Results of COVID-19 impact study
In late April, Channel Dynamics contributed to a global channel survey, coordinated by our US based alliance partner – The Channel Company, by interviewing local Solution Providers/MSPs to get their insights from an ANZ perspective.
The aim of the survey was to talk to customer facing solution providers of all sizes to see how COVID-19 was, or was not, impacting their business, both in the present context and the medium term of 3-6 months.
This article covers some highlights from the global findings and the insights of local ANZ solution providers.
In this summary we will focus on four areas where COVID-19 has had an impact on solution providers/MSPs:
- Business model
- Sales and marketing
- Technology segments
Business Model Impact
Those solution providers that had already started to transition their business to a managed services and/or cloud focused business were the least impacted and saw potential upside with the shift to Work-From-Home (WFH) as the catalyst for further change. There was a high demand for additional cloud based services and licenses for remote working apps or access as well as O365, Teams, UC/videoconferencing etc.
For product orientated resellers, overseas supply chain issues resulted in product shortages from vendors such as Lenovo, HP, Dell that impacted their ability to transact. On the positive side however, these shortages resulted in distributors clearing their warehouses of slow moving inventory.
Other than the WFH initial product spike in demand, partners reported that on-prem server and storage upgrades were being postponed, which was also impacting their project revenue.
Overall, 70% of solution providers interviewed expected a negative impact to customer contracts and payments, with 55% expecting a negative impact to their cash flow. Most reported they expected distributor credit/credit limits may become more challenging.
The number one concern was cost control and staff retention. The goal was to try and keep staff where possible, and while some reported that they had laid off staff, they often felt COVID-19 accelerated something they were planning anyway. Hiring freezes were being implemented, and keeping remotely managed staff motivated/productive was top of mind, with some solution providers taking up JobKeeper to assist their business.
For the more mature MSPs, many stated that a significant percentage of their revenue was contracted and/or recurring, and unless they had a client go bust, they would be OK.
Sales and Marketing Impact
Most solution providers stated that their current WIP was little impacted. However, the picture 3-6 months out was very different, with deals falling into two extremes. If you were working with government, these deals were being brought forward. If you were working in the commercial or SMB, projects were being cancelled or delayed unless the spend was essential. The looming concern was centred around the negative impact on the normally buoyant End-of-Financial-Year revenue spike.
Many of the product orientated or smaller MSPs commented they were struggling to gain traction with their customers in regard to generating new pipeline. Additionally, being in lock-down meant they could not get out to interact with clients the way they used to. Prospecting calls were not being returned or being pushed out by several weeks. Most felt a different style of marketing and prospecting was going to be needed once the initial peak of WFM and COVID had passed.
Technology Segment Impact
Understandably at the beginning of the COVID, enforced lock-down customers were rapidly trying to deploy, secure and manage a huge increase in staff working remotely. Therefore, any technology essential to this initiative had an uplift in enquires and sales across all solution providers. As mentioned previously cloud based migrations and applications were accelerating as well.
Non-essential IT such as servers, storage, networking, system ERP/CRM upgrades were generally being put on hold until a clearer view of what would be required long term.
Observations & Conclusions
In summary the top items solution providers were concerned about were:
Retention of staff
Cash flow & credit
Not knowing where this is going or when it will end
What everyone agrees is that the now two overused COVID-19 phrases of “unprecedented” and “new normal” will have a long lasting and often permanent effect on how we live and work.
Given all the change taking place, it is important solution providers take the necessary time to be reassessing their Go-To-Market model, customer interaction and technology focus with the initial peak of WFH passed.
In conclusion some ideas this survey raises to consider are:
- Have you built a cash flow plan with sensitivities for the next 12 months?
- Have you had dialogues with key customers to understand how they are adapting short term, or any structural changes requiring a different approach in the longer term?
- What skills and resources are going to be needed as a solution provider in a Post-COVID world, and do they exist within the existing employee base?
- What vendor and distributor support can be leveraged (or can be provided if you are either one of these) that will help re-position the business for what will be the “new normal”?
- How will you go about marketing and messaging to your clients or prospects when face to face meetings or seminars are still probably a number of months away?
Channel Dynamics is Australia’s premier IT channel research agency. Working with all the top vendors and distributors for the last 15 years, the company has developed a reputation for building engaging and successful channel programs across almost all technologies.
The firm will be contributing research analysis and training designed to help channel players succeed in a post COVID-19 world.