Erick and Rich discuss MSP-as-a-Service, a new outsourcing option for newcomers to managed services and existing MSPs who need more time to go all-in on building an AI practice, plus three practical steps any MSP can take to ensure they’re dedicating time to growth, margin protection, and leadership instead of fighting fires all day. Then they’re joined by ex-MSP and current thought leader Alex Stanton for an insightful conversation about what MSP rollups, cyber resilience, and AI herald for the future of managed services. And finally, one last thing: the crazy price paid at auction for a Flamin’ Hot Cheeto shaped like a Pokemon character.

 

Discussed in this episode:

Summit Holdings Launches “MSP-as-a-Service” Operating Model to Help MSPs Scale Faster and Increase Recurring Revenue

Further thoughts on AI and managed services from Alex Stanton:

Mapping the Next Golden Age of Managed Services

AI “Systems of Action” Have Worrying Implications for PSA Vendors

‘Cheetozard’ auction results in a Guinness World Record

 

Some guests on this podcast are clients of Channel Mastered. Compensation plays no part in their appearance or the content of the discussion unless the episode they appear on is a “bonus episode” explicitly labeled as sponsored.

 

Transcript:

MSP Chat episode 116 audio export

Rich: [00:00:00] And 3, 2, 1. Blast off. Ladies and gentlemen, welcome another episode of the MSP Chat podcast, your weekly visit with two talking heads, talking with you about the services, strategies, and success tips you need to make it big in managed services. My name is Rich Freeman. I’m chief analyst at Channel Mastered, the organization responsible for the show.

I’m joined side by side, virtually with you as I am every week by our CEO and chief strategist. His name is Erick Simpson. He is boiling hot right now in Southern California. How’s it going, Erick?

Erick: You? You nailed it. Rich. Hashtag boiling hot. I’m melting. I don’t know what’s going on with this weather phenomenon we’re having, but.

We hit 98 [00:01:00] degrees here where I am in Southern California yesterday, which is a, apparently a record for March. Yet, we have friends and colleagues and clients all up and down the East coast that are, experiencing snowstorms and freezing temperatures. And I know, I think it’s snowed where you are recently as well.

Right, rich,

Rich: we got a little snow late last week and we, I’m in Seattle, we don’t typically get a whole bunch of snow during the winter and for it to happen in March, like that was a little unusual. Didn’t really stick. It went away pretty quickly, but yeah, a lot of, a lot of odd weather.

But I, right now I guess we’re in that a Goldilocks just right territory here ’cause it’s going up into the mid fifties today. It’ll be a little rainy, but not too cold, not too hot. We’re doing okay weather-wise.

Erick: Okay, good. And we’re just, another thing that struck me was we’re still, as of yesterday, I think we’re still in winter.

It’s winter still and we’re hitting almost a hundred degrees. Crazy stuff.

Rich: I checked the forecast for San Francisco next week, Erick, a little bit [00:02:00] earlier today. ’cause you and I are gonna be in San Francisco for the RSA conference, giant Cybersecurity event. So we’re gonna be talking lots of security on upcoming episodes of the show and that the temperatures looked promising.

They weren’t expecting rain, we’re in for good weather for RSAC. In the meantime, let’s dive into our story of the week. And this comes to us from somebody you and I have both known personally for a long time. His name is Juan Fernandez. Long time MSP solution provider a, an award-winning, top ranked partner of hps.

I remember for a long time he worked in the vendor world for a while. He was Channel Chief at Super Ops. These days he’s out on his own building a number of different things, one of which went live officially day before yesterday. As we’re recording this, and this is a new venture. It’s owned by a company Juan is part of called Summit Holdings.

The business itself is called MSP as a service. Basically the [00:03:00] idea is that you as an MSP or a Wouldbe MSP can outsource most of what MSPs traditionally have done to this company. Juan and his team have built strategic relationships with approximately 60 companies in RMM and PSA and security backup.

Every, every kind of tool that you would imagine you might want as an MSP they have OEM level, like vendor level relationships there. When you outsource your particular stack to them, you can go to the menu, pick and choose what you wanna use. You’re not actually providing them access to your subscription.

They can all assemble that on the back end. And then through services provided by their in-house knock sock unit. Last year, summit Holdings purchased a outsource third party knock and SOC business called. And so they now have the ability on an outsource basis to do no services, soc services, service desk [00:04:00] for you using a tool set and stack that you assemble and choose.

And then basically they’re running all of the device and cloud management for you. Now, we’ve spoken on the show before they, they, they have not invented the idea at MSP as a service of outsourcing. The basic day-to-day blocking and tackling that MSPs do. We’ve spoken about out overseas providers who do this kind of thing.

In those cases you’re bringing your software to them. I’m not an expert in this area, but according to Juan, the pricing can be a little complicated. Some of them price per ticket some of them price per hour price. One of the interesting things about the MSP as a service offering is they price to you the way you price to your customers.

So per user, per month, basically there’s some variation in there, depending on which pieces which specific services they’re capable providing you’re actually using. But they’re [00:05:00] billing to you the way you’re billing to the customer. And they’re taking on, they’re not augmenting. They can if this is what you wanna do.

But the idea basically is they’re not augmenting what you do evenings and weekends or taking on a piece of the capacity. You’re basically handing that over to them. And this is designed to appeal to a number of constituencies, Erick. So if you are, say, a telco provider or a, a VAR and you wanna get into managed services, this is a pretty quick way to do that.

They’re talking to franchise organizations. They’re talking to private equity companies that are building MSP roll-ups because if you want a a sort of high margin pre standardized tool stack and model that you can bring to your acquisitions, this is an option for that. I should say. That MSP as a service users, according to Juan typically makes something like 35 to 50% [00:06:00] margin on their MSP services and still come the rates that they are charging to their end users still come in about 30% below the market rate in their geography.

So it’s according to to Juan, it’s a high profit margin. It’s very standardized. You could see why that would appeal to private equity companies. What’s most interesting about this to me though, Erick, is how it ties into something we talk about a lot here on the business. And that is the fact that endpoint management, cloud service management.

A lot of the work MSPs traditionally do and have done is already commoditized and it’s getting more and more commoditized. And the margins and the relevance to your customers increasingly are in those AI services that you’re providing to them. The AI solutions you’re helping them build use internally and sell through or use in conjunction with their customers.

That outcome oriented consultative work that we talk about so much, [00:07:00] this is a way for people in our audience who take that future for themselves very. Seriously, this is an option for getting there in a relatively quick, clean way. I’m gonna take all of those commoditized services that are less and less profitable, less and less relevant to my competitive future.

And I’m gonna hand those to Juan, and he’s just gonna run that side of the business for me, and I’m gonna dedicate 100% of my time and the talent on my team to this new consultative, outcome oriented, AI oriented. Kind of business. I’m just gonna clear the table to do that. I’m still gonna be making pretty good money on those basic MSP services.

I’m gonna have essentially, infinite scalability to grow that business as quickly as I need to. And as, as quickly as I, I acquire new logos, but I’m gonna spend my time working on the stuff that is [00:08:00] highest margin, highest profit, stickiest, and most strategic to the future of the business.

So from that perspective, it’s an interesting option that’s out there for MSPs right now. And then it is also an interesting alternative for folks to investigate to the overseas outsourcing models as well.

Erick: It is very interesting, rich, and as I combed through the press release a couple of things jumped out at me.

Completely US based knock and SOC services. I think that’s something that MSPs, pay attention to. The, I’m very curious about the pricing. There are other competitors out there that we know of that do a per user per month pricing, but sounds like this is a little bit more easy for MSPs to engage in where from a tool integration perspective, I’ll just leave it there and just say, I’ve talked to a lot of folks that deliver these kind of service, a lot of vendors that do this offshore [00:09:00] nearshore and things like that.

And there’s always, either give us a license to your platform or, we’ll just create an integration to our homegrown kind of ticketing system, and then it creates this. A little bit of friction there. I would, just think about it that way. But yeah, the, when you mentioned that there’s really good margins to be had in with these commoditized services where it’s driving the overall price down, I’d be very curious to, to see what that what the pricing looks like and, and compare it to MSP, the cost of MSPs doing business themselves. What I do like about the approach is you can, like you said, you can now focus on working on the business rather than in the business. Stop that firefighting, stop, all of these other things. So that’s very interesting. A lot of interesting things here that drive me to want to delve deeper into.

And as a matter of fact, I have a call scheduled with Juan this Friday to learn more about this in greater detail. But a couple of other [00:10:00] things that are very unique to what the offering. How the offering is described in the press release are things that we don’t see from any other outsourced, typical outsourced service desk provider, not provider.

And these include of course, the basic 24 7 support for end users knock, so SDX co-selling and go-to market support. Ever seen that from an outsource service desk. Pre-sales engineering, client onboarding. That’s comes with a territory, but this seems like a more complete package. White labeled support with SLA adherence, of course.

And then here’s one quarterly business review assistance. So there’s a reason why these things are unique and different, and we don’t see them anywhere else is because Juan and his team are proven MSP operators and know what it takes to grow. A business [00:11:00] relationship. And I like the idea of, having that kind of backing to allow you to manage and grow those client relationships while the day-to-day support is being handled and allowing, the MSP business owner and their team to focus on those things that are most valuable today, like you said.

Or it’s the things that, that, move the needle in terms of building company equity value and, moving ai, increasing efficiencies moving where the puck is going rather than where it is today. And it could give strategic MSPs that leg up in this horse race that we see everybody in terms of leveraging AI for the benefit of their organization as well as for their clients.

Crafting more valuable. Outcome based AI first services, which like you said, we always talk about on the show. So a lot of interesting things. I’m gonna learn more when I speak with Juan because I’ve [00:12:00] got a ton of questions as you can imagine.

Rich: Yeah. And as you can imagine, I did ask for more specifics about the pricing.

Understandably he didn’t get into that. So I know roughly how it works. I don’t know what the numbers look like. Hopefully you can get into that and with Juan and let me know a little bit about what you learned. First of all, good call out on the, this is all US based. I should have noted that before.

It’s also white label which is also worth noting. And then also, yeah, you’re talking about the CO and on the co-selling, by the way, that’s not just in conjunction with Juan’s team because of these strategic relationships they have with the 60 odd vendors, they can actually. Pull the vendors into some of those co-sell motions as well.

But the service is called MSP as a service. And the idea isn’t just that you’re outsourcing your help desk, that you are outsourcing or at least mostly outsourcing the entire MSP business as it’s traditionally been practice, including the [00:13:00] QBR and the sales and all of that. And the idea isn’t necessarily that Juan and his team are doing all of that for you, but they’re doing a lot more than the knock and the SOC and the service desk.

It’s a much more complete package of services.

Erick: Very interesting. Whatever Juan is willing to share with me we’ll talk about on an on, on a future episode, maybe Rich.

Rich: In the meantime, let’s move on to your tip of the week. If you sign on to MSP as a service, you’re gonna free up some time.

What you do with that time though, is an important question. I believe that has something to do with your tip.

Erick: Absolutely, rich. And, we, you and I have been talking about this very recently, with the things we’re doing with channel Mastereded and you with channel Holic, and how do we reorient ourselves so that we are as effective on working on the business?

How we’re working in the business, right? This is the challenge that MSPs have all the time. [00:14:00] Calendars are filled with reactive firefighting tasks, internal issues, client problems and things like that. Strategic MSPs block time outta their calendars. I am I recently shared with you how much more time I’m gonna block outta my calendar so I can be more effective for our team and our business growth goals.

And you said the same thing. I, this is one thing that, that takes a lot of discipline and re repetition. Somebody told me recently that in order for something to become a habit, you have to do it for 90 days straight. Be consistently doing it. It becomes a habit.

And so I’m just gonna toss out three things or audience to think about in terms of building a strong habit of carving out time to dedicate to working on the business outside of the day-to-day stuff and the noise. And so I’m gonna, I’m gonna take [00:15:00] us through what. Two levels. First level is if you find yourself rich, MSP, that is constantly just firefighting and things like that.

Can’t find an hour a day to work on the business. Block an hour a week. Just find a day every week that you can block out an hour and first hour you’re gonna spend. Rich is prioritizing the top three things that are keeping your business from growing to the goals that you want to hit. What are those things?

And don’t try to do them all at once. Take the first one and focus on that until you have it resolved. And if that means you’ve gotta bring in other team members, maybe you’ve got some consultants or coaches, maybe you’ve got some vendor support, whatever those issues are that are creating you and the organization, the most pain work on that.

And the level two of that is. More than one hour a week, which [00:16:00] means not two hours in the same day, but maybe you can break it out into, a couple of days a week till you can get to that one hour per day. And my recommendation is don’t do it. If you work in the office, even if you’re hybrid, do it outside of your normal place where you are.

If you can go to a place, like if you’re in the office, do it from home before you come in, do it. If you’re working from home, go find, a WeWork or a coffee shop or something where you can actually, and I know a lot of people are like, yeah, I can’t really work in a coffee shop on a tiny laptop.

I’m that guy. I’ve gotta have my command center to work rich. But at least just carve out the hour, block it in your ca calendar and be ruthless about protecting that time. People are gonna come in knocking on your door. People wanna schedule I this. This happens to me all the time, rich can you find a time, on Friday, which, when I have my block time to work, okay, it’s important enough, I’m gonna do that.

You have to be religiously ruthless about this and protect that time. They can wait till [00:17:00] Monday, right? Unless it’s a fire. Okay, then push it. But tip number two, delegate. Delegate. One operational task every week. The first LA layer, one operational task, one task a week. You’re gonna delegate that to someone else on your team.

If you have someone else on your team, you can delegate it to. And if not, think about outsourcing some of that admin support. Sometimes rich MSPs have all this noise, like we always talk about, we need more technicians. What are they doing? 40% of their time is noise. Maybe you don’t need a level one technician.

Maybe you need administrative support person or another person that can help him clear that noise. Same thing for the business owner. When we used to do our MSP university bootcamps, we said the first person an MSP should hire when they first opened their doors as an administrative aid to help them deal with, calendaring and, invoicing and taking calls and things and all that noise that prevents us from doing the things that only we can do.

And that’s the other one, [00:18:00] rich, do the things that only you can do. Don’t think, oh, I can do it faster than, my buddy Bob over here. I’m just gonna do it. No. That’s how you be. That’s breaking the rules of delegation and don’t tell ’em how to do it. Give them guides and things like that, but just give them the here’s what I need, here’s the outcome.

You can say, look, here’s how I do it, but find a better way and let them do that. ’cause you know what, as long as it gets done, they’re gonna, they’re gonna own it. And you can give them guidance along the way, et cetera. And then the last one, rich schedule one strategic client conversation a week. One strategic client conversation a week.

This is outbound client relationship building stuff. Take ’em to lunch. Do something with a client once a week from your position. You can only do these things rich if you’re blocking time to get them done. And when you do that and start delegating, you’ll build better client relationships. You’ll grow your business, you’ll surround yourself with more [00:19:00] folks that you can engage with.

Join a peer group, right? Spend that time wisely and focus, there’s gotta be some kind of an equilibrium that says, I need to be working on the business at least as much as I’m working in the business. And how do I get there? It’s by following these practices and being ruthless about protecting that time and getting it done.

Rich: Yeah. And like you said, it’s if all you can do, even just to get started is that one hour a week, then do that. The more you can do, the better. But I’ve had conversations with MSPs in the past. You talk about there, there’s never enough time for lead generation and it’s a similar kind of thing.

If you carve out an hour a week for that, it’s better than nothing. So yeah, absolutely do what you can block out that time. And we don’t mean that metaphorically, right? Go on the calendar and block that out. Make it difficult for you or somebody else to schedule something else on top of that time.

This [00:20:00] relates a little bit to a similar topic we’ve spoken about before on the show in terms of carving out time, which is that the I think the really smart MSPs out there right now are carving out time for ai, right? And learning what it can do and getting to know vi coding and all that kind of stuff.

And that can actually be part of, you can budget that as part of your working on the business instead of in the business. And they dovetail potentially perfectly ’cause you’re talking about. Delegating operational tasks. And one of the things you should be doing as you experiment with AI is look for things that you can delegate to an agent.

Basically this really kind of basic stuff that you don’t, nec stuff that someone other than you can do. Try to identify those things that suck up time and see if there’s a way to hand that off to to ai, hand that off to an agent, to free up time that you can dedicate to [00:21:00] thinking strategically about the business today and tomorrow.

Erick: And that’s exactly one of the priorities that I will be focusing on as I block more time outta my calendar on a weekly basis, which to do because I can see how inefficient I am, the more that I just use AI kind of transactionally. I need to build a, an AI system and platform with agents that I can orchestrate to take care of all the noisy things that yes, there are still gonna be noisy things that only you can do as a human being that you can’t really delegate to others.

But those are the things that I’m gonna start focusing on first, like the things that only I can do. How can I become more efficient? Leveraging ai, creating agents, creating processes, and orchestrating that so that I can be more present and valuable to our team, rich and to our clients.

Rich: So Erick is not just talking the talk, he is walking the walk, [00:22:00] folks he’s going to live by his words of wisdom here.

And maybe we’ll touch base on on that somewhere down the road. And some of what you put in place and what I hope to put in place maybe will be stuff that folks in our audience can think about applying in their own business as well. We are going to take a quick break here, ladies and gentlemen.

When we come back, we will be joined by Alex Stanton. He is an XMSP, a current day thought leader in the realm of managed services and ai. We’ve been talking about the next generation MSP and the future of AI in that vision. No one better I know, talk about that with than Alex Stantin. He’s gonna join us in just a moment after the break.

Stick around

and welcome back to part two of this episode of the MSP Chat podcast, our spotlight interview segment where we are very pleased to be joined by the Chief Strategy officer of [00:23:00] Think Purple. His name is Alex Stanton. This is one of those episodes of the show folks when it helps to be watching on video to fully appreciate where Alex is joining us from.

Alex. Welcome to the show. First of all, tell folks a little bit about who you are, your background, and where you are right now.

Alex : I’ll start with where I am to get that out of the way. I’m hello from a sailboat on a bay in Lanta, Thailand. We I’m joining you from 14 hours in your Future.

It, it was, it’s a good day. I can tell you that the day you’re about to experience. My background was founder of an MSP. Like many of the people that’ll be listening here, I’ve talked and spent time with many founders in my career. But I started in the early two thousands developing and coding and many of the same origin stories that so many MSP founders have that grew up and built businesses.

Some days I say I [00:24:00] accidentally built an MSP before I knew it was an MSP. Founded the tech, the company technically, and by 2009 it became real and stopped being a hoppy. And then from 2009 grew that into a regional MSP. We had a little over 40 employees when I made the decision to join New Charter in its early days.

So I exited to new charter circa 2021, where I served alongside the amazing early executive team there as CTO and then later CIO of that group as we grew into what new charter is today. Exited there. And took some personal time and spent lots of time doing other things over the last year and a half including working with ai special projects and some other things and find myself consistently attracted back in and around the MSP space.

So really glad to be here with you guys. [00:25:00]

Rich: Yeah. And we are really glad to have you here. The, these days you’re doing some consulting. That’s what think purple is about. And so for me, you’re, you are one of my favorite people to speak with about the state of the managed services industry right now, in part because you have a very independent and experienced, but very independent perspective on it.

One of the things you and I have spoken about in the past, and Erick and I, for obvious reasons have spoken about on the show, is the rise of these mega MSPs, not just big MSPs like the company that you built on a regional scale once upon a time. But the new charters of the world, these huge MSPs and the implications their rise has for smaller MSPs.

Looking down the road, looking at where we are now and where you expect the industry to be two, three years from now, how dominating a presence do you expect these very large MSPs to be in the [00:26:00] marketplace?

Alex : I think you have to even zoom. I’m gonna, I’m gonna just double click and zoom one layer out to get outside of the MSP ecosystem for a minute.

And you have to look at the MSP customers, which are the small business, the small businesses of the world, right? And so often we think about when, talk about the MSP market as being a North American market, but in fact it’s a global market. Business owners globally are demographically older and demographically closer to retirement than they’ve ever been.

And that tsunami, if you will, is continuing of the de the glacier effect of unmovable unstoppable of demographics. So if you look at m and a in general, it’s not just happening in the MSP space, although it’s been talked about heavily, and obviously it’s a great spot to build a company and it’s a very healthy, very mature ecosystem today.

In part I would like to think because of some of the leadership that and some of the efforts that New Charter did in especially the [00:27:00] 2020s the early 2020s.

But what you find today is you find SMBs globally are led by often founders who were looking and staring down retirement. And one of their few choices is often m and a themselves.

So that means you don’t just have consolidation happening inside the MSP space, you have consolidation happening everywhere. And I don’t know a good MSP who hasn’t been hurt by m and a meaning in their customers. Getting acquired. It’s super common to be talking with, working with an MSP, and you hear them say, oh, one of my top five customers that I’ve had for 20 years, they loved us, but they got acquired, and the new company has an IT department, and the new company doesn’t meet us anymore.

So I, I think it’s important to address that this is happening everywhere. I say that because I think the mega MSPs, as you put it, [00:28:00] they’re positioning naturally in the spaces where they’re capable of handling some of these larger accounts and these larger customers. And at the same time, meaning con consol, PE-backed, often consolidated clusters, portfolio clusters of industry aerospace clusters, energy clusters, et cetera. You find this. And so as you see that m and a happen, I don’t think you’re necessarily creating, the big MSPs are competitive to the smaller regional MSPs. In fact, I think it’s pretty rare for even the big megas to feel like each other are competitive to one another. If anything, the mega MSPs and this is something I find investors to the space who don’t know it are often when I consult with them I was working with this hedge fund recently and they were really trying to understand it and they didn’t understand how these big PE-backed MSPs weren’t competitors with each [00:29:00] other for SMB customers because it’s so rare that you actually are directly competing for the same account in la, right?

Is Evergreen and new charter, are they competing for the same. Manufacturing plant in la. I rarely, what that small or medium sized MSP has going against it in the big accounts is they might lack some sophistication. They might lack a dedicated cybersecurity team. They might lack some of that, those capabilities.

But I think there’s still a huge runway for the independent MSP to grow and grow up alongside the big MSPs. And I think it’s created a healthier ecosystem. I don’t think that there’s really a threat versus the big guys are a threat to the small ones. ’cause unlike other industries where take the rental industry equipment, rental, if construction equipment, heavy construction equipment.

If you look at a map of those and what happened in that industry, it [00:30:00] rolled up to four. And literally, like in all of North America, there are like four equipment rental companies left really. There’s a couple of mom and pops here and there, but in general there’s four of ’em. You are not gonna see that in the MSP market.

It’s a relationship business. There’s massive amounts of work. We’re gonna grow to a trillion dollar industry globally in what, two or three years? This is not a space where there’s a, where it’s a, where it’s a one or the other. The big MSPs are bad for the smaller ones or prevent the small and medium sized MSPs like I had to grow up and compete.

I think if anything, it’s a healthier ecosystem.

Erick: Alex, that’s it’s an interesting take because there’s a lot of fear, uncertainty, and doubt among smaller MSPs that are seeing all of this m and a happen. And like you, I’ve worked with a lot of MSPs in my early days after ex after exiting my MSP and then now I’m working with them on the m and [00:31:00] a side.

Like you said, it’s this silver tsunami where people are aging out and it’s great. But. If you were to, take what you just shared with us and spin it in a different way. ’cause what I’m understanding you to say is hey, it’s really not that much, there’s not really that much to fear.

And you gave a couple of hints of what these smaller MSPs need to do to compete in the SMBA little bit better. You mentioned, skilling up some competencies and technology adoption and things like that. What should smaller MSPs do today to remain competitive in the market?

Is it simply just delivering more of that personal touch and then skilling up into cybersecurity and ai? Are there other ingredients that you would like MSPs to think about in terms of, the next two or three years of growth?

Alex : Yeah, I think SI think those medium sized founder led MSPs, those are the ones you’re talking about, right?

Like the, what, 5,000,025 employees.

Erick: 5 million, two, two and a half [00:32:00] to 5 million where we see the majority of these smaller MSPs kind of sit,

Alex : yep.

Erick: What do you, what are you thinking about when you think about that cohort?

Alex : When I think about that size, it’s, for one, I will say it’s hard and it’s probably harder than it’s ever been to be that size of an MSP. So first of all, this is not me saying it’s just Easy Street, right? But I don’t think your competitors are necessarily the big MSPs. I think the competitors are actually, I think the competition is going to probably be what you may not expect, which is like the ripples of the world. If you’re familiar with like Ripple HR software platforms you have a broad range of organizations, companies.

Coming in and attaching to the fringes around it services. It’s a very, sexy space from a revenue standpoint. You have companies that are already have their hooks in small [00:33:00] businesses. So a lot of those smaller MSPs, they have a few bigger accounts and then they rely heavily on a bunch of smaller accounts.

Those smaller accounts are going to be much more difficult, I think, over the next five years. And I and into the future. And there’s a few reasons for that. So I can go into those. But before, before I do that, ’cause I want to be, I wanna let you guide the conversation. I think those smaller MSPs can do really well to not be too fearful of working with bigger accounts.

They’re much more hands-on. You have to have a lot higher politics, a lot higher, acumen, a lot higher touch. But I think focusing in those slightly bigger accounts, which I know sounds like, yeah, Alex, I would love bigger accounts, right? But those smaller organizations are in a better spot to create bespoke solutions.

They’re in a better spot to land and expand in the co-managed world and in that space. And I think they’re in a better [00:34:00] spot to actually, it’s a ground game. MSP business will always be a ground game. It’ll be who you go to rotary with. It’ll be who you grow up with when you know you have clients that are building their businesses.

Looking to build alongside your customers is one of the best ways to grow. Now, if that MSP founder isn’t super, doesn’t really want to grow, they’re happy. In that range. And sometimes I meet founders that are like, they’re super chill. They’re like, Alex, I don’t wanna, I don’t want to, I don’t want a hundred employees.

I don’t wanna, I’m not really looking to exit anytime soon. I just wanna be able to run my business and make good money and have a great work life balance and keep my employees happy and keep my customers happy. I do think if you are not growing, you’re dying. I have always believed that.

And I do think that will be, it’ll be much harder for the MSPs that really want to sit still and want to have incremental little things around the edges. [00:35:00] I think that’s gonna be harder. And I think you just have to partner on the cybersecurity. I think you have to partner on the AI piece. I think you have to partner, you have to be willing to really be collaborative and not, and, but you have to own everything tech for your customer.

And, but you have to bring in partners to do the advanced stuff. ’cause you can’t be sending your customers off. I think that’s the one thing that you can’t be doing. You can’t be like, we don’t do that. That’s a really dangerous spot to be, I think going forward, you don’t have to fake it till you make it.

You don’t have to pretend you shouldn’t. ’cause customers are smarter than they’ve ever been. They’re more in touch and more in tune. But I think that plays to the advantage. ’cause if you bring in I’m not involved with any groups, so I’m not gonna name drop the household name, sim SOC companies.

But we all know who they are. The high quality advanced MSPs in the channel that kind of work with you. Find those partners, deliver cyber, do it with transparency with your [00:36:00] customer of Hey, we’re not, we don’t have a full team that does this, but here’s the partner we have and we’re gonna own that relationship and help you.

I think you have to really be in that curation zone for your customer. And you have to be red carpet, white glove. I think that wins. I think, I do think solving pain or not causing pain with technology wins, but you can’t say, we don’t manage your CRM. We don’t know anything about HubSpot. That’s not our problem.

And I don’t think MSPs can do that anymore. I think MSPs have to be willing to lean in and understand their customer’s technology stack. Maybe not be experts at, managing HubSpot. But if your customer has a CRM that’s cloud-based, I think you have to own identity managing it, helping them set up security profiles, helping them kind of tune in things.

You have to be willing to lean in on stuff that I think a lot of MSPs have that have been in this kind of color by numbers. We have to be [00:37:00] unified stack. Be consistent on our techs, our tech product. We only offer this thing. We’ve been taught that as an industry, right? Standardize. Standardize. And I think that if you’re a smaller MSP, the, you have to standardize the under the hood stuff, but you have to be bespoke and curate to your customers to keep those higher quality clients.

That’s my thought. And the big MSPs cannot compete with you in that zone. They just can’t.

Rich: Y you were talking about how the big MSPs the mega MSPs aren’t competing with one another for end users which I totally agree with. That’s been my experience too.

But they are competing with one another for MSPs for acquisitions.

Alex : Yes, they are.

Rich: And thinking along as a follow up to what you were just talking about there, so if people do what you were just saying, they’re smaller MSPs, do what you were just saying, that’s gonna set them up to win over the course of the next few years, win in the marketplace, grow the business, [00:38:00] acquire new logos, et cetera.

If they’re thinking in a near term or a longer term timeframe about an exit, about a sale is there anything different Supplement? How should someone in that two and a half, $5 million zone be thinking about building the business right now? For a, an exit, a sale later on in terms of what the acquiring companies value beyond the traditional MRR and ebitda, et cetera.

Alex : Yeah. So look, one of the biggest mistakes that we see, and I think this has been beaten up so much I don’t wanna spend a ton of time on it, but if you tell me you wanna spend more time, we will. I don’t think EBITDA matters as much as people think it does. I don’t mean it doesn’t matter, of course it does.

But if you’re growing like the rule of 40, right? We’re aware of that, right? Or the rule of 30. I mean if you think about it, [00:39:00] you have really smart buyers now, right? You don’t just have buyers in the early days. So much out there is still five years old, I think, or still a lot of things beyond being repeated in the industry from, four or five years ago.

Where the buying parties weren’t, they hadn’t run these companies. You have to remember, every major acquirer now has been actively in the trenches running MSPs for what, six to eight years? The Megas. Like deeply running them. Not just like owning them as a portfolio company, but like in the weeds running ’em.

When I was at New Charter as CPO, I could look through a p and l and I could immediately it took me five seconds to know whether that was a good business or not. I could get on a five minute call and immediately understand the value of who I was talking to. So I think you have to realize that your acquirers are very smart and they’re very tuned into the industry because they are the industry, right?

They’re running these companies. [00:40:00] So e EBITDA only matters so much. What matters is having a good growth engine. If you’re actually thinking about Nex exit, right? Like acquiring those new logo. What matters is net retention, period, full stop, net, net retention. I don’t even know if EBITDA should be the North Star for an MSP, I think it should be net retention, because if you can show rockstar levels, net retention, 110%.

If you’re a small MSP, like you should be able to hit 110% smaller. MSPs should be able to hit higher. I would cut your junk customers, and I would say this to my past self, like I, it took me forever. It took me forever to let go of the fear of, oh my God, but that customer’s making us $500 a month.

Oh, they’ve been, that’s $1,200 a month. That’s 15 grand a year. It was hard to let go of. Of bad customers, and my [00:41:00] employees wanted me to, they’d been begging me to, and of course it was the right thing to do. It just took, it took me too long.

And I think that we hear this a lot more information in the industry, but I don’t think I can say it enough. If you’re thinking, I’m gonna exit down the road, get rid of the dead weight early, make the, make those decisions now, I think this is the best time as an MSP to cut problematic, difficult bad quality revenue mix customers.

If your goal is in exit, like if your goal is just to milk it and go, then go for it, enjoy it. Those are high profit. Some of those are great profitability accounts, right? But they’re just not really the mix you want. They’re not really that type of customer that fits your team well.

And so I think. Being willing to have high NRR get rid of the problematic customers before your due diligence. My God, that’s one of the worst things, right? You’re in the middle, you have a problematic customer. You held onto ’em, they’re in your TTM, right? You’re trailing [00:42:00] 12 months of revenue.

They’re sitting there in your revenue mix, you’re in due diligence and something blows up, right? The customer you knew was maybe gonna fire you or you were gonna fire them, or the situation was maybe not great between everyone, but they were a lot of money, so you kept them around. Those are the types of customers that I would say early.

Cut that so that you don’t have that customer churn in your TTM, does that make sense? Because you want a good 12 months to 36 months of Hey, we made some hard decisions in 2026, right? We take care of some things. You can see it. But then look at 2027, look at what we did. We did this in 26 and then we executed in 27 and now in 28, we’re on fire and you owe us big.

We’re focusing on NRR and healthy high quality clients, I think is an [00:43:00] MRR mix. Of course, but I think that we’re almost not past that. But I don’t, I think it’s pretty rare to run into, unless you’re a var, but still trying to become an MSP out there. I don’t think there’s many MSPs that are still heavily relying on, TNM.

Hopefully, maybe I’m wrong.

Erick: Yeah, it makes a lot of sense, Alex. And we talk about these kinds of things a lot, and the other, portion of that whole, get rid of those underperforming, c-C-D-N-F customers is you now have capacity to spend more time with those growing clients and increase that TTM, right?

Let’s pivot to AI for a second because, we wouldn’t serve our audience if we didn’t talk about AI on every single podcast. It seems the last of course, 12 months.

Alex : You have to, are you kidding me?

Erick: Yeah. So think about these MSPs that we’re talking about, these smaller MSPs and their adoption and maturity of ai.

How should they be looking at it? [00:44:00] What are they doing right? What are they doing wrong from your seat on the bus? And are they moving fast enough or is it, you know what, these are MSPs. They’re doing what they always do. They’re taking their time. They’re not putting a lot of risk into it. They will partner until they can own that domain and then deliver it.

Is it we have to adopt it ourselves and run it and be confident that we can manage it and secure it before we build out services and solutions for our customers, because we’re seeing MSPs doing all kinds of different things. What are you seeing?

Alex : You gave me my soapbox.

Erick: Alright let’s expand.

Alex : All right. Okay. First things first. I’m gonna go backwards in what you just, the questions you asked. I literally have a LinkedIn post that I wrote and I saved ’cause I’m on holiday and I thought I’d, I’ll post it later. I don’t wanna deal with that while I’m out. But it literally just says.

Let’s bifurcate the conversation vendors stop [00:45:00] telling MSPs that they, that your technology is for them and their customer. Stop telling MSPs to transform themself before they go do stuff for their customer. And I’m the contrarian stop telling MSPs they have to go be MSPs with all the love to PAX eight.

And the people I love over there, like really, because here’s the thing, the truth is today the number one value expansion for an MSP. Is not an ai and I’m an AI guy. Like I’ve spent the last year and a half deep in AI tech working on enterprise projects. I’m working with MIT’s Project Nanda on ai, global expansion of Ag Agentic web.

So I’d like to think, I’m not, no one’s an expert, but I’d like to think I’m at least like talking to the smart people every once in a while. So I’m getting like a little bit coming in just to go [00:46:00] focus on cybersecurity. We still haven’t sold and followed up on cyber resiliency. MSPs are literally still expanding that piece of their business, which is what their customers want them to be doing, by the way.

So like in general, that epoch of getting our cyber hygiene right, and that conversion from oh, we have an MSSP over here and I’m an MSP, but I don’t do security. Like these differences. And then now everyone has to be an, do security. We understand that you have to bring your customers up to a minimum viable baseline, and every MSP has this responsibility.

It’s in your wheelhouse. I still think that’s the most revenue MSPs are going to make over the next two years is all in cyber and GRC. ’cause by the way, that’s where your customers expect you to live. Like your customers don’t expect you in their org chart reflowing, their business organization. Heck, even in mid-market and big companies, the CIO reports to the [00:47:00] HR person who then reports to the CFO and tells ’em what the CIO is doing.

Like even CIOs at bigger companies don’t have a seat at the organizational chart problem, which means AI transformation is not sitting in the IT department in most organizations, which means the MSP is not going to be the driver. Effectively of AI transformation in their customers, especially the bigger customers like, ’cause an MSP is a small organization with very niche specific tech stack workflows.

Everything, right? If you focus on trying to transform yourself before you go to your customer, you’ve lost ’em. So I’ll go back. Cybersecurity needs to be the focus, I think of most MSPs from just a, keeping the lights on, revenue standpoint, cyber resiliency, and keeping dealing with all the compliance [00:48:00] issues that come with that.

That did not go away. ’cause AI showed up. And I have fear that AI will be a distraction for most MSPs as a shiny object that have to make sure they’re walking and chewing gum. So you have to, that’s my first soapbox item. The second thing is we have to bifurcate this. We must. Get the vendors and the MSPs to stop with this idea that we have to tr do our internal work before we go to our customers.

A 30 person MSP is nothing like your 150 person manufacturing clients or your 75 person engineering firms or your 500 seat sales company clients. These are not the same businesses as your MSP and doing AI transformation inside your MSP is using tools and things that your customers do not use. [00:49:00] Your muscle memory for doing that is going to be, it’s a different team.

It’s a different conversation, it’s a different workflow, and I think you’re gonna be too late to the game. So I said you have to do cyber first, but you cannot tell your customers no. We’re just gonna turn this off. I accidentally dropped an F-bomb at a university on an AI cybersecurity conference panel because the MSP sitting next to me on the panel it’s one of my local universities too.

So it was properly embarrassing, thank everybody laughed, but literally said oh, have it like turned off at all of our customers. Like we just worship with them and we just churn off access and p they’re just not allowed access. And I was like, you know what? People are doing it Fortune one hundreds.

They have their per, they have their chat GPT, and they’re taking photos with their personal chat, GPT of their screens using it, copying and pasting it, and they’re, they’re putting it into drafts in Google, like old fashioned spy movies [00:50:00] and copying and pasting it off their personal Google accounts back into their work.

So if you work at a big company that doesn’t give you access, that’s what people do. What do you think your small business clients are doing? Whatever they want. So I look at it as the MSP has to lean in on this fast and immediate, but they don’t have to overcomplicate it. They really don’t. It doesn’t have to be some, we need to go in and build all these agents and we have to go like redo and reconfigure your entire ecosystem.

And I have an ax to grind here ’cause I think that you will see really high quality firms that will help MSPs do the really advantage work, the stuff for the 10, 20% of their businesses. ’cause inside of an MSP ecosystem, most of your clients are gonna do the same thing MSPs are gonna do. They’re gonna drink from the AI watering trough of the vendors because it’s [00:51:00] really going to be good enough.

Is good enough. And I’m, you can look at this at a macro scale. Big fortune companies are churning to Salesforce and ServiceNow for their AI agents. There’s companies with enough money to, they have whole AI teams. They could build whatever they want. Why are they churning on AI agents and ServiceNow or Salesforce?

It’s ’cause of compliance. Somebody else is gonna run it for you. It’s probably pretty good. And there was a report recently by Canales, I’m sorry, Omnia just did a survey not long ago, two weeks, basically saying that what some extreme percentage of MSPs are mostly in a wait and see mode with the vendors.

And I think that’s probably smart, to be honest. And I think that’s what most small businesses, which are most MSP customers, that’s what they’re going to do. Autotask, if you’re an engineering firm, is gonna have AI workflows built inside of it. HubSpot and the CRM is gonna have [00:52:00] AI workflows built inside of it.

Most small businesses don’t need some big, sexy, complex end to end workflow map that looks really cool, but is like a, a project to maintain. And there’s all kinds of security issues and I think there’s going to be room for that. But I do think keeping it simple is going to be the key.

Having these conversations with your customers, mapping your customer’s line of business applications, starting a conversation with each customer on what line of business apps they use. Understanding what AI tech is built into those apps at your next QBR. Richie. I hate you saying QBR, but I just said it.

QBR I just, I wish there was a better name for that. We should call it something very different, but it’s universally understood. So I think you have to. You can’t ignore ai, but I don’t think you go spend a ton of time building out some complex practice and you don’t try to pretend to be something to your customers that [00:53:00] you’re not, if the customer wants to r and d with you, you r and d with them.

But I would say, be care, be cautious in that area because I think it can be a distraction and it’s hard to gauge revenue. I’ll stop in just a second. You mentioned the MSPs are all over the map. I can attest to that. I was in a executive conference. I ran an AI session with 30 of the largest MSPs in New York City.

Had a conversation on around AI with them. I was just a little breakout, like a one hour thing and I wasn’t even supposed to be there. But I wound up last minute and 30% of the room was doing work with their customers. 30% of the room had their own chat bot internally going, they’d, cloned their service manager.

Ask Alex anything, type that chat bots and connected it to some data to make like their QBR faster, to make meeting prep quicker. Things like this. Basically co-pilot with, the most basic of configurations and [00:54:00] prompts and data sets. And then the other third was doing nothing and didn’t know what to do ’cause they couldn’t figure out how to monetize it.

And literally nobody in the room had any, had figured out how to monetize any of it. And I think that’s the big problem in the MSP industry today is I don’t think most MSPs have really figured out how they’re gonna monetize AI properly. Microsoft is having a huge problem with copilot, deep copilot U utilization.

They’re selling seeds, but utilization and penetration is an issue. So they’re launching a whole forward deployed consulting firm just to help organizations with that. So I think for MSPs. That’s going to be what most of their customers need. Maybe 80% of their clients is just gonna need off the shelf what their line of business software has.

And then they’re going to need their MSP to help tell them that’s okay and help tell them that’s probably where they should invest their energy. ’cause I think most MSPs should put their energy there. [00:55:00] Anyway, just my 2 cents.

Rich: So I want, I do wanna get into. Somewhat forward looking di dimension of of AI with you, ag agentic AI specifically, and use that as maybe a way to follow up on what you were just talking about there.

We’re seeing, we’ve already seen plenty of service desk automation tools there, there’s plenty of AI being used internally within a lot, not most, but plenty of MSPs right now. It, in my mind it’s mostly built around generative ai. To automate some of the the interaction with the customer and the triage and some of the level, a lot of the level one work et cetera.

But we’re seeing just this year, this young year, a lot of progress in agentic AI and long run fully autonomous agents. We can get to what that means in terms of solutions that you’re providing to customers down the road. But I guess the first question [00:56:00] is, do you have any thoughts about the implications of long run fully autonomous agents internally for MSPs?

And how does that relate to, from a certain perspective, your advice there before was wait a little bit, slow down a little bit. Maybe get the security story first. Maybe you get the copilot story right? You don’t have to be on the bleeding edge of everything.

So it paint a little bit of a picture for us. So where you see AG agentic AI going in terms of how MSPs run the business, and then what advice you would give people in the audience about how rapidly, if they want to capitalize on the productivity advantages of being a first mover there, they should go on that.

Alex : Yeah. And by the way, I wanna be really clear, I think MSPs should be at the bleeding edge of this for their internal ops. Okay. I’m not saying that MSPs should wait for the vendors. [00:57:00] What I’m, what I was trying to say there is like many MSPs that are waiting, their customers are also gonna be waiting for the, their vendors.

I was using that as just a comparison, but I actually think MSPs are in a very unique position to start experimenting. Learning. Many are already doing these things. I think the biggest risk is probably room for like anything that we’ve seen. This is not new under the sun. If you had a really good engineer and you’re a smaller MSP, that was great at, building automation scripts, for example.

And we’ve all been there. You had that, you had a rockstar, nerdy engineer who wa took it on themself to go build a bunch of complex things. And what they did was built a great kingdom that they could manage and support, documented none of it. And when they left, all hell broke loose. Everyone’s been there.

So I, I would encourage a structured approach [00:58:00] to this. This is not something that you just, you know, as a CEO or a leader, you have to lead the AI initiative at your MSP full stop. Like full stop. If you’re a founder, you have to own the MSP transformation in your internal organization. I think that’s the same, by the way, for any organization working with the university right now on AI transformation to the mid-market.

And the entire program that I’ve designed there starts with executive sponsorship. The CEO has to attend a think tank before their organization’s even eligible for enrollment into the transformation program. So I think if you’re an MSP, the CEO owns the program, owns the AI initiative internally, and you run a transformation council, you have each functional area of your business talking deeply.

You ha you, you create [00:59:00] a rubric for what you’re gonna attack and how you’re gonna attack it. No, no, just flinging stuff at the wall to see what sticks with random outcomes. Like you have to actually say, we wanna try this or have an idea. We have a sandbox, or Bob worked on this thing over the weekend and got it working in a test bed.

We think it’s worth deploying here. And then you measure it. And this is like hard for a small business to do, by the way. This is like time consuming. It’s effort, right? You’re trying to fight fire. But I don’t think an MSP founder today can ignore I they cannot ignore ai. And by the way, I know many executive CEOs of like bigger companies, not so much Ms.

MSPs, but just like outside the MSP ecosystem that are locking themselves away for three days at a time. Vibe coding CEOs. There’s a whole [01:00:00] group. I was at a, I was at a, a launchpad event. And it was literally like a hundred millionaire guy, like a senior executive built, founded and sold many companies.

And he’s like literally telling his peers like, you have to literally next week, cancel everything Tuesday through Thursday and lock yourself away for three days with Claude code and go build something Like this is like the culture. There’s a, this is what’s happening outside of MSP world.

And so you’re gonna actually have some of your customers doing this, by the way, which is like a challenge. So I think the CEO has to be leading this charge, building a team, talking to every single vendor, know exactly what they’re talking about or doing for AI or what they’re not. Understand that first.

You should do that tomorrow if you haven’t already. As an MSP, you should have a weekly meeting just for AI transformation inside your m ms. With no, no other topics [01:01:00] allowed. It’s only AI transformation with one person from each functional area of the service delivery and customer and all that. And they should all be looking at what tools they have off the shelf, the AI solutions coming from the vendors, what the gaps are, brainstorming ideas, what’s working, what’s not.

Come up with a strategy and a game plan around API. Key management around what tools you’re going to use, what budgets you’re gonna set, what your security I concepts are around it. Like you have to do that internally like tomorrow. I don’t think you have to do that before you go talk to your customers though.

’cause I also think tomorrow you have to get your ser, your customer experience people out talking to clients, not doing it and selling an AI readiness thing, but actually going to them and just cataloging their line of business applications. Opening a line of communication called an AI discovery program that you’re gonna run [01:02:00] for all your customers and put them somewhere on a map of where do you wanna invest?

How serious are you about this? Where do you see yourself along the AI adoption curve? How curious are you about it? We should be talking to our customers tomorrow to understand what they’re going through. And I think we should be trying to basically convince our customers to stay in the copilot plus vendor AI lane.

’cause I honestly believe for most small, medium businesses, a cocktail of those two things is going to be enough and it’s probably good enough is going to be good enough for most SMB in between those two things from a compliance and a security and a governance and a sustainability standpoint. But the opportunity for MSPs and agentic.

Is massive for their internal operations. And that’s where I think they should be diving deep. And then I think eventually they’ll probably have partners that come in for the [01:03:00] top 10 or 20% of their customers. A lot like we did with cybersecurity, right? Most of our 80% of our customers need a good cybersecurity program.

They don’t need a five star, gold-plated cybersecurity program. And when we have customers that need that, we have partners that we bring in. I think you’re gonna see the same thing in the ag, the super age agent world of a age, agentic development, et cetera. And I think copilot, copilot studio and the M 365 stack is probably where most MSPs will end up living because good enough will be good enough, and it’s not swimming upstream and their customers are already in the zone.

Everyone understands it, and it’s not very sexy, it’s not very exciting. I think it’s a way to make some money, and I think it’s a way to keep or retain your customers through the turbulent waters we have coming, because this is gonna change everything. So you have to be leading your customers, but we don’t have to [01:04:00] be, we’re early innings still, guys.

We are very early innings in all of this. No one’s an expert and nobody knows where the puck is going.

Erick: I think you answered my next question for you, Alex, but let’s unpack it a little bit because, putting my MSP, former MSP hat on with you for a minute, we’re always trying to figure out how to enable our clients to, to achieve their, to we’re trying to deliver those business outcomes, right?

Moving that conversation into the boardroom and having real impact for our clients. You just mentioned a couple of strategies that can help deliver that outcome for clients. But also position yourself as unique and different and distinct, a little bit bespoke. So if we were to say, here’s probably three things that you as an MSP can do for your customers or clients around agen ai, let’s couch it around the, what you consider this good enough, these applications and subscriptions that they’re already [01:05:00] using, the copilot stuff and some of the things that come with their their SaaS applications for their businesses.

Maybe it’s verticalized, maybe not. Is a good motion to say, Hey, we’re gonna have a workshop. We’re gonna do some virtual stuff, we’re gonna bring in speakers, we’re going to educate you on this. And then that becomes an opportunity for the MSP then to deliver some more bespoke kind of strategic project based services that then maybe become kind of a.

AI as a service. I’m, I’ve been using the term B-C-A-I-O, recently. What are your thoughts?

Alex : Okay. Working backwards. I think one of the worst things the industry can do, the MSP industry can do is charge customers for TNM project work or when doing AI stuff, building AI agents, I think that’s a real missed opportunity.

And [01:06:00] there’s an inflection point when you set a precedent with your customer of, we’re going to do this as a as a one-time project, and this is gonna cost you, 10 hours, you’re really backing yourself into a corner. And it’s just so much harder to go back to that customer later and be like, yeah, I know last time we did this thing for you, we charged you, a thousand dollars.

Erick: Yeah.

Alex : But this time it’s gonna cost you $500 a month. Yeah. So I think one of the risks is like even over promising. For example, if you get an engineer that’s super ambitious and they go build some crazy N eight N workflow for a customer like that’s okay, even if it makes a big difference for that customer tomorrow, right?

Even if it’s really working right away, like owning that over time, right? Owning a non-deterministic platform in a [01:07:00] world that is changing so fast, like. How many times did we have issues in customer support during the cloud adoption era with just the mo the, just literally the shifting tides of Azure dashboards or M 365 settings that just moved, like Microsoft would just rearrange the UI before PowerShell was fully built out, right?

And we were reliant on ui, ux for lots of, sometimes it would be in PowerShell and not in the ui, ux, or then the next day it would work in PowerShell and vice versa, right? Like we were in a situation having to explain to customers why things broke that we’re deterministic. Now we’re in a world where everything is moving so fast.

Like I, I can’t even explain how fast it’s moving. You go away for a week and you feel like you missed everything, it’s a great time to be alive, but. If you’re on the bleeding, bleeding edge and you’re developing a solution for a customer on that [01:08:00] bleeding edge, I think you have to really think about is the juice worth the squeeze?

And I’m not saying don’t help your customers take advantage of this. I am saying maybe we need to take a step back and we need to not be afraid tactically to just not tell our customers to wait. I think it’s the worst thing you could do. Tell your customers don’t do AI right now. Telling your, I still hear MSPs telling your customers, oh, they’re training on your data.

Rich: No, they’re not.

Alex : They’re not training on your data. If you’re buying a business subscription to open AI Andro or you’re in any of the Microsoft Azure AI ecosystems, they’re not training on your corporate data. It’s not happening. So like we have to get misinformation out. We have to be really crisp with customers.

We can’t be the department of, no. We did that with cloud storage. Remember Dropbox and customers like, can I just put it in Dropbox? No. Store it on your server [01:09:00] because we can back the server up. We can’t back drop. And they’re like, yeah, but with Dropbox I can access it from my phone. No. Accessing anything from your phone.

Bad customer. That’s what we did. We couldn’t control it, so we just said no, and our customers went around on us. I think we have to just, we have to lean in all the way. We have to talk to our customers. We have to figure out what tools they’re using like tomorrow, and then we have to give them high quality tools and we have to try to convince the boardroom to give their cust, give their employees the tools.

I think that is the n And by the way, when we start training and workshops, I’m gonna keep going backwards here. Every time I get into this conversation with a customer a university wanting to run a big transformation program, first thing. Can you just teach us to prompt? Literally that’s what happened.

No. You try to go in and have this nuanced, really cool, big thought leadership and everyone at the, everyone that [01:10:00] shows up to the lunch and learn or the workshop or the training session or the thought ideation meeting, they’re like, okay, we’re here to learn how to prompt. That’s what happens. ’cause that’s where most people are living today.

We might see it and those of us in the industry might be like grasping around all the really cool stuff we can do. We’re leaving people way behind us, so we have to remember that we have to just back up, get our customers, bring ’em forward, bring them with us. Help our executive leadership and our boardroom understand they must invest in just giving generative AI tools.

This is not gonna sound very sexy. This is not a Gentech universe. I could go into all that with my Cambridge work and all kinds of my AI and gentech security work. We can talk and nerd out all day on what that future looks like. But today, tomorrow, probably through the end of this year, the work is helping our customers pick in a, pick a tool, [01:11:00] connect it to the most basic data sets, create some really basic governance around that, right?

Not rocket. That’s where copilot is gonna make our life easy. I’ll say that for most M SMBs. For most MSPs, I hate to keep, giving Microsoft credit, but they keep delivering and I think overall copilot is probably the tool in the toolbox. If not that, then maybe you’re setting up and helping your clients.

Adopt a commercial version of Claude or something like this, right? And connecting it. But you have to own management of that. I don’t think an MSP gets to say, that’s not our problem. I think an MSP has to say, okay, we’re gonna charge you for that, right? But we’re gonna own and connect that. And monitoring that is hard and all these other factors.

But I think you have to help get generative AI

in the hands of all the end users at all of your customers. [01:12:00] Like I think that’s probably the mission for the most part over the next year. ’cause it’s expensive, there’s costs around it. Connecting the data sets is a little scary, but that’s where our customers still are. People are still learning how to prompt, honestly.

Like when you actually, they’re using it at home and they’re experiencing magic and they’re coming to work and, they’re using their personal chat GPTs to get things done. And I think that’s the biggest risk that the MSPs have if they don’t lean in with their customers pretty early and really have those conversations with their clients.

And then I think the opportunities over the next year shake out and become much more obvious in how the more advanced agentic workflows, et cetera, are going to happen. This is really early inning still.

Rich: Folks you have just experienced exactly how good Alec Stanton is at 10:00 PM on vacation.

Imagine how good he is at [01:13:00] 9:00 AM on a workday. Alec, thank you so much for joining us on the show and taking some time out from your break. For folks in the audience who want to get in touch, talk with you about something you said, learn more about you where should they go?

Alex : I’ve got all my contact [email protected].

You can hit me there, find me on LinkedIn at Alex L. Stanton, and I’ll be at MSP Summit Vegas as part of Channel Futures. Hanging out with Len and my my one and only my favorite boss I’ve ever had. Mr. Mitch Morgan founder of New Charter. We’re having a conversation about doing AI transformation for your customers.

At MSP Summit. We’re running a workshop there.

Rich: Alright, Erick and I will see you there. We’re both gonna be there and I’m doing a couple of panels myself alright. Looking forward to seeing you in a few weeks in Las Vegas. Until then, folks Erick and I are gonna take a quick break here.

We come back to the other side. We’re gonna share some thoughts about this very interesting conversation with Alex Stanton. [01:14:00] Have a little fun wrap off the show, stick around. We’re gonna be right back

and welcome back to part three of this episode of the MSP Chat podcast. One last thank you to Alex Stanton for joining us in the middle of his vacation and sharing a lot of wisdom with us. That was a super interesting conversation. I could probably follow up on eight or 10 different things that he said.

Erick, I’ll just call out two things that sort of leap to mind. And one is, it was interesting to hear him talk about net retention outweighing EBITDA and MRR and acquisition conversations. And it just brings to mind, first of all, if you I, regardless of where you are in the evolution of your businesses, an MSP if you’re not aware of thinking at all about what acquirers look at, you’re making a big mistake.

But if you are somebody who has been told, as many of us have been, that it’s all about MRR [01:15:00] percentage and ebitda. What we just kinda learned from Alex is that this has evolved. And what I can tell you for as a matter of certainty is it will evolve again. So regardless of whether you’re looking at an exit.

In two years, or five years, or 10 years or 15 years, you need to be aware of what acquirers care about. And you need to be continually refreshing that awareness of what matters now, and thinking about how that affects your business. That’s issue number one. The other thing that came to mind towards the end of the conversation, there’s, you will sometimes hear in conversations about ai in Silicon Valley, this thought that the big constraint in terms of how fast AI advances is not the l lm, not the technology, not the LMS that’s just moving at the speed of light Right now.

People will say it’s power or it’s data center capacity. Like that’s the breaking factor. Other people wiser people, I would say point [01:16:00] to. We, the people, human beings, and our capacity to learn and absorb and accept and embrace and use that. There are real limits on how fast people can do that.

And so when Alex is talking to you about how your clients are still just trying to figure out how to prompt, it’s a good reminder. You absolute, and I’m sure he would agree, you absolutely need to be educating yourself and investing in a culture of AI innovation inside your company. But at the same time you need to be mindful of the fact that within your company and within your clients, there is this sort of capacity restraint in terms of how quickly people are going to be able to move forward.

And as a result technologies like copilot are really still a great way to begin in ai with SMB customers.

Erick: Now, let me tag in on that last one first, rich, because it reminds me, it’s kinda look, copilot is already in [01:17:00] Microsoft has moved more of copilot functionality into a premium M 365 subscription.

So it’s already there in embedded, and it reminds me of the old adage, when you ask a photographer what’s the best camera? We have a media team at Channel Mastereded. I’m always having these conversations with Connor and Riley and, the gear that we need and what’s, we make decisions about, what we’re gonna evolve to next and asking them what we should do.

So the photographers, when you ask a photographer a question, what’s the best camera? They’ll, a lot of ’em will say, it’s the one you have on you. And that in most cases, for every human being on the planet is your cell phone, camera. So sometimes. Your cell phone. Camera is the best camera you have.

What’s the best? Now, pivoting, right? What’s the best ai tool for most of your business customers. It’s the one that comes with your Microsoft subscription. It’s copilot, right? So that analogy really struck home. It’s we should be empowering those [01:18:00] clients and making sure that we’re running workshops.

And I love the idea of training and educating, rich, this is my jam, right? Thought leadership. Let’s show these folks how to get more out of it and that way, and does allow you to be, remain more sticky. And tying it into my other takeaway as well was that net revenue retention.

Factor as well as, I work with a lot of MSPs now. We talked about it in the interview that, have, are ready for that exit or that next adventure in life. They wanna sell their organization and we’re seeing valuations now. Alex is spot on here where NRR is being valued and a much higher and being assessed in a much different way now as these buyers become more mature.

And I love how Alex, identified that, hey these mega, MSPs that are bank, they’ve been running these MSPs for, eight years now. So they really understand at a much deeper level what some maybe new [01:19:00] PE firms coming in, know about what really makes an MSP.

The right choice, and it may not be, ultimately having, high double or, double digit ebitda, things like that. But that NRR and also the other factor that I’m tracking is staff retention as well. That’s becoming another kind of a KPIs like if you’re churning, customers bad, but if you’re churning staff really bad.

So just some takeaways there.

Rich: And like I said, plenty more from that that conversation. Thank you to Alex Stanton. Folks, this leaves us some time for just one last thing. And did you know I didn’t until very recently that there is such a thing as a an auction for a flaming hot Cheeto?

Do people actually bid on flaming Hot Cheetos? It turns out now and again, they do. And in fact a world record, a Guinness Book of World record has been set quite recently on an auction price for a flaming hot Cheeto. Now you would you [01:20:00] even consider bidding at auction on a Cheeto?

I probably would not, but maybe you would if it was a Cheeto shaped like a Pokemon character. And you are better at this than I am, Erick. So I’m gonna say Charizard.

Erick: Charizard and he says, Char, and he belches fire. So this is like the tie into this flame in hot Cheeto thing. It’s a funny, you have to be here at this moment in time to appreciate how funny and ridiculous this is Rich.

Rich: But thank you for making that connection actually between flaming hot cheetahs and Za because somebody found, just found in a bag a, a charizard shaped flaming hot Cheeto. This has gotta be a one once in a lifetime, once ever kind of thing. And they put it up for auction. Erick do you wanna guess how much somebody paid for the Charizard shaped Flaming Hot Cheeto?

Erick: I know because [01:21:00] I read this one. It first, came in the news, we’re reporting on it a little bit afterwards, so why don’t you share and surprise our audience. At how much them finding food shaped into, pop culture things might be worth,

Rich: If only I was a place financially in my life where I could even consider this kind of transaction, somebody paid $87,000, $87,840 to be more precise for that Cheeto.

And now the question is, every now and again, somebody pays a massive amount of money for a piece of art that involves a banana stapled to a wall, and then they eat the banana. It’s is this person gonna eat the Cheeto? Or, I would be interested to know what they’re planning to do with it now that they’ve spent close to $88,000 on it.

Erick: Yeah, who knows? I don’t know, was it the flaming hot Cheetos folks and just did that as some sort of a pr, just, back channel PR thing. It’s in the news, rich.

Rich: If that if this was a a plot mission [01:22:00] accomplished ’cause they got us to talk about it here on the show.

And I don’t think we’ve ever talked about Cheetos before. So well done if that was a a marketing scheme. Folks, that’s all the time we’ve got for you this week on the MSP Chat podcast. A quick note we spoke a little bit about with Alex Stanton about cyber resilience maybe being the thing you should be focused on right now instead of ai.

Erick and I will actually be at the RSA conference in San Francisco doing nothing but go deep on security and you’ll in fact see us there on the next episode of the show. Just FYI particularly if you’re in our audience and you’re gonna be at the RSA conference go ahead and drop us a line.

We’re gonna be spending several days next week in San Francisco at RSA, going deep on security. What we’re gonna be doing next week on the show as well. And until then, I will just remind you, this is both a video and an audio podcast, which means that if you are watching us on YouTube right now, but you’re into audio podcasts, go to Google, Spotify, apple, wherever you get your audio podcasts.

And check us out [01:23:00] there as well. If you are listening to us right now, but you’d like to check us out on video, go to YouTube. You’re gonna find us there too. And wherever it is you find us please subscribe, rate review. It’s gonna help other people find and enjoy the show just like you do. This show is produced by Riley Simpson, part of the team with us here at Channel Mastered, where we work with vendors to help them perfect, thriving MSP Channels. You can learn more about that business at www.channel master.com. Channel Mastered has a sister organization called MSP Mastered. That’s Erick working one-on-one with MSPs to help them grow and optimize their business. You can learn more about that. www.mspMastered.com. So once again, we thank you for joining us.

We’ll see you in a week from San Francisco. Until then, I will simply remind you as I do every week, you can’t spell channel without [01:24:00] MSP.