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Managed services companies upbeat despite economic signals

At MSPWorld, managed services executives expressed guarded optimism regarding MSP market prospects and growth potential, despite some economic concerns.

Managed services companies expressed cautious optimism regarding their industry's outlook, citing growth opportunities but acknowledging some concerns regarding the potential for an economic downturn.

Executives speaking at this week's MSPWorld conference were mostly upbeat on MSP market prospects. Clients are investing in technology and recognize managed service providers (MSPs) as an avenue for acquiring and managing it. Spending covers a wide swath of technology from mainframes to AI applications.

Macroeconomic patterns somewhat cloud the outlook, however. For example, the recent bond yield curve inversion in the U.S., viewed as an indicator of an impending recession, has rattled the stock market. Worries over global economic growth have also surfaced.

Managed services companies remain optimistic

Those signs, however, have yet to put a significant damper on MSP activity.

John BurgessJohn Burgess

John Burgess, co-founder and president of Mainstream Technologies, a managed services, software development and infrastructure provider in Little Rock, Ark., said he sees confidence among customers, which has translated into a willingness to invest in infrastructure and deploy emerging technology.

"Customers are willing to explore new options," he said.

Robin Chow, founder and president of XBase Technologies, a Toronto-based MSP, said his company grew 20% year over year in 2018 and is targeting 25% growth this year. But he said he's a bit concerned regarding a possible downturn. As a result, he plans to slow down the hiring of junior-level staffers and interns.

Robert ScottRobert Scott
Charles WeaverCharles Weaver

Also expressing guarded optimism was Robert Scott, managing partner of Scott & Scott, a law firm in Southlake, Texas, that specializes in MSP-related law. The MSP executives he has encountered are experiencing double-digit growth. The economic signals that could herald a possible slowdown are not having an "adverse impact on their business at this time," he added.

Charles Weaver, CEO of MSPAlliance, which hosts MSPWorld, said the tail winds propelling technology spending in the U.S. are outpacing the head winds of a potential reversal. He cited Gartner's projection of more than $1 trillion in IT services spending for 2019.

Overall, managed services companies are in much better shape today than in previous years when customers didn't recognize the MSP moniker and MSPs had trouble finding customers, Weaver suggested.

"Most customers know about MSPs," Weaver said. "They know about MSPs as a viable IT option."

Chow agreed that getting customers to understand MSPs and the MSP's role is no longer an issue. He said the task at hand is to convert prospective customers -- convince them his company provides a better offering than the prospect's previous or existing MSP.

Even in down economies, MSPs traditionally do fairly well.
Charles WeaverCEO, MSPAlliance

"It's conversion for us at this point," he said. "It is not a matter of education."

Economic resiliency

Come what may, managed services companies are in a good position to adjust to economic shifts, according to industry executives.

"Even in down economies, MSPs traditionally do fairly well," Weaver said.

Burgess pointed out that 2009 was a good year for his company despite the 2007-2009 recession. New customers came to his MSP, looking to shed W2 costs, he said.

Scott said MSPs can differentiate themselves as a cost-cutting solution during a downturn: "Look at that as an opportunity … to position yourself as a company that can save costs or deliver more profit."

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