Two items that are worthy of mention today. First, Forrester is reporting that the global economy is creating a 'perfect storm' for the managed services sector. This is nothing new for MSPAlliance members but it is always good to see external sources verify what the industry is seeing.
The other bit of news is that large vendors are cutting their credit to the channel. Now some of you may be thinking that this is bad but there is some good that will come out of it. Hardware vendors are being squeezed right now. Reducing credit to channel companies is the first step in minimizing any potential loss due to defaulting end-users. So, what does this mean for the MSPs?
Nothing. If MSPs are being squeezed by reduced vendor credit, then alternative sources of funding will have to be cultivated (for those MSPs out there who don't sell product, please ignore this blog). Local banks, credit unions, distributors, and other lendors are out there and ready to do business, particularly if it is with one of the only thriving sectors of the economy. Even the MSPAlliance Leasing Program has seen a marked uptick in inbound applications for leases.
In closing, I know the market is very painful right now but managed services is doing quite well. Keep on doing what you're doing and help as many businesses as you can. That's the best thing anyone could expect from a MSP today.
Wednesday, November 12, 2008
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3 comments:
Hey Charles! Don't forget about distributors -- they help partners get credit and other alternative financing plans in place like leasing. Ex: Kelly Carter, director of credit at Ingram Micro (NYSE:IM), Santa Ana, Calif., said that the distributor has no plans to restrict solution provider credit and is in fact proactively increasing credit lines for qualified VARs. http://www.crn.com/it-channel/211200205?queryText=Credit
I stand corrected. Very good point. In fact, I'm going to go back and amend the blog to include distrbitors as they will play an immportant role in the upcoming year.
MSP's have a lot of options for managing their back end. There is the traditional financing models that allows them to invest as they attract new clients and gain contracts that are paid out monthly over the life of the contract. However another option is to offer Clients discounts for up front one-time annual contract payments. The benefits of creating a cash rich base many times outweighs the few points that may be subsidized to entice cleints to pay at the beginning of the contract. This type of approach can help a MSP manage operational costs and reduce the need for financing.
Paul
Paul Cronin
CEO 1nService
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