VoIP MSP's & government [sub]contracts
December 21, 2022
by a searcher in Denver, CO, USA
Hi Searchfunders,
Does anyone have experience evaluating VoIP-specific MSP's that would be willing to share their insights? I'm seeking to better understand Avaya-based technology tailwinds/headwinds and how VoIP-focused MSP's fall into the broader MSP ecosystem (valuation, consolidation potential, competition etc..).
Additionally, the business I am looking at has 10+ year sub-contracts in place with large federal agencies, but from my initial diligence it seems that these contracts are reevaluated on an annual basis for renewal. Are there any anecdotes as to the likelihood of government contracts getting renewed each year once a long-term agreement is in place? I assume each contract / service has its own idiosyncrasies, but would love any color on what to look out for.
Thanks in advance for the help!
from Regis University in Denver, CO, USA
IMO those gov phone systems aren't going away, unless a Depression forces deep cuts in gov personnel and budgets. Switching vendors from Avaya requires a rip and replace and that is a lot of work and money, so I think that portion of this biz is safe. I doubt another vendor can make a bid low enough to warrant rocking the ship. However, as a subcontractor, you're more vulnerable to being cut out or more likely having pressure applied to accept lower margin.
The core Avaya biz has huge concerns - google their outlook and you'll see Avaya is expected to file Ch. 11. They won't fold, as their product serves a lot of large orgs like hospitals and govs, but the product future isn't very favorable. Also the same issues that keep those gov contracts safe will also work against you making inroads on any large orgs. But expanding to service those orgs as a subcontractor could be a path for growth.
The network engineering portion of the business has a very favorable outlook with the right party.
from Bentley College in Miami, FL, USA