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...
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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