Business Is Booming For Managed-Service Vendors - InformationWeek

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7/15/2009
05:52 PM
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Business Is Booming For Managed-Service Vendors

No small business wants to get stuck in a relationship with an IT vendor that goes belly-up on them. When it comes to dealing with managed-service providers, however, the economic risks may be lower than you think.

No small business wants to get stuck in a relationship with an IT vendor that goes belly-up on them. When it comes to dealing with managed-service providers, however, the economic risks may be lower than you think.Anytime an IT vendor goes out of business, customers inevitably suffer the consequences. Even a simple task like getting tech support or ordering a replacement part can turn into a full-blown crisis. And while hardware might keep chugging along for quite a while without a vendor to support it, how many companies want to get stuck with software when the flow of bug fixes and security patches suddenly dries up?

Working with an IT managed-service provider can solve a lot of problems for a small business. But it can't always solve this one. Plenty of companies have been badly burned when a service provider suddenly goes under --and takes its customers' data down with it.

In today's tough business environment, companies can't be too careful when they select a managed-service provider. I probably don't have to tell you that carefully vetting a provider, and sticking with established providers with impeccable references, is nothing more than common sense.

Pressing the panic button, however, and completely avoiding managed IT services would be a big mistake. Managed services offer too many benefits for smaller companies, especially those attempting to plan for future growth without overextending their budgets or their in-house IT resources.

Here's more good news: While the IT industry in general continues to struggle, managed-service vendors are actually weathering the storm better than many traditional software providers.

CompTIA recently completed a study that examined the financial performance of 158 technology providers over a 15 month period. As it turns out, managed-service providers held, on average, a stronger cash-flow position during the first quarter of 2009 than traditional technology providers held during the first quarter of 2008 -- well before the economy started its nose dive.

According to a May, 2009 InformationWeek article that summarized the study, "The most successful managed services providers that CompTIA surveyed held profits longer through the economic downturn and began to recover sooner."

Another recent article on this topic points out that the managed-services market is "booming," with annual revenue expected to climb from $8 billion in 2008 to $16 billion in 2012. A key driver for this growth: Solid backing from established, top-tier technology brands that bring a welcome measure of maturity and long-term stability.

Such trends don't guarantee that a particular service provider will weather the storm. But they do tell us that the managed-services model is fundamentally sound. Managed services aren't a fad or a flash in the pan, and in many cases they are essential alternatives to overpriced, overly complex traditional IT solutions.

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