Consolidation among MSP tools vendors is sparking pricing concerns among its customer base, according to the CEO of PA-based firm Bardissi Enterprises.
Kaseya's September 2018 acquisition of RapidFire Tools, and the merger between Autotask and Datto last year, are just two examples of consolidation in the volatile MSP tools space.
Bardissi Enterprises CEO, George Bardissi, said the big changes from its vendors has bred uncertainty for the next three to five years, and could force the MSP to look for new vendor partners.
"It's all so fluid; prices are going to change. I may have to go out there and find a new vendor now for certain categories, because who knows how they're going to change things. So there's a little bit of uncertainty there," he said.
Consolidation is not, of course, confined to vendors. MSPs are also joining forces, or being snapped up by larger players. For example, Clifton, NJ-headquartered MSP NuMSP announced its seventh acquisition of a fellow MSP when it bought out Sacramento, CA-based peer Salient at the end of January. These acquisitions offers challenges and opportunities for a regional player like Bardissi Enterprises.
The MSP finds itself at a potential disadvantage faced with larger peers who have more money to spend on marketing and a wider reach in terms of resources, outreach and financial cushioning, Bardissi said. However, these bigger, newly merged entities are also, paradoxically, providing a new source of customer for their smaller peers.
"It's good and bad because we're starting to see larger organizations with more marketing and sales dollars behind them try and go out there and win customers, but then they don't seem to be able to retain them for the long haul," he said. "If I'm going up against them head to head right now, I might lose to them because of the perception that these guys may be bigger, with more resources and they'll be able to do a better job now. Then all of a sudden, that's falling down."
While this offers a win in terms of picking up customers from the bigger players, it is also impacting the MSP's sales cycle, Bardissi noted.
"I have to wait for that fall down to happen. Maybe it takes six months, maybe it takes nine months, maybe it takes a year or whatever it is; it's a little bit all over the place and it is messing up the sales process. So even if it means more business, to have these repercussions in the market has a ripple effect."
Trade war pressures
Elsewhere, Bardissi Enterprises is feeling the impact of wider market disruptions, such as the US-China trade war, that has seen a number of technology components subject to tariffs of varying percentages, and may see even higher tariffs brought into effect in March if an agreement between the two nations can't be reached before then. This has led to cost uncertainty and supply chain questions, according to Bardissi.
"A key challenge at the moment is fluctuation of costing, because some of our vendors are a little bit caught up with some of the larger economic things that are going on right now, such as the current government situation with trade agreements, so our vendors can increase their pricing and there can be longer lead times to get stuff into the country. A lot of the gear that we're buying gets manufactured outside of the country."
The fluctuation in pricing mean questions for MSPs, such as "do we have some breathing space?" or "do we actually have to go to our customers and discuss some sort of pricing change?", Bardissi noted.
"If [vendors'] pricing has to fluctuate as a result of all of these things happening, how is that going to ultimately look dollars and cents wise, and how do we then turn around and incorporate that? Customers are very averse to unexpected pricing changes, so obviously we keep a very close eye to make sure that we can prevent that if possible."
Alongside these external factors, internal factors that this year will have an impact on business at the MSP include adopting an "all in or all out mentality", which means no one-off projects and no higher or lower levels of service for one customer versus another. This impacts business because there are not quick sales in this context, Bardissi pointed out.
"That does take longer to close, because not everybody fits that and we understand that."
With these internal and external factors as a backdrop in 2019, Bardissi said, the firm is looking to build its customer base by between 12 and 18 percent, while growing the company "across the board", particularly in security, cloud and managed services.
In the security space, the MSP cited outsourcing certain functions, such as real-time security processing, or threat analysis and remediation, as a way to tackle a growing skills shortage, noting that a vertical of companies offering such services is building itself alongside the channel.
"There are companies that have come into the market that are specifically covering these territories - security operations desks or monitoring things in real time and offering threat analysis. There are companies out there doing just that and those companies are selling their services to MSPs, who then put them in the package that you sell to your customers."
However, this model is not without challenges, Bardissi notes. Price in particular is a concern, with the MSP saying that his firm is waiting for these offerings to come down in price in order to be affordable for the customer, "as I really believe that that's where things are going".
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