Weak Economy Begins to Impact Managed Service Providers

I'm not ready to press a panic button or sound an alarm. Generally speaking, the managed services market remains healthy and growing rapidly. But the weak US economy is starting to impact some managed service providers, according to a recent MSP roundtable attended by Axis Business Solutions.

Here are some anecdotal stats and trends culled from the event.

The roundtable, held at the MSPAlliance's Atlanta conference in April, revealed the following findings, according to Joseph Paquet, VP of vendor alliance and relations at Axis Business Solutions:

  • Accounts Receivable Challenges: Small business customers (50 users and below) are "lagging and late" to pay their monthly MSP bills. In fact, 30 to 40 percent of these small business customers are taking 30 to 60 days to pay outstanding invoices, according to Axis Business Solutions.
  • New Business Challenges: It's taking longer for MSPs to close new business. Opportunities that had required 30 to 45 days are now taking 60, 75 and even 90 days to close. Plus, some MSP-related projects are getting delayed, according to Axis.
To counter these trends, Paquet says, some MSPs are:
  • Billing for a month of service in advance of the month.
  • Embracing EFT (electronic funds transfer) to speed the payment process.
  • Pushing into vertical markets (healthcare, legal, financial, etc.) where deep relationships and deep skills can ensure ongoing business and timely payments.

Proper Context

Axis Business Solutions' Paquet was kind enough to share the findings above in a PDF he sent out to me and other MSP industry watchers.

To be sure, anecdotal information from roundtables and IT conferences can reveal key market trends. While the MSP industry generally remains strong, I maintain that no portion of the IT industry is completely immune to an economic slowdown.

One way or another, small business owners will cut their IT spending -- through reduced purchases or aggressive price negotiations -- if they're nervous about their own cash flow.
TAGS: Financing
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