One of the headlines commanding our attention at the beginning of the year is the steep decline in the price of oil. According to Reuters, oil prices have dropped a precipitous 40 percent in the past five months. As individuals and as consumers, the prospects of cheap fuel are clear and compelling. CNN likens the impact to a $60 billion tax cut. Relief at the pump clearly means more money for such discretionary items as meals, entertainment, consumer electronics, and life’s other luxuries. But might cheap fuel spell similar benefits for managed service providers?
An armchair analysis yields both pluses and minuses to this story.
Let’s take the minuses first. Small businesses in the energy industry will need to brace for contraction, so their MSPs need to take heed. There might be some upside in the potential to rely more heavily on outsourced IT operations, but tread gingerly. If your contacts get downsized, you don’t want to appear to be the cause.
Industries expected to suffer from declining oil prices include both traditional and alternative energy sectors and the infrastructure companies that serve them. To be sure, the latter represents a sizable chunk of the economy that includes heavy equipment manufacturers, chemical companies, and others who serve both energy and non-energy industries.
On the positive side, affordable oil is expected to benefit companies in the retail, apparel, restaurant, automotive and travel sectors. Tech, healthcare and financial services sectors all did well during a sustained period of energy price declines from roughly 1985 through 2000, so these might also figure into your strategy reviews.
More generally, smaller numbers at the gas pumps will lift consumer spirits. This optimism, coupled with other signs of economic improvement, should boost consumer spending, and that could well make 2015 a rewarding year for small businesses and the MSPs that serve them.
Of course, at the micro level your MSP business relies directly on car transportation for such routine tasks as customer visits, last-minute restock runs, business meetings and other logistics. You probably wince when pump prices rise and breathe easier when they fall. In the great scheme of things, life has gotten a bit easier for MSPs.
Window of opportunity
On the other hand, you probably shouldn’t get too comfortable.
However you proceed in the new year, bear in mind that we’re looking not at a cheap-fuel era, but a window of opportunity. The U.S. Energy Information Administration advises that oil prices will bottom out around May 2015, as Middle East oil producers approach a break even point.
This represents a great opportunity, in other words, to rethink your business plans and growth strategies. A temporary break in data center operating costs could offer you the latitude to review your company’s pricing terms, explore your clients’ subscription options and aggressively discount to suit strategic goals. This might also be a great time to review your clients’ consolidation and virtualization programs. Might it benefit some clients to accelerate that migration and consolidation project? As long as gas remains affordable, why not schedule a series of meetings with key clients to review timelines and revisit initiatives?
Outlook: net positive
In summary, the outlook seems net positive, with distinct pockets of new opportunity and perhaps a few rough spots as well, depending on your specifics and those of your clients’ businesses. In sizing up your prospects, make sure you combine your top-down assessment with grassroots research. In other words, talk to your clients. Tap into your most strategic asset: your direct access to the businesses you serve. Get their take on how cheap fuel will affect their businesses. They may see gold, they may see gloom. They might even opt for a steady-as-she-goes strategy.
What’s important, however, is that they’ll appreciate your taking the time to check in with them. This simple goodwill gesture will generate returns that can’t be measured in barrels.