Despite gloomy economic forecasts across much of the globe, N-able Technologies yesterday offered some upbeat perspectives to managed service providers. The Ottawa-based company says 2008 was a "record year" for N-able in terms of revenue, international growth and partner success.

It's great to see N-able and some (though not all) of its rivals offering upbeat outlooks for the managed services market. But you know me; I'm always looking to provide a reality check for readers. Just how well is the managed services industry performing right now, and what's the MSP outlook for 2009? Here are some clues.

First, let's start with some highlights from N-able. In a Dec. 30 press release, the company said:
  • N-able grew its international sales by more than two-hundred percent in 2008, and expanded its global footprint to include Australia, and New Zealand, as well as countries in Northern and Western Europe. The company also established operations in Hong Kong and India, while extending its reach into the UK and growing its market share in North America.
  • N-able has approximately 1,700 partners in 41 countries, supporting 36,000 SMB customers worldwide and holds several strategic alliances with leading software innovators and manufacturers including Intel, Microsoft, American Power Conversion (APC), 3Com, Quest, VMware and others. The company is planning a series of educational seminars for 2009, including a European road show in February that will highlight how solution providers can cut IT service delivery costs while growing revenues.
  • The company's N-central Express hosted, one-year subscription-based software has gained considerable momentum among Microsoft partners and MSPAlliance members.
No doubt, N-able and several of its rivals have worked overtime to grow the MSP market -- and assist MSPs -- during a brutal economy. And I expect many MSP software companies to continue to grow in 2009 -- especially those that open international offices and offer localized SaaS (software as a service) deployment options to MSPs.

Reality Check

But let's also keep the situation in perspective:
  • Profitability: Since so many MSP software companies are privately held, very few companies actually disclose their net income and profit margin information. As a result, some of the industry revenue growth may come through aggressive pricing that squeezes software margins.
  • Fourth Quarter: Many MSP software companies had strong momentum from January through September 2008, but I sense that business slowed for quite a few MSP software companies in Q4. I am not saying that was the case at N-able. But it's important for readers to remember that some software companies may leverage their strong Q1 through Q3 results to declare victory in 2008 -- even if Q4 was weak.
  • International Presence: I see a dangerous trend unfolding. A few North American MSP software companies think they can "go global" merely by hosting their software on the Web for potential customers in Europe, the Middle East, Asia and so on. But during a trip to Australia, I heard from multiple MSPs who are frustrated by North American software companies that don't open local offices down under. Translation: You can't do everything remotely. MSPs want local feet-on-the-street and local support from their software suppliers. So far, N-able, Kaseya and a handful of other software providers have heard that message pretty clearly. But many North American software companies continue to rely too heavily on the Web and too little on localized support for their international efforts.
  • 2009 Outlook: No doubt, MSPs are well-positioned to survive the continuing economic storm. But a clear trend is emerging -- and it's either wonderful or alarming, depending on where you sit in the industry. On the one hand, many solid MSPs are going from "good to great" and winning business in the mid-market, where companies are increasingly outsourcing IT services to partners. But on the other hand, some fledgling MSPs are failing because they lack a true business commitment to the managed services model.
The net result: I worry the MSP industry may eventually lack middle-class players. You'll potentially have elite, extremely well-run MSPs and a bunch of "me too" resellers that try some tools and claim to be MSPs -- but aren't.

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