These Vertical Specific Opportunities Could Diminish After The World Economies Reopen
Every day that goes by, I find myself more grateful for the position I am in and the industry that I am currently a part of. Millions of people around the world have been victimized by the current pandemic, either from a health standpoint or a financial one (or possibly both). I have started to pay close attention to what industries are taking the biggest lumps, as I feel it is only a matter of time until this begins to effect the Managed Services industry (which has ultimately gone unrecognized for it’s important role in this whole situation).
While I am certainly not an economist, my role as a Marketer and Consultant is to speculate demand (and in this case the lack-there-of). Here are the verticals that many MSPs service and specialize in that I believe may be uniquely impacted when the dust settles and we all begin our new normal.
Last week on my way to pick up some essential goods for my family I drove through a local town that has been established as a center of commerce since the year 1750. The town is now a small colonial “main street” with shops and restaurants that is a popular destination for locals and visitors of the Philadelphia area. It was at this moment that I realized that many of these shops will not re-open and this small but active economic community will likely have to start over, suffering for years before it is able to regain the levels of foot-traffic that it requires.
Aside from “Mom & Pop” retailers that will be effected, many large retailers that were already on the edge of bankruptcy will likely take the plunge as well. E-commerce suddenly went from being a convenience to a necessity and many people that were slow to embrace an online shopping experience, were suddenly forced to adapt. Now that these online accounts have been created and retailer email opt-ins have been acquired, it is no doubt that this will take away from the what will be remaining of the physical retail business. All of this does not even factor in the rise in unemployment and the lack of money to spend on luxury and non-essential goods that are often sold in physical stores.
Hospitality & Restaurants
If you had a trip planned this spring (like I did) then you have experienced first hand the effect that this has had on the travel and leisure sector. Airlines and hotels are now forced to offer “IOUs” or account credits that may or may not be redeemed in the future, all while their planes and hotels are near empty and their staffing levels cut down to a minimum. Many MSPs that are in a tourist area will feel this the most. For example, Atlantic City, NJ which my IT company once serviced is in the top areas of the United States that will be effected, due to it’s high share of employment in the Casino & Gaming industries, all of which are deemed unessential.
The other side of this coin is the Restaurant industry. While many high end restaurants and those positioned in tourist areas are suffering major losses and closures, the local corner pizzerias and delivery joints appear to be bustling. In an attempt to order food last weekend, we had to wait almost 3 hours to get delivery because the pizza place down the street had so many orders. This is a perfect example of the financial complexity of this pandemic and how these sub-sectors of industries are seeing such-mixed consequences.
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Commercial Real Estate
Another industry that is bound to be effected in a complex way is Commercial Real Estate. In the most obvious sense, the closure of businesses and reduction of staffing levels will inevitably create more supply and less demand for commercial properties. This has an effect on Real Estate Agents, Mortgage Brokers, Developers, Architects and everyone down the line that is involved in these transactions.
In addition to this element of the downturn, many businesses that MSPs helped to go remote during this crisis may consider this a semi-permanent solution based on their results. I have heard first-hand from several friends and family members that their places of employment may allow them to work from home permanently after realizing little to no loss in productivity. If enough companies decide to implement this, it will undoubtedly have a long term effect on the need for traditional office space which is an important part of the Commercial Real Estate market.
Another somewhat obvious industry that will be impacted is Financial and Professional Services. As markets around the globe continue to decline and unemployment rises, many individuals will have to draw on savings and investments to stay afloat at the worst possible time to do so. This not only effects the investors financial future but also the future of the Wealth Managers, Brokers, and Institutions whose income is tied to “assets-under-management.”
I will not pretend to know the complexities of these financial systems and how likely they are to survive without intervention, but I do know that when companies feel financial pressure they look to cut expenses. We can only hope that these small to medium Financial Companies and local Banks do not decide to cut corners in the proactive areas of their IT budgets. This may include services tied to backups, security, or disaster-recovery where the value is not always obvious until issues occur (much like an insurance policy). This could not only hurt the IT industry that supplies these services but also put these companies and their customers at great risk which they may not realize.
Staffing & Recruiting
Another victim of supply and demand will likely arise in the Staffing and Recruiting industries. While many unemployed individuals are hitting the job market, there will be no shortage of applicants for these companies to source. While that may seem like a good thing, a shrinking number of job openings will make placing these individuals very difficult.
When our company considered using a recruiter, it was often because we received very few qualified applicants when posting the jobs ourselves. The companies that are still hiring right now will probably not have this problem, as high unemployment equates to many over-qualified individuals that are actively seeking work and are desperate for a job. This surplus of talent on the open market will definitely diminish some of the exclusive value that these Staffing & Recruiting firms typically offer and reduce the need for their services.
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Our Managed Services firm had several customers in the Construction and Development industry, many of which were my personal favorites. They appeared to have very stable businesses that would grow at a sustainable rate and ultimately saw the value in the services that we offered. The issue with Construction right now is that their demand is tied to almost every other industry in the economy (much like Business IT). In fact, my state has deemed Construction as “unessential” unless it is actively working on projects for “essential” industries.
As a result, many residential Construction companies that have had to close were likely forced to delay projects and lay off their entire hourly waged workforce. This is devastating for most, since the quality of their services is tied to the reliability and craftsmanship of their crews. This is a major differentiator in this industry and will make it difficult for these companies to just pick up where they left off when their work is able to resume. MSPs that service these companies will certainly feel the effects of this in their receivables and their user counts.
Dental & Eye Care
Two of the sectors of the healthcare industry that have been forgotten about are the local Dentist & Optometrist. Many have had to cancel their entire month of non-emergency appointments and will continue to feel the short-term effects of this until the shut-downs are over. While the need for dental and eye care is not going away, there is no doubt that this shut down will have an effect on the make-up of this industry which many MSPs choose to specialize.
This is an area that could see some consolidation, as smaller practices decide to close their doors and join larger ones. Should this be the case, some MSPs may even benefit from this, depending on which end of the merger they are on. This is all to-be-determined in the coming months, but will certainly be one that has an impact on the Managed Services industry on a local level.