The MSP Industry’s Dirty Little Secret
If you still think managed service providers (MSPs) are immune to the recession, here’s an eye-opening recap of my breakfast conversation with the CEO of a major MSP software provider. Although the executive remains optimistic about the overall managed services market, he conceded that the industry currently suffers from a dirty little secret.
According to the software company CEO:
“Your blog entry about mounting unpaid invoices in the MSP market was on the mark. It’s the dirty little secret in the managed services market. A significant number of MSPs aren’t paying their bills.”
The challenges don’t end there. During CompTIA Breakaway 2009 in Las Vegas I heard the following chatter:
- Many MSPs have frozen employee salaries in 2009.
- The government vertical, which seems flush with government stimulus money, also faces challenges. The State of Ohio, for instance, has asked VARs and MSPs to cut their prices/fees by 10 percent, according to one Breakaway attendee.
- Some MSPs have successfully recruited three to four customers, but are struggling to scale beyond those initial successes.
- At the end of 2008 and the beginning of 2009, Kaseya saw a small number of its customers “go out of business or scale down plans,” said CEO Gerald Blackie.
Now the Good News
Still, I don’t want to be known as “Mr. Gloom and Doom.” Generally speaking, the MSP business model remains a fantastic way to build and scale a channel business.
Although the rising managed services tide won’t lift all boats, there are signs that the MSP industry as a whole continues to perform strongly.
A few prime examples…
- Alpheon CEO Greg Donovan told me his Morrisville, N.C., managed services business continues to enjoy double-digit growth in 2009.
- Autotask CEO Bob Godgart tells me June 2009 may have been an important turning point for MSPs and the economy. The reason: It was the first time in several months that MSPs seemed to be increasing per-company headcount running PSA software.
- ConnectWise signed up roughly 130 new partners/customers, the strongest month ever for the company, according to Jeannine Edwards, director of the ConnectWise Community.
- Kaseya CEO Gerald Blackie mentioned to me that the company is on pace to grow about 70 percent vs. 2008.
- Level Platforms CEO Peter Sandiford mentioned that demand for Level Platforms’ SaaS platform is growing roughly 200 percent year-over-year.
The bottom line: As a whole the managed services industry remains healthy. But overdue invoices and financial challenges remain the norm for many MSPs that haven’t quite perfected their business models.