Slowing Economy Opens MSP Opportunities

By Pedro Pereira  |  Posted 2008-10-20 Email Print this article Print


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SMB companies will want solution providers to do more for them during the downturn, but providers must hone their value message.

Managed services and automation software vendors believe the current economic slowdown is opening new SMB opportunities to services providers.

"If you don’t look at this as an opportunity, you’re looking through the wrong end of the telescope," says Frank Coker, president and CEO of CoreConnex, a business automation software vendor.

But there is work involved, vendors say. MSPs must fine-tune their message within the context of an economic downturn.

IT systems are essential to business operations, regardless of their size. Companies need their IT systems running uninterrupted, even if they have to put off IT replacement or upgrade projects. To keep those systems humming, companies will need MSPs more than ever during economic hard times because using services helps control IT operating and staffing costs.

"This is our time to shine," says Kaseya CEO Gerald Blackie. Barring what Blackie called a "complete meltdown," managed services providers and vendors should do quite well through the current economic crisis because customers will cut staff budgets in favor of outsourcing parts, if not all, of their IT environments.

MSPs use remote monitoring and management tools by Kaseya, N-able Technologies and Level Platforms to maintain, troubleshoot and update their clients’ IT systems. Some vendors such as Zenith InfoTech and Ingram Micro’s Seismic program offer hosted infrastructure services that solution providers can private-label.  

"This environment is an accelerator for the managed services provider," says N-able CEO Gavin Garbutt.

The added pressures on SMB companies to cut budgets and run more efficiently will only increase their interest in managed services, he says. Those businesses are turning to IT service providers and asking, "Do more for us," Garbutt adds. "SMBs completely realize they’re relying on IT to operate their businesses."

Mark Jagger, president of solution provider Cyberstreams in Bellevue, Wash., says his customers are definitely under pressure to tighten their budgets. But while they are cutting how much they spend on some portions of the business, they are leaving IT budgets alone, he says. They are counting on IT investments to help them control costs in other areas of the business.

"That may change, but right now that’s what we’re seeing," Jagger says.

SMB owners, he says, are evaluating how to increase their value to customers and to improve their own cash flow. In so doing, Garbutt says, they are giving MSPs the opportunity to reinforce their own value message to those businesses.

That message, says Garbutt, should revolve around increasing IT predictability for customers at a cost that’s lower than running systems with in-house staff. There is also predictability for the MSP as a result of the monthly or quarterly fees providers charge to maintain end users’ IT environments.

CoreConnex’s Coker says the best times to sell IT are when the economy is expanding or contracting. The message from the services providers, however, has to be delivered in context, he says.

During the current hard times, Coker says, the message should center on maintaining quality of service while keeping costs down and boosting efficiency. In times of economic growth, he says, the message centers on the need for investment to take advantage of expansion opportunities.

READ: CoreConnex Takes the Guessing Out of Financial Management

Be the times good or bad, communication is crucial. And so is the MSP’s understanding of its role within the customer’s organization, says Kaseya’s Blackie. That role, he says, increasingly is as the client’s CIO or IT department, which requires having a solid understanding of the customer’s business and having a strategic outlook on the customer’s business goals.

Strategic thinking and close integration with the customer are the pillars of a successful MSP business, say managed services experts. The managed services model requires a shift from anchoring the business on the next sale or the next project.

For channel companies still hanging to that model, or use a time-based model to charge for services as opposed to charging recurring fees under contract, the economic downturn will prove more painful, says N-able’s Garbutt. When customers put off purchases or projects, it affects those providers.

And those providers that have dabbled in managed services without fully embracing the model also are at risk. They will be tempted, says Garbutt, to fall back on the old way of doing business because they see safety in it as opposed to forging ahead with the new model. 

"When the economy starts contracting, and SMBs start contracting their spending, the traditional service provider or VAR will retract to what they do best," Garbutt says.



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