Managed Services Stand Up to Slowing Economy

It's one small piece of information that provides big-time hope to the managed services market. Kaseya says its annual revenue more than doubled in 2007 compared to 2006. Solutions providers can breathe a collective sigh of relief -- at least for the next few weeks -- as they digest the Kaseya news. But we should all keep the news in perspective. Here's why.

Since most platform providers are privately held, it's difficult to measure the overall health of the managed services sector. In the broader economy, IBM provided some hope about IT spending on Monday, but Wall Street remains on edge. Intel recently announced weak results; Citi Group delivered a big loss; and American Express is worried about consumers reducing spending and missing credit card payments.

So, what about the managed services sector? No IT sector is completely immune to an economic slowdown or recession. But three pieces of anecdotal evidence suggest managed service providers and their partners remain relatively upbeat about their current business prospects.

  • Kaseya says its 2007 revenue was 215% of the prior year's results. And the company didn't mention seeing any spending slowdowns in Q4 2007.
  • Autotask plans to expand its staff by 30 to 40 percent this year amid continued revenue growth.
  • Our MSPmentor 100 list -- to be unveiled January 28 -- indicates that most managed service providers enjoyed high double-digit revenue growth in the MSP space this in 2007. Many of the list members more than doubled their managed services revenue compared to 2006.
Nice anecdotes. But let's keep all of this information in perspective. Rewind to early 2001 and a conversation I had with Craig Conway, CEO of PeopleSoft (since acquired by Oracle). At the time, Conway said he was worried about the economy but PeopleSoft's own customer relationship management systems indicated that sales remained strong. He sounded cautiously optimistic, and I wrote an upbeat piece about PeopleSoft and the application industry's ability to stand strong vs. the economy. But within a few months PeopleSoft's sales pipeline slowed dramatically and it was clear the application space wasn't immune from the recession.

Hopefully, that lesson won't repeat itself in the managed services space. Current business looks good, but be sure to ignore pundits who claim managed services are completely immune to a recession.
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