For Managed File Transfer, One Choice Stands Out

For a mature, niche market like managed file transfer, there sure seems to be a lot of interest from the private equity community who recognize that there’s steady money to be made in selling picks and shovels, rather than joining the rush of prospectors looking to find the Lost Dutchman’s Mine. Over the last few years, a lot of private equity money has been spent to acquire some well-known managed file transfer players. PE-backed HelpSystems acquired MFT software GoAnywhere with its 2016 purchase of Linoma Software, and then added more market share in 2020 when it bought managed file transfer vendor GlobalScape. Publicly held Progress Software bought IPSwitch in 2019.

Just recently, private equity-backed Redwood Software bought Advanced Systems Concepts Inc. in February of this year. ASCI had purchased MFT vendor JScape a year earlier. And on March 23, file-transfer-as-a-service company Files.com announced that, backed by money from its owner Riverwood Capital, had acquired ExaVault for its file sharing SaaS service.

Affirming Managed File Transfer’s Value

As a long-time managed file transfer player, it’s exciting to see this kind of activity. It affirms our belief in the value of the products we offer. After all, secure, managed file transfer software is an essential tool in any data security, data management, and regulatory compliance strategy. Coviant Software has been supporting our many happy clients with that task for nearly twenty years and, as long as MFT remains a vital piece of such programs, we aren’t going anywhere.

And while it’s affirming to see that profit-focused private equity firms recognize that there’s money to be made selling software and services that transfer files, for those organizations in the market for such products—or that are customers of the acquired companies—consolidation has a downside.

They’re in it for the Up-Sell

Choice breeds innovation and competition, and mergers and acquisitions in mature markets limit choice. And when there are fewer choices available, prices tend to rise. That’s Adam Smith’s invisible hand at work. That’s especially true for the products that have been purchased. Companies that buy out their competition don’t tend to compete with themselves. They integrate both their technologies and their organizations, eliminate redundancies, and then work hard to not only keep the acquired relationships, but up-sell them.

After a few months or a year, the team you’d gotten to know is gone and someone new is emailing you about a contract renewal (and probably a boost in costs), and trying to interest you in some complementary add-on service that they’ll bundle with whatever your replacement product is now.

Private Equity isn’t Charity

Private equity companies aren’t charitable organizations. They exist to enrich their primary stockholders and they do that by buying companies at attractive prices, cutting costs, and increasing prices. Depending on their calculations, they may even re-package companies in their portfolios to sell in order to raise more capital to keep the cycle going. Chances are you’ve already experienced that and know what happens when a product you like gets acquired. Sometimes it’s better. Often it isn’t. What does that mean for you? It means that change is coming and you should start to think about alternatives when you find that your costs have risen and your level of support has declined.

Coviant Software is not owned by a profit-hungry private equity firm. We are 100% focused on building, selling, and supporting the award-winning and ethically priced Diplomat MFT family of secure, managed file transfer products. And we are proud that we deliver the best full-featured, enterprise-grade MFT platform on the market at the best value on the market. That isn’t an empty boast. It’s the collective sentiment of the many organizations that rely on Diplomat MFT to secure and deliver their most sensitive files on-time, every time. Millions of files every day get where they need to go safely because of Diplomat MFT and we do it at a cost that is less than half of what the PE-owned vendors charge.

Try us for free, and if you agree, we’d love to do business with you.