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Managed Services Model Helps Companies Weather Recession

CompTIA reports that managed services providers are holding profits longer and recovering sooner than traditional product and support sales companies.

Companies that use a managed services model are doing better in the recession than companies that use traditional product and support sales, according to research released Tuesday.

CompTIA reported that both groups have lost profits because of the economy in the past year, but managed services providers had more success generating cash flow, avoiding large quarter-to-quarter fluctuations in income, and generally outperforming traditional technology resellers.

The most successful managed services providers that CompTIA surveyed held profits longer through the economic downturn and began to recover sooner.

"Managed services represent the best opportunity in some years for technology solution providers to create significant shareholder value," Todd Thibodeaux, president and CEO of CompTIA, said in a statement. CompTIA's inaugural "Best in Class" benchmark report was released Tuesday at a CompTIA Managed IT Services Executive Forum. The group, with more than 50 members, formed earlier this year to help the managed IT services market through networking, education, and accreditation.

The forum is addressing educational needs that will lead to differentiation; addressing business issues, education, and best practices for managed printing services; and creating a vendor-neutral, business-level accreditation process.

CompTIA surveyed 158 technology providers in North America in February and early March of this year and examined financial performance over 15 months, from the first quarter of 2008 through the first quarter of 2009. CompTIA said it looked at earnings before interest, taxes, depreciation, and amortization (EBITDA), a proxy for a company's ability to generate cash flow.

CompTIA said that the median managed services company had higher EBITDA in the first quarter of 2009 (5.3%), after a year of economic pressure, than the median traditional technology solution provider in the first quarter of 2008 (5.1%).

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