Managed Services: Two Views On the Economy
I attended two different conferences this week, one located in San Francisco and the other hosted in Las Vegas. While one conference was filled with upbeat attendees, the other event was clouded by economic uncertainty.
It was quite literally a tale of two cities — and two industries. While San Francisco and the broad IT industry worries quite a bit about the economy, attendees at the Kaseya User Conference in Las Vegas were generally upbeat about their business prospects.
I’m not suggesting that the managed services market is immune to an economic slowdown. But Kaseya executives provided some clear indicators that their business remains strong. CEO Gerald Blackie displayed a slide that showed Kaseya revenues growing from about $11 million in 2006 to roughly $25 million in 2007 (those figures are my rough interpretations of a bar chart from Kaseya).
Blackie also said he expects Kaseya to double in size again this year.
Attendees also seemed upbeat, with many established MSPs expecting double-digit managed services revenue growth (at a minimum) this year.
When the Kaseya event wrapped up on June 3, I headed to San Francisco for a private IT event. While speaking with individual attendees, I heard anecdotes about tighter IT spending heading into the second half of 2008, along with some hiring freezes and even some project and staff cuts.
It was a healthy reminder to me that, at some point, cautious IT spending may impact the managed services market. But so far, the MSP industry seems to be holding up remarkably well.
Joe, so was the SF conference mostly about enterprise companies as opposed to the markets Kaseya covers (which seem to be more SMB but I may be mistaken)? or what was the big difference in outlook in your view?
Confirmed: The San Francisco event was focused more on corporate IT across midsize and large enterprises. It was a private gathering with about 80 IT executives across multiple verticals. The feedback from attendees was anecdotal, but lots of private discussions about IT budget cuts for later this year.
So, what does this mean — if anything — to the MSP space? Don’t forget that some MSP platform providers also serve enterprise IT. Kaseya and Nimsoft both fit that description, though my sources at both companies seem upbeat about sales.
Also, I continue to hear that MSP sales cycles are stretching a bit. Deals that used to take 60 days to close now take 90 days or more.
I don’t want to “sound and alarm” or “press a panic button.” Things seem relatively good in the MSP space. But I also think it’s important for MSPs to plan and spend responsibly, while keeping a close eye on the enterprise space for hints of a spending slowdown.
so you believe that enterprises lead in the trend of IT spending over SMBs rather than lag behind them?
I believe large corporate IT is looking around and CIOs from one vertical (say, transportation) are speaking to CIOs in other industries (say, manufacturing in Detroit or financial services in New York) and sharing concerns about energy costs, housing, spending slowdowns, etc.
I am not suggesting that corporate IT spending will collapse. But the concern in large enterprises has increased significantly in just the past 4 to 6 weeks, from what I’ve seen.
My views on small business IT spending are biased, however, because I write so much about the managed services market. Overall, platform providers and MSPs sound cautiously optimistic about the rest of 2008.
I think that the current economic situtation creates more of a value proposition for managed services regardless of the size of the business. Let’s face it, client expecations do not go down (again regardless of the size of the business. Managed services provides can offer more services at a cost effective rate if they can operate and manage their customer base efficiently. Reduced travel costs, proactive responses vs. reactive fixes, 24×7 monitoring and support are just some ways a MSP can offer a higher level of service and still provide a solid ROI for the client.
Great comments. I have recently seen a spike in my SMB clients finally deciding they’ve waited long enough (no more “I want to see if I can last another _______ with the stuff I have”). They are starting to pull the trigger even though they still have the same fear they did in the spring but most are financing since they have less cash on hand than before and most are dealing with independents like me thanks to Dell Financial Services guilty verdict in NY court.