In 2025 the MSP economy could go either way. So keep one eye open! Here is what I mean. I want to share my observations about how MSPs and the tech industry historically have been impacted by macro-economic activity and recessions.
Earlies
Like a weekend curbside yard sales overwhelmed with lookie loos before the 9AM start, some parts of the tech industry go into a recession early (by analogy). My experience has been that storage tends to go into recessions early. I saw this first hand with SanDisk in 2006+ before the 2008 financial market meltdown (“The Great Recession”) but it came out of the economic setback early. Chips can go either way
but no doubt about it - they are cyclical as well.
Figure 1: SanDisk and other storage companies tend to go into recessions early.
Fashionably Late
Speaking from personal experience, I was giving a keynote at the infamous SMB Nation 2008 fall conference on Friday mornin when the global equity markets crashed based in-part on the Lehman Brothers collapse a few weeks earlier in September caused a tizzy and a tussle. Best I could do in my speech was say “don’t turn on your TV today folks” LOL. Our MSP segment plowed along just fine the next few years creating a certain MSP arrogance and attitude of “what recession” and a keep economic measurement for me - SMB Nation events - were strong.
Then BOOM! The year 2011 arrived not unlike a Spring season (aka the month of March) not as a lamb but a lion. What was the end of the story? The MSP recession snuck up on us. My traffic and engagement data bears this out but equally important were high-level activity indicators such as phone inquiries and email activity declined. Well-respected MSP thought leader Arlin Sorenson penned a post that more MSPs would grow broke coming out the Great Recession than going into it. Why? Cash is always king and our SMB MSPs were starting to consume cash savings.
Analysts
Moving on and looking forward, two analysts that track the MSP space have been very bullish on 2025-forward. Well-known analyst Jay McBain recently posted a couple positive examples. McBain recently posted (Late October 2024) “What economic downturn? The hyperscalers continue to soar” and you need to put that in your economic mix.”
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A couple months prior (August 2024), McBain penned this contribution “Partner Channel Optimism Overshadows Recent Market Turmoil”
Seasoned industry analyst Larry Walsh recently shared an optimistic macroeconomic view that that data doesn’t lie. Key economic measurements are doing great in the positive category - something I concur with. But all recessions are and I can’t resist to old Wall Street adage that I my neighbor loses his/her job its a recession. If I lose my job its a depression (LOL).
You can read Larry’s insights here:
In another post that is focused more on the MSP micro-economic side, Walsh released results of his Partner Confidence Index (4Q 2024) that is very optimistic which is a good thing. You can find that here: where you can see and read part of it before the membership paywall kicks in.
Analyst bottom line? McBain and Walsh are economically aligned on this topic and everyone likes good news. Oh oh - before I move on - there a sage words from SMB MSP guru Karl Palachuk that you are an economy of ONE. That includes best practices for serving your client in a downturn (even perceived downturn. Take in Karl’s wisdom here: https://www.linkedin.com/pulse/youre-economy-one-karl-palachuk/
My Gut Feeling
Again - keep one eye open as recessions can sneak up on you just when you think everything is going great. Not sure I’d go as far as shorting the markets but now is a damn good time to be MSP smart!
Holy shifting supply curves!
Sometimes an MSP dip goes beyond survey data and event barroom yakking (IT Nation - I’m coming for you this week in Orlando and I’m ready to babble about this topic). Just to shoot straight, you can be economically impacted by externalities and internalities. Three externalities I want to share with you are:
- Small Business Server end-of-life (EOL). Was completely off the self in 2014 after the July 2011 announcement.
- AI adoption in tech and business moving forward. It’s ya’ can’t beat ‘em join ‘em.
- Election cycle. I’m downgrading the impact of the Fall election (this was written two days before the November 5, 2024 vote). Regardless of your tribal leanings, I’m just seeing this as part of the dialog with my MSP conversations. There was much more chatter in the 2016 cycle.
My prediction for the 2nd-half of 2024 (“No MSP Recession”) still stands:no recession in 2024: The good news is that I’ve got less than 60-days are I write this to be proven right!
Bottom line - I’m naturally a bull but I've seen a lot with my SMB MSP trips around the sun and I think you need to study and keep things in balance! Your thoughts? Agree or disagree?
PS - If you like the work we do at SMB Nation, don’t miss our Microsoft Migration webinar at 1pm CT on November 12th - discover more HERE!