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.
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Joe.
I’ve spent the last week calling our customers here in the UK following our acquisition by GFI – answering customer questions and assisting with sales as trials of our software have gone through the roof.
So i’ve had a great opportunity to speak to many HoundDog/GFI Max Customers and I have to say, I’ve been very surprised at how many IT Support Co’s/MSP’s are reporting business has never been busier.
Perhaps, being in the ‘outsourcing’ business in a recesion is not such a bad place to be.
Chris Martin
GFI Software
GFIMax (HoundDog Technology)- Easy, Affordable Tools for IT Support
Chris: Thanks for offering some deeper perspective. I agree: This is a good business to be in. And generally speaking, MSPs are healthier than old-line product resellers.
But MSPmentor continues to work very, very hard not to “hype” the managed services industry. Our site is meant to provide an accurate snapshot of the MSP industry’s health. And right now, some MSPs aren’t healthy.
This is an interesting thread Joe. Glad MSP Mentor is keeping an eye on this type of information.
As of July this year, we have seen an average increase in the number of users (Emaployees and Contractors) of our existing ConnexIT psa (http://www.coreconnex.com/products/connexit) customers go up by at least 3 per company over the same time last year. This means that MSPs using our system are seeing a need to have more resources engaged with clients. A good sign for the industry.
Tony Lael
CoreConnex
Business Systems for IT Service Companies
Tony: Thanks for the update on CoreConnex. I’d welcome a deeper briefing when you have time, joe [at] ninelivesmediainc.com