Managed Services: Software Companies Turn to India

During a two-week road trip across North America, multiple managed service providers and software companies told me they are holding up relatively well during the recession. However, many of the sources told me they will be pleased to show "slight" growth in December 2008 vs. December 2007. Those same sources were expecting strong December growth only a few months ago.

Within some boardrooms, the MSP discussion has shifted to international expansion -- with India starting to dominate more and more internal company debates.Among the anecdotes I'm hearing:

  • North America: The managed services "party" is over, meaning that "easy money" no longer exists. Small MSPs (with five or fewer employees) face tall challenges as they target small businesses that are holding the line on costs and even cutting staff. However, I want to reinforce that managed services remains a fantastic business model. Success or failure will depend on an MSP's executive leadership. Also of note: MSPs targeting mid-market customers are benefiting from midsize organizations that want to outsource IT staff and related services. Acquisitions also continue. We have the early details on several deals that have yet to be announced. One involves the buyout of an eVault/i365 backup provider. We hope to share details in the next few days.
  • Europe: I am hearing from more and more MSPs focused on backup and recovery services. Those MSPs seem to be doing well. But I have to be honest, I am not hearing enough about Europe right now and need to speak to more service providers to get a better look at the local landscape.
  • Australia: Kaseya and N-able are among the few MSP software companies with "feet on the street" in Australia. Several other MSP software providers tell me they support Australia and international markets through SaaS (software as a service), without any firm plans to open local offices in Australia. I think that's a huge mistake. SaaS is powerful, but during my trip to Australia in October multiple MSPs told me they are tired of dealing with North American software companies that don't bother to open offices in Australia. The Australia MSP market is reaching its tipping point now, and localized support from software companies will shape that market for years to come.
  • India: A growing area of focus. Kaseya just opened an India office there and has sold 100,000 licenses in the area. And another major MSP software company recently held a board meeting where the discussion turned to India. Board members called on the company to formulate the India strategy fast. Watch for at least two or three major MSP software companies to talk about their India strategies within three months -- if not sooner.
Overall, I remain upbeat about the long-term prospects for managed service providers. Many MSPs continue to grow. Those that continue to grow all have one thing in common. It isn't a software tool. It isn't a state-of-the-art NOC (network operation center). Rather, the best MSPs typically have at least one business-minded leader within their executive ranks -- someone who really understands marketing, sales, customer recruitment and retention.

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TAGS: MSP 501
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