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COVID-19 Channel Partner Impact: The 2112 Group Research Findings

Roughly one-third of channel partners have two months or less in cash reserves, but 57 percent of partners believe they will meet or beat their original 2020 revenue plan, new research from The 2112 Group reveals.

Research: Channel Chiefs pivot amid COVID-19 pandemic.
Research: How channel partners navigate COVID-19 pandemic.

Amid the coronavirus pandemic, The 2112 Group findings show that channel partners are in reasonable shape -- and perhaps better shape -- compared to mainstream small businesses across the United States, ChannelE2E believes.

Among the main street small business anecdotes to note:

  • Companies with fewer than 500 employees typically have less than a month of cash reserves, according to a 2016 study by the JPMorgan Chase Institute.
  • Only 21 percent of small business on Long Island, one of current coronavirus pandemic hot spots -- expect their businesses to recover in 2020.  Moreover, 81% of those Long Island small businesses say they will need loans to operate through 2020. (The Long Island Small Business Research is recapped here.)
  • Two-thirds of U.S. small businesses plan to apply for “forgivable” Small Business Administration loans under the government’s new Paycheck Protection Program, according to a survey by the National Federation of Independent Business, The Philadelphia Inquirer reports.

Meanwhile, The 2112 Group's. latest research findings concur with the early vendor-facing version of the study, in which channel chiefs expressed optimism and confidence about the their ecosystems amid the pandemic.

Silent Channel Challenges: Abandoned M&A, Layoffs & Revenue Concerns

Still, channel partners and vendors can't let their guard down. Among the anecdotes ChannelE2E has heard:

  • Pay Cuts: Multiple technology vendors are quietly asking their executive teams to take temporary pay cuts.
  • Flexible Payments, Discounts: Some MSPs are checking in with vendors to pursue discounts or some payment flexibility on subscription services.
  • M&A Delayed or Abandoned: At least two M&A deals involving IT management software have been called off at the 11th hour, ChannelE2E has heard, leading to job cuts at the two would-be sellers.
  • Revenue Variables: To ensure business continuity, BlackBerry CEO John Chen said the company has modeled scenarios where revenue drops 20 percent, 30 percent and even 50 percent. The exercise was designed to ensure the business can survive extreme turbulence, though Chen doesn't expect to see such extreme drops. “You would expect anybody to do in modeling, and we believe we are quite comfortable,” with the company’s financial condition in those various scenarios, Chen said during a call with financial analysts last week. BlackBerry owns Cylance, an endpoint protection and cybersecurity platform that's catching on with MSPs and MSSPs.
  • Cybersecurity Layoffs: Even MSSPs (managed security services providers) and MDR (managed detection and response), and SOC as a Service cybersecurity companies will experience some layoffs. The evidence: Herjavec Group, a Top 200 MSSP, cut 8 percent of its 350-person workforce.
  • Lending Challenges: The U.S. Small Business Administration Paycheck Protection Program -- designed to offer $350 billion in low-interest loans -- is off to a bumpy start. Financial giants like Wells Fargo and regional banks like Heartland Financial USA say they can't lend any more money under the current program parameters. Still, more money may be on the way. Track daily updates on the PPP program here.

Bottom Line: Bright Spots and Business Challenges

Admittedly, those ChannelE2E bullet points are to be expected amid a global economic shutdown. But The 2112 Group research provides some upbeat findings amid these challenging times.

More: Complete Coronavirus Pandemic Business & Technology News & Analysis

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.