MSP Software, IT Services: Targeted Layoffs Amid Turbulent Economy, Maturing Markets
Generally speaking, the managed IT services and cloud services markets are holding up well amid the coronavirus and associated economic turbulence.
But that doesn’t mean MSP, cloud and IT service providers can fully escape the economic fallout. The latest anecdotal evidence involves ConnectWise, which confirmed four percent staff cuts on July 7. The targeted cuts arrive more than a year after private equity firm Thoma Bravo acquired the IT management and business automation software provider, and roughly eight months after Thoma tucked Continuum into the business.
ConnectWise isn’t alone. MSP-friendly software and technology companies such as Datto and OpenText (owner of Webroot and Carbonite) had some job cuts earlier this year. Other companies in the MSP software sector have quietly cut compensation plans for top executives and/or eliminated open positions.
Even faster-growth sectors — such as cloud data protection — have seen their share of job cuts. One example involves Cohesity, which trimmed some positions earlier this year.
Some of the cuts involve the coronavirus (COVID-19) pandemic and related economic shutdowns. Indeed, MSP software companies saw their revenues dip in late March 2020 and early April 2020 before beginning to recover in late May 2020, ChannelE2E has reported previously.
MSP Software Market: RMM, PSA Sectors Mature
Still, there’s also another reality: The MSP software market is maturing. We are transitioning from a go-go era of blue ocean opportunities for PSA (professional services automation) and RMM (remote monitoring and management) toward more mature market competition, ChannelE2E believes.
Indeed, RMM and PSA revenue wins will increasingly involve rip-and-replace migrations from rival platforms — instead of organic growth from new MSP launches. At the same time, eager disrupters such as NinjaRMM and SyncroMSP seem to be taking some share from entrenched rivals, according to anecdotal evidence that ChannelE2E has heard and seen.
More clues about how the MSP software market is performing will arrive when SolarWinds announces its latest quarterly results. The earnings date appears to be July 30, 2020, according to EarningsWhisper.com.
IT Services Staff Cuts
Meanwhile, big IT service providers and consulting firms have also made job cuts. Accenture, Cognizant, Deloitte, KPMG and PwC have all confirmed layoffs.
But there are some bright spots. MSPs that successfully transitioned to faster-growth opportunities — such as public cloud managed services — have helped customers to accelerate workload migrations to Amazon Web Services (AWS), Microsoft Azure and Good Cloud Platform (GCP) during the pandemic.
At the same time, the MSP industry slowdown that we all saw in March 2020 and April 2020 seems to have eased a bit — though plenty of people are worried about the other shoe dropping in the second half of 2020.
Among the areas of concern: Some small business customers may stop paying their monthly IT services bills once their PPP (Paycheck Protection Program) money dries up. SMB shrinkage, in turn, could trigger MSP shrinkage. And that, in turn, could place new stress on MSP software providers.
Reasons for Hope
Still, I’m a glass-half-full type of guy. The reasons:
- Software remains the fastest way for small businesses to transform their companies — in any economy.
- MSPs remain the most qualified organizations to deliver and manage software and related IT services on behalf of vendors to small businesses.
- MSP software providers, therefore, are well-positioned for the long haul.
All that said, it’s safe to expect more market turbulence until some sort of COVID-19 vaccine surfaces.