Can MSPs Leap Over Economic Slowdowns?

Don’t press the panic button. The mood is generally upbeat here at CompTIA’s SMB Summit in Bonita Springs, Fla. But a few attendees have mentioned that they’ve noticed some SMB customers holding more tightly onto their money in recent months. Still, the SMB sector appears to be the most promising market segment for VARs pushing into managed services. Here’s why.

“Too many VARs look at managed services and get enterprise aspirations,” said Richard Cole, CEO of Geeks On Call America, during a panel discussion here at the event. “Offering managed services to small and midsize businesses is an opportune way to minimize any risks associated with economic cycles.”

Cole thinks the recent US housing slowdown coupled with uncertainty in the Middle East has caused some small business owners to pull back a bit on IT spending. Getting customers under contract with managed services, he added, is one way to keep VAR revenue flowing. While many solutions providers point to remote administration as the key to managed services, Cole sees the market slightly differently. He believes any service — even on-site break/fix services — can generate profits as long as the services are offered under customer service contracts.

Cole compared the MSP opportunity to a heating oil provider or an exterminator. In those markets, customers can sign a service contract for unlimited, timely support. Likewise, Cole added, VARs can transition their customers to service contracts that generate predictable monthly revenue.

Without such contracts in place, VARs are at greater risk to economic slowdowns. Plus, he added, managed service contracts are assets that allow VARs to more easily sell their businesses at higher multiples.