The strategic acquisition of assets Absolute wanted to divest to focus on its core business continues HEAT’s transition from FrontRange’s old SMB business to an integrated endpoint management platform that increasingly appeals to enterprises
HEAT Software, which was created earlier this year when ClearLake Capital Group acquired FrontRange and merged it with Lumension, which they already owned, has cut a deal to acquire some significant assets from Vancouver-based Absolute. Absolute is divesting its non-core properties as part of a major consolidation to focus on its core endpoint security business going forward. The transaction sees HEAT acquire the assets and operations related to the Absolute Manage and Absolute Service business. The deal is likely to close in early October. Financial terms were not disclosed.
For HEAT, the deal represents another step forward in the company’s strategy to position itself as the market leader in the Hybrid Service Management and Unified Endpoint Management market, and continues its evolution from FrontRange’s former doldrums.
“FrontRange was one of the companies that helped give birth to the service desk market, which ITIL subsequently changed into IT Service Management [ITSM],” said Jon Temple, President and CEO of HEAT Software, who became FrontRange’s leader three and a half years ago. “The market bifurcated between those who gravitated to the enterprise – like CA, IBM and BMC – and those like FrontRange which were more SMB-focused.”
FrontRange’s business tapered off in the last decade.
“The company was slow to react to some of the major technology trends, especially the movement to the cloud, where ServiceNow was the pioneer in this space,” Temple said. “This hurt all the established players.”
Temple said that he joined FrontRange after becoming convinced that the service management market is not going completely to the cloud, like in CRM, where the cloud has almost completely cannibalized new on-prem opportunities.
“In our lifetime, that is not going to happen,” he said. “Analysts say 50 per cent of the category will still need an on-prem service management solution. Vendors do need to be able to do both cloud and on–prem, however, and have the ability to move from one to the other.”
Accordingly, FrontRange started work on delivering an innovative multitenant hybrid service platform that could deploy either cloud or on-prem.
“We launched that in 2013, and customers loved the flexibility of choice,” Temple said. “It significantly energized our growth again. Today, we are the fifth largest player in ITSM, with the goal of going into the top three.”
The merger with Lumension in February of this year was motivated by a desire to improve their growing links between ITSM and endpoint management, something that customers have increasingly demanded.
“The linkage between the two allowed the service desk agent not only to identify the incident, but to improve the mean time to repair by doing it all from the same platform, thus streamlining the business process,” Temple said. “We already provided this integrated endpoint management, but Lumension took this to the next level by providing advanced threat protection to prevent a percentage of the incidents from happening in the first place. We didn’t have this endpoint security capability before. Lumension brought the security aspects in.”
The decision to rebrand the merged company HEAT was another in a venerable IT tradition of companies renaming themselves after their product.
“The brand equity was really around the HEAT product, which was much better known than FrontRange’s name, so we gave that name to the merged company so as not to dilute our branding efforts,” Temple said.
The new integrated endpoint management business was also increasingly taking the company upstream in the market.
“Aside from having a differentiated approach to service management through our hybrid platform, I had a feeling it would open up the value chain,” Temple said. “It doesn’t contain one piece of code from the old SMB HEAT legacy application, and was built with super scalability in mind. We were hopeful it would be appealing to the mid-enterprise category as opposed to just the legacy SMB, and we discovered that this thesis was correct. Most of our growth today isn’t in the lower end of SMB but in the mid-enterprise category – companies with 1 to 20 billion dollars in revenue. These are customers who, quite frankly, would not have ever entertained a discussion with us before 2013.”
Absolute’s Absolute Manage and Absolute Service solutions were available because Absolute is undergoing a major refocusing around its core endpoint security solutions. In August they rebranded the company itself, dropping the Software from their name, and indicated they are phasing out their flagship Computrace brand, which they believed reflected their past rather than their future. The sale of the two solutions to HEAT reflected the fact that they want to focus exclusively on their core business going forward.
“For Absolute, the divestiture of these businesses made a lot of sense because they were not core to their business, which is information security,” Temple said. “They are absolutely core to us, however. They were in touch with a number of potential suitors, but from our perspective it was an absolute bullseye.”
Absolute Manage is an integrated Client and Enterprise Mobility Management software solution which lets organizations manage and secure all their mobile and endpoint devices, regardless of platform, from a single console. Absolute Service is an ITSM and Help Desk solution that enables automation of ITIL processes like incident management, request management, and service level management. They will be respectively integrated into HEAT’s solutions portfolio and HEAT Service Management business unit.
The new solutions acquired from Absolute strengthen HEAT in several ways, because their strengths complement areas where HEAT was not strong previously.
“There are good business reasons and good technology reasons why this is a very accretive acquisition for us,” Temple said. “Absolute is known in endpoint management for being strong in the Apple community, which makes them the leading player for companies with lots of both PCs and Macs. We were strong on PCs, but not on the management of Macs, so this gives us a significant extension of our capabilities.”
The respective geo strengths are also highly complementary.
“In terms of customers, Absolute is the inverse of us,” Temple said. “We are strong in Europe from the endpoint management perspective, and not in North America, and they are the complete opposite. This accelerates our leadership because it makes us strong in both of these two major geos.”
Temple also stressed the importance of the deal from a technology perspective.
“We and Absolute have a shared strategic vision around unified endpoint management,” he said. “EMM [Enterprise Mobility Management and MDM [Mobile Device Management] rose quickly and will die quickly because customers don’t want a separate software portfolio to manage their mobile endpoints. They want to manage the user regardless of the devices, from a single console. Those categories will die and reappear as features inside a unified endpoint management platform. Absolute has built a leading, fully integrated EMM solution with their endpoint capabilities, and adding those to our unified platform was another important part of the rationale.”