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Reaction to the 2020 Global State of the Market Report
From Thursday, June 18th's episode: Let’s kick off with what is clearly catnip for me, a research report! Datto has released their Global State of the Market report for 2020.
Here’s the highlights:
Prior to the COVID-19 pandemic, MSPs were expected to grow by 17%. After the start of the pandemic, 40% of MSPs expect to reduce their growth projection by at least 10%.
Nearly 40% of MSPs reported annual revenue of $2.5 million
Over the past three years, 22% of MSPs reported that their total revenue per year grew by up to 5%, and 24% of MSPs reported growth of up to 10%. Thus: SMB customers increasingly depend on MSPs for their IT services, Datto says.
The survey found that 57% of MSPs expect the use of on-premises servers for critical applications to decline over the next three years.
Why do we care?
Of course Datto claimed there are still growth opportunities. There’s a lot of optimism in every quote I’ve read related to this. Been there, don’t care. I wouldn’t expect someone there to sound any alarm bells. It’s bad for investors. And, remember… they just laid some people off.
43% of MSPs are not saying that there will be a decline in the use of on-premise servers. My educated guess – these will align to the 25% of the market that Forrester thinks will go out of business. Please, Don’t be in that group.
Given that there is a general, non-data driven optimism, to see 40% of MSPs reducing projections by at LEAST 10% should tell you something. Note my guidance has been to build projections assuming a 30% reduction in order to endure the coming turbulence. I’d offer that this 40% will be in the group who perform the best going forward.
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Around half (51%) of MSPs saw monthly revenue decreases as a result of the coronavirus pandemic. Additionally, more than a quarter (29%) of MSPs saw their accounts receivable increase, showing more clients could not meet contract deadlines to pay for services.
The survey also showed that optimism has not diminished, and most respondents expect a quick recovery from the economic hit in the second quarter.
Meanwhile, data from Synergy Research group indicates that the data center market has lost momentum due to the pandemic. Hardware spending in the enterprise space declined sharply, while public cloud spending increased.
Why do we care?
Look, I think those respondents are crazy. I’m also ignoring the statements coming from IT glue about the research – it’s the usual vendor optimism garbage.
That optimism has no data. Here’s what the data tells me. We’re looking at surge in cases in the fall, we have a significant number of workers who have delayed payments on houses, cars, and credit cards until the fall, and we significant unemployment. We see from the data that customers are already feeling the impact, and here that data says revenues are down, and the delays have started.
Don’t cite the stock market- - that’ firmly divorced from the general economy.
You know that meme, of the dog sitting in the fire saying “It’s Fine.”. Don’t be that dog. Repetition does not spoil the prayer – Planning for the worst and hoping for the best is not a bad thing, and all of the data clearly says rough times ahead.