Managed Services Revenue: The Good (And the Bad)

Take a look at recent financial data points from CA Inc., Nimsoft and Siemens Enterprise Communications Group (SEN Group). You’ll notice an emerging trend: It’s hip to disclose recurring revenue and managed services revenue information. The reason: Wall Street and financial watchers consider the recurring revenue model a sign of business stability. Plus, there’s a need to rise above the MSP industry noise, where the mainstream press and some of the high-tech press continue to foolishly hype managed services as recession proof. Here’s some perspective…

First the good news:

CA: During the company’s first quarter, CA booked nearly $400 million of business with managed service providers, including one contract for more than $100 million with a duration of seven years, according to CA’s financial release.

Nimsoft: Although privately held, Nimsoft does share some financial metrics each quarter. For the quarter ending June 30, 2009, the MSP and enterprise software provider saw monthly recurring revenue grow by 40% from the prior year, and its order backlog was up nearly 60%, according to a Nimsoft press release.

SEN Group: The company says it has signed $100 million in new and extended Managed Services agreements with enterprise customers in the public sector, financial services, pharmaceutical, education and healthcare industries. The deals, SEN Group claims, typically lower customers’ voice and network total cost of ownership (TCO) by up to 15 percent to 20 percent.

Financial buzz can even occur in casual conversation — as ConnectWise CEO Arnie Bellini proved at Microsoft’s Worldwide Partner Conference in New Orleans earlier this month.

Now the Bad News…

Much of the press continues to hype managed services as “recession proof” — suggesting that all software providers and their MSP partners are thriving amid the recession. Sorry, that just isn’t true. I know plenty of software companies and MSPs that are generating mixed results and even poor results.

As a result, well-performing companies are working hard to distance themselves from the MSP industry pretenders. And the fastest way to prove you’ve got momentum is to disclose some financial information.

It’s good to see healthy financial data points from the companies above. But the rising MSP tide won’t lift all boats. Plenty of pretenders remain in the market…

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