It’s time to end the denial. Despite all the media propaganda suggesting managed service providers are immune to the US economic crisis, that message just isn’t true. Here’s why.
During meetings with high-level MSP industry executives this week, I’ve heard a consistent theme: Since about mid-September, pockets of the US managed services industry have experienced slowing growth.
And two North American MSP software executives tell me their fast-growing international programs — particularly in the United Kingdom and Australia — are helping to offset slowing US sales growth.
Time for US managed service providers to panic? No. Time to deal with reality? Absolutely.
Real Opportunities, Real Challenges
On the upside, managed service providers are better positioned than traditional VARs during these uncertain economic times. And roughly two-thirds of the MSPs at the N-able Partner Summit here in Dallas indicate that they are in hiring mode and seeking more employees.
However:
- The credit and lending crisis (see the reader comments) has started to impact day-to-day business for MSPs and their customers
- Sales cycles are getting longer, according to several MSPs I met at the CompTIA Managed Services Summit this week.
- Even the most mature service providers — power utilities — are having trouble collecting fees from their customers. If a growing number of small businesses and consumers aren’t paying their utility bills, you can bet those same folks won’t be paying their MSPs.
- Small managed service providers, particularly two- and three-person shops, are beginning to see a more challenging business environment, according to Kaseya CEO Gerald Blackie.
- The SaaS 20 Stock Index, which measures the stock performance of software as a service and managed services firms, is down roughly 40 percent this year.
- Top MSPs such as masterIT and Everon Technology Services are providing real world guidance to their staff members, telling them about the challenges — and the opportunities — ahead.
Again, MSPmentor isn’t pressing the panic button. Overall, the MSP industry is holding up pretty well. And managed service providers are carrying the IT channel forward.
But we will work overtime to cover the MSP industry — the opportunities, the challenges and the economic realities — responsibly.
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Tags: CompTIA Managed Services Summit | Kaseya CEO Gerald Blackie | Managed Service Provider | Managed Services | MSP | N-able Partner Summit
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Joe thank you for being a voice of reason in an industry where the media reports fantastic or terrible news but rarely describes the good and the bad in a balanced way.
Al: Thanks for the note. I remember when CRM and ERP vendors told me in early 2000 that their sales pipelines were strong. They nearly guaranteed that they would see a potential slowdown before anyone else because CRM gave them “visibility” into long-term customer buying trends.
But within weeks of making upbeat statements to me, PeopleSoft announced a big customer sales slowdown, and the bottom dropped out of the tech market.
Fast forward to today: The MSP market remains strong. And it’s far better to be an MSP than a VAR these days (generally speaking). But we’re all going to take a few lumps as the financial crisis plays out.
Joe;
Your insight it dead-on. One of the most requested keynotes I have been delivering this year is entitled “How to maximize service delivery revenue during economic downturns”, in which I identify MSPs as the least challenged of all service provider groups during periods of economic uncertainty with the highest profit potential.
In Q208 attendees to my sessions indicated that they were not feeling any ill effects due to the slowing economy.
However attitudes have changed in Q3 - nearly all attendees I’ve polled during the last 3 months have indicated that their businesses have definitely been affected in some manner as their clients slow or delay capital purchases and stretch payments beyond 60 and 90 days - and I’m getting this feedback across the country.
A few tips I offer to those VARs feeling the pinch include:
- Reduce internal costs wherever possible
- Raise rates yearly
- Increase efficiencies and utilization by investing in tools and technology and adopting best practices processes and procedures for service delivery
- Partner with other service providers and vendors to stabilize and increase revenues
- Modify deliverables to be more attractive to clients and prospects during uncertain economic times
- Move balance of deliverables to lessen commodity-based services
- Shape marketing and messaging to reflect alignment with your clients’ needs
- Increase marketing efforts over historical levels
- Leverage vendor and distributor services and offerings such as co-operative marketing events, marketing development funds, etc.
- Add financing as an option to each and every proposal
- Build deep client relationships as the Trusted Advisor and outsourced CIO to reflect value and lead enterprise change in your client environments
Good seeing you at CompTIA!
Erick Simpson
MSP University
http://www.mspu.us
Erick: Thanks for sharing the tips. I agree: A lot of these new perceptions started in Q3. Generally speaking, there are upbeat folks here at the N-able Partner Summit. But there’s also the clear reality that the credit crisis has impacted some business momentum in recent weeks.