Battle-hardened MSPs fear second lockdown

Battle-hardened MSPs fear second lockdown

More than a quarter of partners experience accounts receivable increase

Credit: Dreamstime

The vast majority of managed service providers (MSPs) are concerned about the financial impact of a second lockdown, as the economic realities of Covid-19 continue to cripple the ecosystem.

Despite signs of encouragement across Asia Pacific - kick-started by the easing of restrictions in New Zealand and then Australia, followed be a gradual reopening in Singapore and Malaysia among other nations - 74 per cent of partners fear a return to quarantine will severely hamper recovery efforts.

According to new IT Glue findings, customer churn also ranks as a leading challenge for MSPs (36 per cent), with more than a quarter (29 per cent) experiencing an accounts receivable increase as a result of Covid-19 - indicating that end-users are failing to meet contractual deadlines to pay for services. Such market dynamics resulted in half (51 per cent) of MSPs reporting monthly revenue decreases as a result of the shutdown.

“The pandemic has created an unprecedented landscape for all businesses,” observed Nadir Merchant, general manager of IT Glue.

The two-part survey from IT Glue - acquired by Kaseya in December 2018 - highlights the pre- and post-pandemic sentiment of more than 1500 MSPs across the market, with priorities changing after the first two months of lockdowns being initiated globally earlier this year.

During the February survey prior to the pandemic, top concerns for MSPs centred around a lack of adequate time to complete work (54 per cent) and an inability to find strong technical employees (53 per cent), followed by changing technologies (32 per cent) and a lack of information sharing (27 per cent).

However, less than 20 per cent of respondents in the May follow-up survey marked these as top concerns following the start of the pandemic, instead focusing on cyber security threats, customer churn, price pressure and a second lockdown. Concern for cyber security reported the greatest change, jumping from 27 per cent to more than 50 per cent, likely fuelled by an "unparalleled increase" in cyber attacks during the pandemic.

“While no business is fully recession-proof, MSPs are uniquely positioned to drive value to customers and thrive during economic downturns,” Merchant added. “This year’s survey shows that the shift in priorities to a now greater concern for cybersecurity, compliance and customer retention means MSPs have an opportunity to serve as a guide to their small business customers.

“They are the epicentre for delivering critical IT services that not only help to maintain the viability of many companies during times of uncertainty and volatility, but will enable businesses to emerge stronger from these trying times.”

Meanwhile, and although MSP interest in mergers and acquisitions (M&A) had already been declining before 2020, Merchant said the pandemic marked the "most profound shift" in M&A sentiment in recent years.

In the February survey prior to the pandemic, more than half (52 per cent) of MSPs indicated they were at least "somewhat interested" in acquiring or merging with another MSP, down from 62 per cent in 2018. Fast forward to May and only 37 per cent are now considering M&A activity following the move to remote work under quarantine.

"Though M&As are likely to slow down as a result of the pandemic, market consolidation will continue – however, the pace of which remains to be seen," Merchant outlined.

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