Building Your MSP's Moat Before the Next Slowdown

Three stories caught my attention this week. One is about debt piling up behind the AI Data Center build-out. One is about the most important CEO in tech admitting to an affair with a woman U.S. officials believe was working for Chinese intelligence. The third is a book written almost 30 years ago that predicted the late 2020s would be a period of real upheaval.

Put them together and they point to the same question I’ve been asking a lot of MSP owners lately. If the economy starts to slow in the first half of 2027, is your business ready for it?

The cracks in AI financing

CoreWeave is the best-known of the “neocloud” providers, companies that rent out Nvidia GPUs to AI customers. It has grown fast, but it has done it with borrowed money. Bisnow reported last month that CoreWeave carries about $50 billion in obligations, roughly $35 billion in debt plus more than $16 billion in data center leases, and it has never turned a profit. Microsoft, OpenAI and Meta made up about 72% of its second-quarter revenue.

Investors are getting nervous. By November 6, the yield onCoreWeave’s bonds had climbed past 16%, which is the kind of number you see when the market worries about getting paid back. Gartner predicts that 80% of independent neoclouds will likely fail within four years. Not everyone agrees: Goldman Sachs upgraded the stock, and JPMorgan called the concerns overblown. CoreWeave reports earnings this week, so we’ll know more soon.

The banks lending into this boom are hedging, too. The Financial Times reported this week that Barclays has bought credit insurance to cover part of its AI infrastructure loans. HSBC has looked at doing the same, and JPMorgan considered it before deciding against it. A broker at Marsh told the FT that on a typical deal, a bank might pass 20% to 50% of its exposure on a single data center project to insurers, which lets its risk committee approve a bigger loan. More than 70 insurers now offer this cover, including AIG, Chubb and Axa, up from only a handful a decade ago.

I read that as a sign the money behind the build-out is getting stretched. When banks need insurance so they can keep lending past their own risk limits, they are taking on more than they normally would. The politics are getting harder as well: according to the FT, 38 ballot measures opposing data centers passed in last week’s midterm elections.

Why should an MSP care about GPU landlords? Because a lot of the AI tools we’re starting to resell and build into our services sit on top of this infrastructure, and a lot of the spending that’s holding up the tech economy depends on credit staying cheap and available. When credit tightens, it doesn’t stay in one corner of the market for long.

Trust is still the biggest risk

Over the weekend, Nvidia CEO Jensen Huang admitted to an affair with Alice Huang (no relation), an executive at Megaspeed, a Singapore company that is one of Nvidia’s largest customers. According to the Financial Times, U.S. intelligence reports say she was recruited by China’s Ministry of State Security to gather information on Nvidia. China calls that “purely a groundless accusation,” and nothing has been proven.

Nvidia’s board has opened an independent investigation and says it has “no reason to believe” company secrets or national security were compromised. President Trump said the FBI is involved, and three House committee chairmen have asked for a closed-door briefing.

I’m not bringing this up for the gossip. If a company with Nvidia’s resources can end up in this position, every one of us should be thinking about who has access to our people, our clients and our systems. Most of the breaches we deal with start with someone being trusted who shouldn’t have been, whether that’s a vendor, a new hire or a friendly voice on the phone. We saw it again last week when attackers used stolen MSP Process credentials to reach client tenants.Eva Bennbrilliantly refers to this in the first line of herLinkedInposthere, "We upgraded our technology but never upgraded the human operating system."

The Fourth Turning

In 1997, William Strauss and Neil Howe published The Fourth Turning. Their argument is that American history runs in cycles of about 80 to 100 years, each with four phases of roughly 20 years. The last phase is a crisis, a period when old institutions break down and get rebuilt. They point to the Revolution, the Civil War, and the Depression and World War II as past examples.

In his 2023 follow-up, The Fourth Turning Is Here, Howe says the current crisis began around the 2008 financial crash and should reach its peak in the late 2020s before resolving in the early 2030s. Plenty of historians think the theory is too neat, and I don’t treat it as a forecast. But I find it a useful way to think about the mood we’re in: lower trust in institutions, more debt, more tension with China and more uncertainty about what comes next.

If Howe is even partly right, the next few years will reward businesses that are steady and trusted, and they’ll be hard on the ones that are stretched thin.

What to do now

Nobody knows for sure whether a slowdown is coming in 2027. But the time to prepare for one is while business is still good. Here’s where I’d focus.

1. Look hard at your concentration risk

CoreWeave’s problem is that a handful of customers make up most of its revenue. Run the same check on your own business. If one client is more than 15% of your revenue, losing them in a downturn could put you in a tough spot. Do the same exercise with vendors. After the MSP Process breach, it’s fair to ask which tools have privileged access to every client you manage, and what happens if one of them goes down or goes under.

2. Be the service clients cut last

When budgets get tight, owners cut what looks optional. Security and compliance are harder to cut when their cyber insurance, their contracts and their regulators require them. Make sure your clients understand that connection, and use your QBRs to show the business risk you’re managing rather than the tickets you closed.

3. Build relationships beyond your day-to-day contact

Most MSPs I talk to have a solid relationship with one person at each client, usually an office manager, an IT lead or the owner. Very few have a real relationship with the rest of the leadership team, and almost none know the CFO. That matters in a downturn, because the CFO is usually the one deciding what gets cut. If they only know you as a line item on the monthly expense report, you’re an easy place to save money.Jason DuncanCFOInfoSystems, Inc.andBrian Blakleyare doing a critical vCISO session on this subjectRight of Boom2027.

Start getting to know the other executives now, while there’s no pressure. Ask for time with the CFO to learn how they think about risk, cash flow and the year ahead. Find out how the business makes money, what worries leadership, and what they’re planning for 2027. Then talk about your work in their terms: protecting revenue, keeping operations running, meeting insurance and customer requirements, and avoiding expensive downtime. The better you understand their business, the harder you are to replace.

This also protects you if your main contact leaves. When the only person who understands your value walks out the door, the relationship often goes with them.

4. Lock in recurring revenue

Review your agreements before renewals come up. Multi-year terms, automatic renewals and annual price adjustments are much easier to put in place when clients are confident than when they’re worried about cash.

5. Build a cash cushion and line up credit early

Aim for several months of operating expenses in reserve. If you think you might need a line of credit, apply for it now. Banks are far more willing to lend when you don’t need the money than when you do.

6. Check the financial health of your AI vendors

Many AI tools are built on venture money and borrowed infrastructure. Before you build a service around one, find out how it’s funded, where your clients’ data lives, and how you would move off it if the company gets acquired or shuts down.

7. Tighten up on trust

Revisit who has standing access to your environment and your clients’ tenants, including vendors, contractors and former employees. Train your team on social engineering, and make it normal to verify unusual requests even when they come from someone senior.

8. Be ready to grow when others pull back

Downturns create opportunities for MSPs with clean books and steady clients. Competitors who took on too much debt may be looking to sell, and good technicians may be looking for more stable employers. If you’ve done the work above, you’ll be in a position to take advantage of that.

Bottom line:the AI boom, the Nvidia story and Howe’s book all point to a period with less certainty and less trust. The MSPs that do well through it will be the ones with diversified revenue, cash in the bank, vendors they’ve vetted and relationships that reach each client’s whole leadership team, including the CFO. That work is easier to start now than in the middle of a slowdown.

This newsletter is for general information and isn’t financial or legal advice.