Datto Layoffs: Sign Of Tough Coronavirus Times For MSPs

The COVID-19 coronavirus pandemic is creating uncertainty among clients, leading to moves by MSPs to carefully watch their accounts and MPS tech provider Datto to pull back from earlier plans to grow business quickly in 2020.

Layoffs at Datto are showing how far the impact from the COVID-19 coronavirus pandemic is reaching into the managed services market, MSPs told CRN.

Datto is in the process of laying off an unspecified number of employees. The Norwalk, Conn.-based provider of automation, networking, and storage technology to the MSP market confirmed the layoffs but declined to provide information on how many of its personnel were affected. The privately held company has more than 1,700 employees, according to its website.

A couple of Datto's MSP partners said the Datto layoffs were just a symptom of a wider concern in the MSP business about the impact from the global pandemic, and that MSPs need to carefully plan for the rest of 2020.

[Related: Datto Warns MSP Attacks Are ‘Skyrocketing’]

The layoffs reflect a trickle-up effect from the coronavirus, said Dave Seibert, CIO at IT Innovators, an Irvine, Calif.-based MSP and Datto channel partner.

"Clients get impacted by the coronavirus, which then impacts the MSP, and then impacts the vendors," Seibert told CRN.

Seibert said Datto is a strong company and has been helpful to his firm.

"With COVID-19, tightening the belt is not a bad thing," he said. "Datto has been scaling for high growth. But today is not a time for an expanding sales mode. We want it to be, but it's not. So it makes sense to tighten the belt."

Most MSPs have been impacted by the pandemic, and those who have not will be, Seibert said. And that makes planning for potential changes in clients more important than ever.

Many MSPs are using a spreadsheet to look at each client in terms of whether they are "essential" businesses or not, how they are doing, are they paying on time, are they downsizing, and so on, he said.

"You need to know how each client is doing and how they will be impacted, and then you can plan for it," he said. "I talk with a lot of MSPs, and I estimate MSPs on the average will experience a 20-percent reduction in revenue."

Paul Hager, CEO of Information Technology Professionals, a Madison, Wis.-based MSP and Datto channel partner, told CRN that vendors like Datto that were aiming at big growth early this year are finding they need to pull back because of the coronavirus.

Datto did not reach out to its MSPs about the layoffs yet, and Hager said he wishes vendors in general would more proactively reach out to their channel partners when making layoffs.

"It's a mistake to not reach out," he said. "Your partners are your voice. For our shared customers, the first place they turn to when reading about layoffs is us. If you clue us in, we can help. Otherwise, we read about this in the news, and then we have to reach out to the vendors. Nothing is on fire here. The layoffs just mean the world is nervous."

Hager has recently seen that anxiety in his MSP peer groups.

"The mood in the Zoom meeting room is concern," he said. "We're thankful, but we're concerned. We're thankful we converted to recurring revenue, and compared to 10 years ago we're better off. But in January, we were very bullish. We felt things were going the right way. But now we have to flatten our goals. Tech is a beautiful place where we always assume wild growth. But when thoughts of wild growth meet reality, we need to readjust."

While Datto declined to discuss specifics about the layoffs, Datto CEO Tim Weller, in a statement emailed to CRN, said as the economic consequences of the pandemic becomes more clear, the company made the "difficult decision" to reduce its headcount.

"Our hiring over the past six months anticipated a much higher rate of growth in 2020 than the MSP industry or Datto are now likely to see. Our actions mean rolling back our global team size to where it was six months ago," Weller said.

Despite the pandemic, Datto is elevated its high-touch account management and direct-to-tech support even as employees moved to working from home, and so partners’ day-to-day interactions will not change, Weller said. "We continue to support MSPs with our trademark one-to-one approach and champion their efforts to keep SMBs running throughout this crisis and beyond," he said.

Datto is looking forward to a good recovery for the company and its MSP partners, Weller said.

"On an optimistic note, we expect higher levels of growth for MSPs and Datto to return when meaningful, sustainable re-opening occurs," he said. "SMBs will accelerate their digital transformations and MSPs will be their perfect enablement partners. It is very difficult for anyone to predict when that will happen."

Several of Datto's employees took to LinkedIn to say they were let go.

Matt Scully, a five-year Datto veteran, wrote on LinkedIn that his career at Datto ended Tuesday, and that he will most remember the friendships he built there. "I will be forever grateful for you all, from internal colleagues and MSPs who became FRIENDS along my Datto journey. You trusted me to speak in front of your clients and prospects knowing a mishap could hurt your business. You can't manufacture that kind of trust," Scully wrote.

Marc Ientilucci, a four-year Datto employee, said via LinkedIn that his position as a qualified assurance engineer II was terminated Tuesday due to COVID-19. " I am grateful for the opportunities I was given, being a part of so many incredible teams and new skills I gained during my time there," Ientilucci wrote.

Kevin Astle, a Datto software engineer, wrote that he was let go from his position during a workforce reduction caused by the coronavirus. “If anyone is aware of job openings at their company that I might be suited for, I would be happy to hear about them,” he said.