Mixed Views On Managed Services Growth Rates

At first glance, research from both MSPmentor and AMI Partners suggests managed service providers will continue to generate healthy growth this year. But a quick phone call Tuesday night gave me a healthy reminder that MSPs aren’t immune to the recession. Here are some research stats and anecdotes worth noting.

Thirty-nine companies in our MSPmentor 100 report more than doubled their managed services revenues in 2008 vs. 2007. (We’ll unveil the complete report during a Webcast on February 11.)  Looking ahead, AMI Partners predicts MSPs will increase their revenues about 20 percent in 2009 vs. 2008. That’s certainly encouraging.

Now for the twist: A five-minute phone conversation with a leading MSP on Tuesday night convinced me the US economy will get worse before it gets better. Many of the MSP’s best business prospects are putting IT decisions on hold — indefinitely. And continued job losses (including 60,000 new U.S. company job cuts announced January 26) have made nervous customers hold on even more tightly to their wallets.

During Tuesday night’s phone conversation, the MSP made this stunning statement to me: “Every sale is getting more difficult. Our best closers aren’t closing deals.”

When great salespeople aren’t generating revenue that’s a sign of larger macroeconomic problems.

Next Moves

Many folks have suggested MSPs should move up the food chain fast, shifting from small businesses to mid-size customers, where IT staff layoffs could generate demand for managed services. I suspect a smarter move is to focus on low-hanging fruit like managed security and managed storage.

Meanwhile, MSP software companies continue to make additional moves into Europe. In some cases, those moves are driven primarily by the need to diversify beyond the weak US economy. (Though I must concede: Many MSP software companies have had a presence in Europe for several years, and Nimsoft actually got its start in Europe.)

When you read the MSPmentor 100 report in February, please keep in mind the old saying: Past performance does not guarantee future results. The managed services business model remains the safest channel bet in any economy. But every potential deal will face increased customer scrutiny.

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