. It's going to come through the margin that you add to the product, but it also comes through the management of all this stuff and the back end of how much time are you spending on this. We talk about differentiators in the actual product. We're similar to you guys; we're constantly innovating, so very similar to what you're saying. When I do a lot of presentations, I did one here this morning in San Antonio; it's focused around the differentiators that we're building into our product for the MSP, and then the MSPs take that and use a differentiator versus their competitors.
It's funny because I've got more than enough content, forget about product innovation, it's more about what don't you know. I think that's probably the most important part about seeing your product or my product out there. If you're using these products, and you see it all the time, you go to a trade show, you see the breakout sessions and you, "Ah, Datto, I've got Datto. I don't need to go to Datto's breakout session," or Webroot's breakout session but you do because what we're doing is we're talking about all the stuff that we've innovated. Not trying to sell you the core product but all the stuff that we've innovated to help give the MSPs an edge. That's where I find, especially DattoCon for us is a good way to actually do that but then I take that opportunity by forcing myself on stage at the keynote presentations and talking about this stuff and in essence, what I'm hoping you'll be delivering over in Denver.
George Anderson: Yeah. I've got a webinar to do to some colleagues down in Australia, later on, today about 7:00 here Mountain Time. One of the big topics we're finding that is a turn on for MSPs is talking more about automation and the ways they can use more automation within their business and deliver one, more value, but also more profits. It's an extension of that. And then we're looking at ways at how we [inaudible 00:22:51] our entire product into that and let them use our products in a way that they can automate it more if they want to.
I think the thing we found out early on was that you could produce a vanilla product and you can have a fantastic vanilla product, but people need to move outside that walled garden. It's really difficult to develop for each different type of customer. They all want to do slightly different things, or they want to tailor it their way. Our response to that was twofold. It was one, to do a lot of integration with third-party remote management and monitoring tool people that Connectwise or to AutoTask and all those guys because they were obviously the tools that the MSPs were using to do their management and their professional services stuff with. The other side of that was we had something called "Unity" which was our API, which at the same time, apart from allowing us to do the integrations quicker with those RMM partners, also allowed the MSP to directly suck data straight out of our back end systems attached to their accounts and use that whatever way they wanted to do.
Then we're trying to say there are all these other tools that you should be looking at. We've got colleagues that are now IT Glue. We know they've been doing spectacularly well with their documentation things, again, because people are looking to automate that. They're looking at ways of getting those processes down and repeatable and easy to follow. We know if they do that, they got a repeatable thing, they can take the money, if you like, the cost of trying to reinvent the wheel every time they do it. There's a whole lot of things going on. Just business intelligence stuff these days. Small businesses, there's a whole ton of value to the MSP and the service provider can return in just business information, and business intelligence information fed back to the user about their business, their systems. Small businesses don't have that.
The MSP market for me is exciting because you can go in so many different ways. It's not just security; it's not just backup, it's just the whole idea of becoming the IT department for a company means it gives you a latitude to do lots of different things. It's a little homogenous at the moment, I think Rob, in some ways. There's a lot of similarities but I think going forward, we'll see a whole lot of different types of MSP, and they'll spin out of that. It's going to be fascinating and something we're excited about.
Rob Rae: Yeah, I agree. I agree. Just even myself personally, in my career, I don't think I've ever been so excited as I am these days just looking at the movement, the way it's going and the fact that we're on top of it. It's a beautiful time to be in this space, and I wake up every day, excited to go to work. I know that sounds like a cliché.
Rob Rae: It's true, and I think we're blessed from that perspective. Lots of content you're going to be talking about at DattoCon, we're going to be talking about at DattoCon. If anybody's interested in getting some more information or getting registered, go to dattocon.com. George and I recorded a video talking about Denver. You're in Denver, correct?
George Anderson: Yeah, I am.
Rob Rae: It's not too far a trip for you. You actually have a little commute.
George Anderson: Exactly. I could actually leave and go from home, which is really cool.
Rob Rae: Very short jaunt for you. What's the weather like this time of year?
George Anderson: Funny. As you know, Colorado is a funny place. We had it up in the 70s last week and then we had a little cold thing came through on Friday night, Saturday morning and we went down to ... I think some places had a foot of snow locally. I had about five inches of snow. It appears and Saturday we pretty much, everybody just hunkered up and stayed indoors. It was very cold on Saturday night, like 20 degrees or something, depends on where you were. Sunday, we woke up, and the sun shone, and by lunchtime, most of the snow had gone. It's wet snow we get this time of year. It just disappears. It's just like having rain; it's like solid rain for a while. It's very weird. Now we're back up to 80s this weekend. That's Colorado.
Rob Rae: It's actually one of things I like about Colorado. It shouldn't be overwhelmingly stifling hot but it should definitely be nice. There's no doubt.
George Anderson: June is a lovely month. It's nice high daytime temperatures. The evenings are usually just beautiful, just great time to be getting out and enjoying yourself. It's a great time of year.
Rob Rae: Awesome. I'm looking forward to seeing you in Denver in about a month.
George Anderson: I know.
Rob Rae: I'll see you out there. It's coming up quick. We still have a ton of work to do but I'm very, very happy with how everything is coming together. It should be a fantastic conference. We're excited, partners are excited. It's a wonderful time right now. We will see you in Denver.
George Anderson: Yeah.
Rob Rae: Thank you very much for joining us today, George. Really appreciate your time, appreciate your insight, looking forward to seeing you. Kevin, I'll turn it back over to you.
Kevin Williams: Gentlemen, again, thank you so much for the time and the insight into what we can be expecting to see at DattoCon. Everyone, stay tuned for more information as we get close to the big event.