MSP Business Model and Financial Lessons Learned in Pandemic

MSPs are facing financial uncertainty due to the pandemic. Industry experts offer advice on managing the pandemic’s impact and preparing for hard times.

Larry Walsh, founder, CEO and chief analyst at the 2112 Group, has taken to calling the pandemic “the tale of two cities. Much like you’re seeing on Wall Street, some tech companies are doing very well and there are others that are not. It’s the same with the MSPs and resellers.”

When the pandemic hit, MSPs saw a customer demand for security, collaboration, cloud infrastructure and cloud apps. MSPs positioned with those technologies in their portfolios have done very well, Walsh said. “The ones that didn’t do well were too vertically focused or not diversified, meaning they had few offerings but not a complete portfolio.”

At the start of the pandemic, 30% of channel partners had two months or less of cash on hand, according to 2112 Group research. Walsh called this “astounding, because the best practice is three months,” which only 56% of channel partners had on hand.

“So, 25% to 30% of the channel was in real fiscal distress and still are,” he said. “There’s been a number of smaller businesses that have had to curtail operations.”

Walsh’s firm is also hearing indirect “background chatter” that some partners are trying to find buyers because they don’t have the capacity to continue on with the economic disruption.

by Esther Shein

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