Episode 138: Kill the Meeting!

 

Transcript:

Rich: [00:00:00] Want to know what the smartest people in the SMB channel are reading? Check out Channel Holic, the industry blog for me, veteran technology journalist and analyst Rich Freeman. Covering managed services, AI, cybersecurity, and M&A, Channel Holic delivers sharp analysis and insider perspectives trusted by MSP executives, technology vendors, and IT investors alike.

If you want to understand where the channel’s headed next and why, check out Channel Holic at www.channelholic.news. And three, two, one, blast off. Ladies and gentlemen, welcome to 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. [00:01:00] I am Chief Analyst at Channel Master, the organization responsible for this show. I’m joined this week, as I am on every episode, by your other co-host, our CEO and Chief Strategist of Channel Mastered. His name is Erick Simpson. Erick, are you ready for some football?

Erick: I am ready for some football, Rich.

Bring it on. It’s been a minute. And a lot of exciting games, but also just learned that the owner of the Rams has acquired, or is in process of acquiring, the Los Angeles Angels baseball team, another team that we also love. And boy, oh boy, I’m interested to see what changes are coming and whether we can get the Angels back into some contention, ’cause they’ve been found- floundering, foundering for the last couple of decades since they won the World Series way back when.

We’ll see. We’ll see what happens.

Rich: Yeah. Yeah. That organization has obviously done very fine things for the Rams, your Rams, and your Rams, I think, are a lot of people’s pick this year maybe as [00:02:00] a, a Super Bowl favorite. The, odds little low for for my Hawks repeating, but but we will see.

I’m, I am ready for some football as well my friend. But first to business. Let’s talk about managed services and AI, as we so often do on this show. And I wanna talk in particular about a new managed offering from Integris. Integris is one of the biggest MSPs in the marketplace, hundreds of millions of dollars top line, a, a mega, mega MSP as I call them.

And within the last few weeks, they introduced a new service called Core, and this is basically their new sort of go-to offering. When they’re talking to a new account, when they’re renewing with an older one, th- this is what they sell to a what’s called a generic managed services customer.

And as context for this a little bit, Erick, we talk a lot about AI and its impact on MSPs and their business model. We talk about the fact that the [00:03:00] device and network and cloud and identity management services that MSPs have traditionally provided and that remain needed and important, they’re also increasingly commoditized And where the momentum is right now, what SMBs are increasingly looking for from their technology partner is help on AI.

And that stuff tends to be done at least initially as project work. We’re gonna come in, we’re gonna do an assessment, we’re gonna security, governance, data readiness. We’re gonna get you ready to go, then we’re gonna start transforming workflows. And there’s r-recurring revenue that comes after that in terms of keeping it maintained and updated.

But essentially you’re looking at two different things that the MSP is bringing to their clients with two somewhat different motions. And what Integris has done, this isn’t necessarily what they were trying to do exactly going in. Going in, they thought to themselves, “We have this traditional bundle of services we’re managed services we’re bringing our clients, but it’s getting less and [00:04:00] less relevant, less and less useful.

What we wanna do is incorporate AI into that bundle so that one contract, one bill, one thing that the customer is buying from us includes both the stuff that they’ve been paying us for in the past and AI services now.” And that’s what Core is, essentially. And in addition to traditional managed services, In-Integris will come in, they’ll do all of the stuff we were just talking about in terms of the assessment and readiness and security work up front.

They’ll transform w- workflows, they’ll build agents, they’ll kinda you name it, they will help you grow and optimize your business using A- using AI. What is particularly significant and interesting about it, though, is that this is all offered as one recurring revenue subscription to the customer.

So it’s not the it’s not a thing where a project comes to an end and let’s talk about the next one kind of a thing. I have one revenue relationship with my MSP. It includes [00:05:00] everything that I’m doing with them, including the newest sort of outcome-oriented, most strategic stuff that I’m doing.

Now, this brings us to a point, and it’s a sensitive point for reasons I’ll explain in a moment. But of course, one of the biggest mysteries for MSPs right now around AI is how do you price it effectively? And, there are lots of people experimenting with outcome pricing. There, there is the digital worker kind of model, where you’re gonna pay us out of the savings that you get from digitizing something that a person was doing in the past.

Core, for right now, is basically priced the same way Integris has always priced managed services, a combination of per user and per device, basically. And we’ve talked before about why that is a model with a limited future. As AI gets better and better customers are either employing fewer people or certainly slowing down the rate of hiring.

So y- user counts [00:06:00] become less and less of a growth source for the MSP, and the MSP’s reward essentially for, delivering value to the end user is slower growth or potentially less revenue. So this is a potential Achilles heel in Core right now. Now what I said in my article basically was they know this at Integris.

I interviewed one of their senior-most executives there and they said, “Look, we’re looking at all the pricing models. We know this is what we’re doing now. We’re gonna need to do something else later. No one has figured out what that is yet, n- and neither have we. And so rather than wait to perfect that, we’re gonna deliver something that works pretty well for us now.”

I underscore this because aft- I wrote about this on my blog, ChannelHolic, and after I did, I was contacted b- by Integris, and they really wanted me to kinda underscore going forward They’re aware of the per user, per device flaw, let’s call it, long term in their pricing model here. And they’re gonna deal with it in the [00:07:00] same time frame as e- everyone else.

But in the meantime, they’ve come up with a very interesting way Erick, to bring AI to your customers that has the traditional managed services advantages of being predictable and budgetable which is the thing everyone loved about managed services. It’s been harder to do with AI.

Integris has a very interesting model for bringing that back to the entire package of value that you’re delivering to customers.

Erick: Rich you can predict what my feedback and questions were going to be. You talked about a couple of them ’cause I’m like, “Oh, they finally solved the pricing. How did they do…

how do you…” It’s a, a moving target. It reminds me so much, Rich, of the days when I was running our MSP, and before we decided to, flip the switch and say, “We’re going all in on recurring revenue.” If a [00:08:00] client, is a block time or break-fix or occasional accidental client transactionally, we are not doing any work for these folks, and we are going to market with our bundle of services, which much like Integris said, we had no idea how effective it was going to be, but we knew that the cost of inaction was worse than taking a stab and leading the charge.

It’s the only way you’re gonna find out. And you used the word perfection, and we always say, Rich, progress over perfection, right? So I hope that Integris… i’m certain, I’ll just put it this way, that Integris is smarter about how they’re bundling and packaging the AI services that they have than we were back when there were no managed services.

We called our services flat rate IT services. That was it, and we just created an agreement. We sold it to all of our A and most of our B clients. The C [00:09:00] customers we made a couple of exceptions and kept them on, which we regretted later because of, all kinds of issues that don’t change when you have a C customer just because you have a new model and you’re trying to do them a favor.

We eventually got rid of them as well, and we found homes for all of these C customers. We were trying to do right by our clients even back then, right? Which is something that, that we know is unique about managed service providers. We really want to do the best for our clients, and if it doesn’t work out we’ll try to help place them somewhere else.

But what we found, Rich, was that first year of the first agreement that we had signed with all of our clients, it was a no-go. We were underwater at the end of the year, and we learned from that, and then we adjusted and the next agreements that we priced and sold to clients were in the profitability zone that we expected, ’cause we didn’t know what to expect.

But the the takeaway here is Once the clients are on an agreement that [00:10:00] includes managed services or AI services, whatever they are, it is much easier then to go back and say, “Okay, here,” having your strategic meetings with clients and having more deliberate strategic meetings because of AI, it’s a lot easier to get them to understand that, hey, we’re gonna make some adjustments.

Here’s the new model moving forward, and we’re just gonna, automatically upgrade you to our next… Whatever tier you’re in, we’ll just automatically upgrade you unless you want to, make an adjustment there. So the first you rip the Band-Aid off, quickly the first time.

So I’m– It reminds me what Integris is doing is they’re going out there and they’re saying, “Hey, we’re going to market. We’re going to deliver it. We’re not sure, but we’re gonna learn, and we’re gonna have clients that sign these new agreements,” which adds lots of value to the organization just being that frontier AI firm, right?

Lots of press and PR. I suspect they’ll attract more clients more [00:11:00] easily because they have a bundled solution that includes AI. And I love that it’s not any different from what the clients expect from their existing managed services model ’cause that’s the rub, isn’t it?

Try to get a client to sign something that’s a little bit different than what they’re used to. They’re gonna ease them into it, and they’re gonna ease them into the next evolution of it the next time their agreements come up for renewal. I think our listeners should take heed on this strategy and pilot it with some of their clients.

Build a bundle of services that includes some AI. Things that you can control, ’cause you know there’s a lot of unknowns, right? But if what you’re doing is providing advisory services to help them leverage the AI solutions they already have, the data governance, the security, and all that’s right within an MSP’s wheelhouse, Rich

Rich: Yeah.

And it’ll be interesting to see. So even i-i- within the the constraints, or within the mo- model of traditional per user kind of a thing, getting the pricing right I think will be tricky. And they have some serious resources [00:12:00] at their disposal at Integris, and I’m sure they did a ton of work to come up with, Sure

the rates or the rate methodology that they’re using. They obviously, I did ask, what are the pri-,” and they didn’t get into that, and I don’t know how customized it is customer by customer, but I’m sure they did a lot of analysis that leaves them feeling pretty good about the, the mar- margin that they will be making.

And in fact, th- this I can say, and I said it in the article, is that the the prices are gonna be a little bit higher than what customers have been paying per user before, but not dramatically not enough to scare them away. And the margins will be very healthy was, I think, the way they put it.

So this, probably slightly better margin for Integris as well without getting into specific numbers there. O- one thought that kind of comes to mind, what one thing that’s different about now versus when you were pioneering the managed services model back in the day, is that everybody understands this AI stuff is new and it’s evolving very [00:13:00] rapidly, and it feels like, correct me if I’m wrong, an opportunity when you’re bringing this kind of offer to a customer to say, “Here’s how we’re pricing it for the duration of this contract.

Understand, though, that the entire industry is trying to figure out what’s the right pricing structure for you and for us, and this is likely to cha- change down the road.” So th- that you can maybe grease the wheels a little bit for an adjustment if one needs to be made by letting the customer in on the fact that, hey, early days, we’re all learning and benefiting together.

Erick: Yeah. And I’m certain that’s the approach that Integris will be taking ’cause, transparency is the best way to to create, a partnership and collaboration. The, the client knows, “Hey, we’re gonna do this together. We’re in this together. We’re gonna get through it.” And yes, the MSPs that was, specifically Integris and some of the other folks- That are kinda moving in this direction have the benefit that we didn’t have when we were trying to figure out managed services, which is [00:14:00] two decades of history and experience and expertise and, the…

it is a different world now than it was then. So no, it’s, That’s very interesting. I’m sure that there’s a lot of MSPs out there that just didn’t wanna be the first to attempt this. And now I think, seeing Integris moving in that direction, it probably gives others the incentive to also, jump in because, the early adopters have the advantage in many cases.

Because if they begin now and they solve it by the next, renewal cycle and are pricing it… And I don’t doubt that there’s good margins here. I can understand, some of that strategy here with Integris. There, there’s learnings to be had delivering subscription services and pricing and things like that per user, per device.

So I’m certain they’re not gonna, be in the situation that we were when, when we tried to do it the first time with managed services and go, “Oh my goodness, we almost had to double what we were charging clients.” But you know what? We kept the vast majority of them because that [00:15:00] was the proof that they were willing to sign an agreement with us, stick it out with us, and even, when we came to them and said, “Hey, here’s how much work we did.

Here’s how much, we charged you. We’re gonna have to make an adjustment,” the vast majority of them were fine with having that conversation.

Rich: We will see. Time will tell how, what Integris learns having now rolled out Core and how they adjust it and what that sorta teaches us.

We’ll we’ll get together to talk about that at some point down the road. And speaking of getting together, Erick, this is the best sort of segue I can come up with for your tip of the week, which has to do with the thing that all of us are required essentially to do every day, but probably least enjoy.

Erick: Oh, you’re talking about meetings. Lots of meetings, Rich. So yes so the tip of the week is really, to take a hard look at the one thing that, technicians cannot control norm- usually, right? And so to just, you know- Pull the, just [00:16:00] open the curtain here. I’m talking about the things that we ask our technicians to do that aren’t directly related to delivering billable services, and that is, we’re gonna focus on meetings here.

There’s a coup- a couple other things that fall under that category, but the meetings that we ask our teams to sit through really take a toll on their productivity and company pr- profitability and things like that. Think about it, Rich. When we were an MSP, we would have these meetings and we might…

There might be 12 people in a meeting, once a week and maybe a few more and another couple of times a week and things like that. And, we were a growing organization and we were trying to figure things out. Having an agenda that was strictly followed without deviating and going down, rabbit holes was challenging for us.

And, we were a big family, as MSPs are with our team and so we really didn’t have a lot of that discipline around, “Okay, here’s the agenda. We’re only gonna bring you in for the part that need to [00:17:00] sit in for or present so that we can ask questions, then you can depart,” and things like that.

So think about it. If we had 12 people in a meeting, that’s, 12 hours of salary of these folks that, we’re just… if they’re just sitting in the back and not contributing or saying anything, that’s, that’s a signal, right? It’s like probably not getting a lot of value, the- they or us from having someone just participate in the meeting.

So three things to identify where some of this, leakage is. I’m gonna call it leakage, and I’m gonna really focus in, in and around the things that, you know, leadership, accidentally does to impact a technician’s billable work or any employee for that matter, right? But it’s the technicians who are being measured against, performance and, sometimes it’s how many tickets they close and things like that.

And when we are impacting that directly, that’s not really fair to them or to the company. So number one, calculate the [00:18:00] true cost of what it takes to run a meeting from everybody’s li- that’s in their salary. Like, how much are we spending for this hour of time, right? That could be sobering.

And then calculate that across how many meetings like that have been conducted in the last quarter, and then multiply that by four and it gives you a sobering number to think about. Have an agenda. Make sure that you’re hitting the mark. Some meetings you may book, it’s us- we get used to booking an hour meeting, and then we really only cover 18 minutes of valuable stuff, and then everybody just sits around, has a donut or a bagel or whatever.

Remember those days, Rich, when people were in the office and did that? Now it’s a little different, but, getting coffee. So require an agenda and then require an outcome. Every meeting should produce some sort of a decision. There should be some accountability from some team members. We should be reporting on stats that help us make better decisions moving forward.

What is it that we want out of every meeting and from every person that’s [00:19:00] going to contribute to the meeting? And then Hey, let’s kill a meeting, right? Try skipping one every once in a while and see what happens, right? See how bad it is, and you might come to the conclusion that says, “You know what?

If we killed one but we had another shorter one with just three– these couple of folks, we can get what we need moving forward.” So just three quick things to think about cost of that meeting. That’s the first thing that I’d like our listeners to do, is try to calculate what it costs you for every meeting.

In fact, you can use some AI and say, “Hey, here’s how many people are in these meetings every– and give me a forecast of what meetings cost us on a yearly basis.” And that will, I think, adjust somebody’s strategy around who’s in the meeting, how long the meetings are, and how often they occur,

Rich: yeah.

It’ll certainly get someone’s attention that this is not maybe a a trivial issue to put on the someday to-do list. But you know what? This is actually a major investment we’re making without really even [00:20:00] realizing that we’re doing it. A, a few thoughts there that dovetail with meeting related stuff I’ve learned through the years.

First of all, you were talking about going to every meeting with an outcome that you’re driving towards, and if you can’t easily define that outcome, cancel the meeting is what I would say, basically. So the biggest kind of meeting poison, I think, in any organization is the meeting is on the calendar, therefore, we are going to do it even if we don’t necessarily need it.

And so issue one is do we need this meeting? What is the outcome we’re driving towards? And then, yes if there is an outcome we’re driving towards, you hold the meeting and you make sure that you’ve actually accomplished that. And another thing that you touched on there that I learned years and years ago back when I had fewer gray hairs and worked at Microsoft, was this idea that like you said, the, people are setting up a meeting and they will typically either just put an hour on the calendar or maybe 30 minutes on the calendar, and the mindset going in is, “We’re going to fill this time [00:21:00] with something or another.”

Al- and almost, at least at Microsoft sometimes in the meetings I remember, it was almost like we need to fill in this time with something or another ’cause there’s an hour on the calendar. But, let’s expand that agenda to make sure we have 60 minutes worth of material there. And one of the things I learned that was really useful to me and I still act on today is if you’ve got a 30-minute meeting scheduled and you know what the outcome you’re driving towards in is, and you’ve accomplished that at minute 18- Have a nice day, people.

Great meeting, and you’re done, and you take that 12 minutes back. Yep. I think that… Yeah, so a, a lot of what you’re talking about kinda comes down to you, you started with understanding the expense, which is like the, the meeting budget that you’ve allocated, whether you know it or not, and now you’re talking about zero-basing that budget.

Kill meetings, see if you don’t really need them anymore. Shorten meetings to the time required and then if you accomplish your goal going into a meeting earlier than than you anticipated, meeting over. Zero base your meeting budget is what I [00:22:00] would say.

Erick: Listen, yeah great insight, Rich.

And listening to you reminds me of how similar running a meeting is to running a project. If you have everything you need and you can be efficient and bring that project in under budget, you’re making more money. That’s interesting. One other thing I’ll do a bonus tip. Number four, what we used to do in our MSP was, a couple of days before the meeting, everybody that had to report something would email that stuff in to an administrative person, who would fill in the agenda with that stuff.

So even if somebody, for whatever reason, would- which happens, right? Oh, can’t make the meeting, a fire came up, whatever, s- we could still see what they presented. And again, c- getting that data in was critical because if we didn’t have any more questions about that segment, maybe one or two, then that person’s time is up, and they could actually depart the meeting early if the rest of the agenda did not impact [00:23:00] them either.

So there’s a lot of ways that you can prepare better for these meetings, and if you have the capacity or the ability to do that. And again, in this day and age of AI, heck, you can connect, your LLM to all of these data points and have it create your agenda for you and send out the meeting invites.

Can’t you, Rich?

Rich: You absolutely can. And with that, folks, we’re gonna take a quick break. When we come back on the other side, we will be joined by Mark Scott and Joel Abrahamson of Top Down Ventures. Very excited for this conversation. Top Down, for folks who don’t know, is a venture capital company.

They invest specifically in businesses that sell to and through MSPs. Mark and Joel are two of the most thoughtful people on managed services and AI that I know right now. They’re investing real money, their own and money that belongs to other investment partners, and they need to have a really informed point of view about how and why they do that, and they do.

So this is gonna be a great opportunity to catch up with two thought [00:24:00] leaders in managed services and AI, and get their perspective on where things stand right now. It’s all coming your way after the break in just a moment. Stick around.

Welcome back to part two of this episode of the MSP Chat Podcast, our spotlight interview segment, where we are very pleased to be rejoined for the second time in MSP Chat history by Mark Scott and Joel Abrahamson. They are both managing partners at Topdown Ventures and they are also part of an organization.

Mark in particular is responsible for one of my favorite reads, truly, I’m not just saying this ’cause you’re on the show. But the Topdown Outliers newsletter comes out once a month. Always thought-provoking and interesting. I look forward to it every time I get it. And the last two, three, four posts in particular have raised all sorts of questions in my mind, guys.

So happy to have you on the show so we can get into some of that stuff with you. [00:25:00] So for folks who are new to Top Down, new to the two of you, before we get started, just tell them a little bit about both the organization and about yourselves individually, and I will start with you, Mark.

Mark: Thanks, Rich.

D- definitely great to be back with you and Erick again. My background, I’ve been in the managed services space for a couple of decades actually, about 25 years. So started with co-founding N-ABLE Technologies way, way back, so basically was on that side at kind of the early stage software provider w- along with ConnectWise and Kaseya way, way back, teaching the the MSP religion back in the 2000s.

So left that business and then went across to start a really one of the first MSP roll-ups in Canada which eventually merged with Chris and, Chris Day and Joel’s business, Fully Managed, and then ultimately we ended up selling that to a, a large telco up in Canada. And then the last two or three [00:26:00] years working with Joel and Chris, we’ve launched really the first institutional venture capital firm in managed services targeting early stage MSP software.

So yeah, d- I guess basically been on three legs of the the MSP stool over the years and, yeah, d- definitely appreciate that you read our Outliers blog and podcast. Definitely yeah we get a lot of… b- obviously we’re kinda, we kinda sit as a central hub, so w- so we’re ac- we access a lot of information and to get it out there to really raise the bar across the industry.

It’s not meant to be a promotional thing by any, by, by any sort. It’s definitely about, again, educating the industry and the corporate finance folks in particular on this great industry that we’re, we’ve all been a part of over the years.

Joel: And Joel, a little background on yourself. Yeah, absolutely.

Mark covered the, our journey with Fully Managed well. I’ve been partners with [00:27:00] Chris Day for oh gosh, it’s, It’s coming up on, it’s gonna be 20 years soon. But we we worked in the MSP. Chris also started IT Glue, which he sold to Kaseya in 2018. And then I’ve been in the fortunate position of working with his capital since 2018 to reinvest back into the early stage MSP ecosystem.

And then the three of us joined forces to launch Topdown Founders Fund One, which as Mark mentioned, is the first institutional capital vehicle that’s 100% focused on supporting early stage MSP software companies. So we raised oversubscribed a $25 million fund to 28 million. That was from the support of the MSP community with over 75% of our investors coming from the MSP ecosystem itself.

And we’ve made 14 investments out of that fund to date. So all in told I think our webpage is now 29 or 30 companies that Topdown has either co-founded, supported, invested in. And we’re really proud to in the, the position we play [00:28:00] supporting the next generation of founders while continuing to move the needle on the, the industry by leading companies like ScalePad.

Rich: So you mentioned having exposure to a lot of data and pulling that together in, in Outliers, Mark. There was a a fact that you quoted in the May post that sort of quantified something that’s been on my mind a lot, and it’s a good kind of lead-in to get your take on this. You said in May there are currently over 30,000 PE-backed companies looking to exit globally, representing a total backlog of $3.6 trillion while in a good year only 100 private companies IPO.

Now the- these 30,000 companies are not all IT companies. They don’t touch the managed services space necessarily, but there is this sort of enormous backlog of companies out there. You’re more in venture than private equity, but I wonder what happens ultimately. You must be looking ahead down the road to the companies you’re investing in and asking yourself [00:29:00] what ultimately happens to all these companies out there right now.

What is the sort of final outcome for them?

Mark: Yeah, you can definitely inside a top-down call me Mr. Exit ’cause that’s that’s where I spend a lot of time, really concerned a- about the industry overall, let alone the companies obviously that w- we’re investing in. And I think it’s just, it’s hard to, hard in, five minutes or less to cover the, the corporate finance history of the last 30 years.

But if you really look at what’s happened, it’s been a kind of a tried, tested model. L- and let’s take SaaS as an example, right? You the four of us get an idea, we build a PSA software 20 years ago. We scale it. There’s a pretty defined set of metrics in terms of how people value it along the way, and ultimately one day you hope it becomes ServiceNow, right?

Or a- again, a minion, a smaller version of a ServiceNow. And even, [00:30:00] yeah so you look at, y- it’s been early stage venture was obviously created and really conceptualized and built in Silicon Valley, and obviously you’ve had that globally build out over the years.

And then the private equity piece of it is just basically You know, the sheer amount of capital that, that exists in pension funds you know, that- that’s just available to to d- to do something other than put it in public companies, right? ‘Cause obviously as companies go public they’re

They won’t necessarily end up with the same kinda hockey stick growth that you see in the private markets. So that’s been all well and good and has worked for a number of years. But really if you look at manage- but if you look at the MSP space in particular, it hasn’t really worked that well from a standpoint of the public market.

So let’s just take public markets to start off with. Really outside of the [00:31:00] AI trade today, there’s pretty much no possibility to go public, right? Or you’re gonna go public like a, a bunch of companies have post COVID, and now they’re all privatizing again, ’cause they see how difficult it is to create value as a public company.

So that’s, where we sit today in this 30,000 figure. It is mind-numbing, right? To think that … G- ’cause basically I, a- again, we were kinda principally focused on the MSP space to try to figure out is it just the case that the Wall Street doesn’t get managed services?

The, the answer is no. They don’t get a lot of industries. The, we re- we read and see on CNBC or whatever it may be the, kind of the rock star companies. But the result is really a lot of, a lotta companies when they reach scale, they get to a point where they ge- they just get re-traded between private equity firms as we see obviously in [00:32:00] the in the managed services, both on the services side and on the software side.

So the result is as well of that, globally is th- is this whole faceless, nameless industry called secondary firms. So these are kinda the mega PE firms that n- nobody probably, if you were at a cocktail party, nobody could name two. And these are the companies that basically invest huge in markets like franchising, right?

If you think of franchising, they get to scale. They’re not necessarily the sexiest things to go public, but they’re multi-billion dollar, hundreds of billions of dollars of revenue and cashflow that they produce, right? So that’s kind of the nature of w- really where we’re at today. And again, I th- and then it’s been exacerbated by the fact that AI, if you read Saster very much, and I try to take s- small tidbits of it, it’s almost depressing to look at the [00:33:00] numbers that they spew out in terms of what it takes to to scale.

Like An- Anthropic, Anthropic scaled to 30 billion in th- in, in, in a period in three years that took Salesforce 30 years to get to, right? So again it’s just there’s a, th- we’re gonna s- we’re seeing kind of a, a little bit of a shift in the capital markets of how how companies are gonna basically be funded as we go forward.

And it’s not just, so it’s not, I guess the conclusion is it’s not just a challenge with the MSP industry, it’s just a change overall that you’re not gonna see as many companies go public in the future, and there’s gonna be alternative models to get there. And that trickles down to the smallest, to the 500,000 ARR company that we’re investing in top-down, right up all, all through the food chain of private equity as companies, continue to scale and commercialize going forward [00:34:00]

Erick: Wow.

So I’m gonna put my MSP, former MSP hat on now, guys. So the MSPs are the ones that are being impacted by all this stuff, right? So put your, put your MSP hat on with me for a second and share what these MSPs and their customers are experiencing through all this. Because obviously there’s a lot of things moving behind the scenes for these folks.

We just heard that and we see in market that not a lot of, MSP vendors are IPO-ing, but like you said, Mark, a lot of them are being traded and, this kind of thing. So what’s the end result for these MSPs, and how should they, how should they think about what they might not be able to control but might impact them and their business model?

Mark: Joel, do you wanna tackle that one?

Joel: I’d love you to take the top-down, and I could take the bottom-up answer to that. Sure.

Mark: Sure.

Joel: And I can kick off with the bottom up. What we’re seeing [00:35:00] trans- transform the MSP ecosystem today is, this, th- this idea that there’s been a, a kind of an innovation glut for a long time where the businesses have been growing in scale through amalgam- through consolidation.

The, the customer needs have been con- continuing to mature as more and more customers are on their second or third MSP. But never have we seen a transformation like AI come and make, the intelligence layer that, that much smarter. And now there’s this, refreshed innovation.

You’re seeing the big platforms double down with new CTOs doing acquisitions like, ConnectWise and Zofik. Companies like Ninja investing heavily in innovation. And then you’re seeing now, a, a lot of new entrants trying to solve the, the new way.

What’s the new MSP going to look like? And so whether that’s what we call the challenger MSPs like Treeline, Titan and Shield that have tremendous financial backings to go out and, do things a different [00:36:00] way, look at the, the industry and try and solve it a different way. Or you can look at what we’re doing at Tough Down, and that’s backing, now dozens of companies that are fixated on trying to figure out how to deliver MSP services better.

And so we’re seeing a, an, a massive evolution of the, the space get smarter, get faster. What I like to say is all the jobs that should be done that weren’t are starting to get done. And as an MSP owner, I can relate. Mark and I, spent many long nights trying to figure out at Fully Managed how we’re just gonna get to all the things that need to be done to properly support our customer base.

Now it’s possible for all those things to get done. So it’s a massive evolution of the space, and you have some of these- Large MSP aggregators that are starting to look and feel more like enterprise-type buyers, type operators. The maturity that they’re bringing to the model is things that, that work in our building with $100 million MSP, and now they’re able to execute with a billion-dollar MSP like Thrive Canon, an army of, [00:37:00] folks that are driving strategy and doing AI transformation thanks to working with vendors like Simthrio or Lemhi to bring those managed intelligence programs through.

So that, that’s what I’m seeing at the bottom up is a lot of just an industry that’s getting better and better week over week. But, to, to Mark’s point, it’s let’s talk about, the, the top-down implications of the global PE, ecosystem and how that’s reshaping the MSP ecosystem.

Mark: Yeah, I think I, I think we’re all collectively trying to figure out the naming and nuances around AI, right? And the, and, whether it’s managed AI. I know PAX8 they really fly the managed intelligence flag, which isn’t really my favorite term personally c- ’cause I think we’ve spent 25 years 25 years as an industry developing MSP as something that actually comes back on RFPs, and actually CFOs and folks that are out there understand what an MSP is, at least, like the actual buyers.

So I’m not [00:38:00] sure why we would try to j- that, that’s like the CPAs or lawyers saying “Let’s switch what we’re called,” kind of thing. Leaving that as the… If you look at, we started in the managed IT side of things in the 2000s, like all of us, obviously automating around, basic IT and security.

Then came the cloud, then came, security’s really you know, for the last five to eight years supercharged the the MSP cycle. And now we see, I, I see really two, th- there’s kind of two flavors of A- where AI comes into place for, and that- that’s for the smallest MSP that’s out there to the folks that are obviously building the platforms.

There’s kind of managed AI, or wh- which I really look at, that’s kind of the IT and AI plumbing. Or sorry IT and data plumbing. So I think that’s the first piece, like what do you need to actually leverage AI? And again, d- definitely the vendors Joel just, [00:39:00] mentioned that’s in our portfolio, and there’s obviously other ones as well have, have started to bring commercially viable solutions to market to help MSPs, enable them for lack of a better term.

Then the next phase is really BPO, right? It’s really business process, not outsourcing business process outcomes, right? And how, so okay we- e- because IT is gonna be running IT, running security, it’s gonna be a smaller slice of the pie for managed service providers as they go forward. So what are they gonna have to look at?

There’s gonna be other areas where you come in with a menu to say, “Here’s how we can, automate your order management from cradle to grave leveraging th- this tool set from an AI perspective. And, that’s costing you right now $150,000 a year in people. It’ll cost you $50,000 a year [00:40:00] if you let us manage the, the agents and the outcomes that go along with that.”

So there’s kinda this, if you think of the GSIs, the global system integrators, they’ve lived on IT outsourcing and business process outsourcing for y- that, that’s their model. So we really look and I think in our last in our last piece that we did in August we were… Or yeah, August the podcast we’re actually doing tomorrow, we see this collision of the larger platform companies.

They’re gonna start to look more like the way Ex- They’re gonna be a mini Accenture kind of looking site, right? To actually go in for SMBs to, to, to consume services from

Rich: It’s really interesting ’cause immediately before this conversation, I was interviewing someone in the C-suite at Integris, one of the very biggest MSPs out there, about this new offering they have that they call Core, where they took both of the models that you were just talking about, Mark, [00:41:00] and combined it into one thing.

You’re getting the managed AI and the BPO for one kind of monthly recurring price. So anyway, a l- a, a lot of thinking and a lot of work about how to get the, get both of those things to the customer going on. This might be another good top-down, bottom-up kind of question for you guys. So we, Erick and I will talk on the show a little bit about how having AI expertise net re- revenue retention.

These right now are variables that are driving valuations and multiples for MSPs when they’re ready for acquisition. From your perspective what are you seeing as the, the top variables, the top drivers of value for MSPs? And then the sort of top-down version of the question is: How does that or does that influence the investing decisions you’re making in terms of where you see the opportunity?

Joel: Whew. Yeah I’ll start there just because I’m so happy to hear you talk about net revenue retention, because that’s something that Chris and ScalePad have [00:42:00] been, shouting from the mountaintops as something that MSPs need to be paying attention to. The idea that MSPs have, have really been stuck in the, add three customers, lose two cycle for many years and focused on new customer acquisition and delivering services while they’ve been, typically

A- again, this, these are just, this is just market data. Ask Peter Kujawa or whomever. They’ve been typically poor at net dollar retention, net revenue retention, and that means that they’re not great at expanding their service offering despite the, the plethora of options for security products or a, n- name the long tail of vendors that have been available for MSPs to in- enhance their service offering.

They just haven’t been great at it. We talk about our investment in Cork, that the common thing that we talk about is less than 25% of small, medium businesses have any sort of cyber insurance. And I put that on the MSPs. Yes, SMBs have t- varying risk profiles, but they haven’t been [00:43:00] able to bring forward a compelling enough offering You know, even the building blocks of cyber insurance to actually get the SMB market to higher than one in four have cyber insurance.

And so what ScalePad and Chris have been really focused on is talking to the large MSPs talking to their customers about how to help move the needle on net revenue retention. And that is through a robust customer success platform offering program. And big companies like Thrive have now standardized their offering on Lifecycle Manager X from ScalePad because they realize that– And Thrive’s always been a market leader at this.

They, their customers are fully embracing their full security offering, so they’re able to have a comprehensive service catalog and move the needle on expansion revenue which obviously supports net dollar retention. So managed AI is just another extension of that. Transformative, yes, but folks, I am glad you called out Integris ’cause they’re doing a phenomenal job bringing a new program around business process [00:44:00] outcomes and managed AI forward to their customers, which allows them new revenue streams through, the implementation of these products, then the implementation of agent workflows.

The anecdote I’ve been using is there was a, 11-person hot tub cover company in Cincinnati that is paying now, good money every month because, an MSP in conjunction with s- one of these agent builder companies in our portfolio, I’m not gonna make this a, a commercial for them was able to build an agent that helps their customers track where their hot tub cover is in the delivery process because they do all their own fulfillment.

And I think that’s just a, such an, a quintessential use case of how an MSP can step in, use AI to manage, a, a business process outcome that was previously done by humans and a mix of technology, and now fully automate it and deliver it as a managed service for their customers. And there is an infinite number of use cases out there for SMBs, and all of that will drive net dollar retention and show that [00:45:00] these are still investable companies, these MSPs, because there’s room to grow.

And so if, back to your question, if I’m an MSP today, I’m focused on demonstrating that I have a strong customer base that’s, that I can keep happy and I can drive additional solutions in to drive up that net revenue retention. And I do it because I have a robust customer success program and invested in new offerings that, that they’re asking for, they’re actually pulling for.

Mark: Yeah, I think from y- from the standpoint of where do MSPs go, right? Whether it be this, like the regional MSP that’s sitting out there that i- is saying, “M- man, I’m s- I’m happy where I am,” or, “I’m scared. I wanna…” What- what’s the, what- what’s this next g- ’cause it’s not like MSPs haven’t had to d- deal with C changes of the model o- over the past 20 years, right?

So if I really look at it, and Integris is a great example, we really see this elevation gonna happen at [00:46:00] the MSP level that’s really being accelerated accelerated by the maturity of the model, but also b- and how global how global the b- the industry is, and how actually similar it is across the globe, right?

If you think of the ConnectWise Evolve user group as an example, they’re in all the major corners of the planet, right? So wouldn’t it make sense for a large platform vendor you know, based in California that maybe has a 2 or $300 million book of business in the US to start to figure out, how do we build this n- and this is, this kinda gets back to the capital the, the, the private equity side as well.

The pr- private equity at a certain level isn’t neces- isn’t interested in just a regional business, like in one country. They obviously wanna invest in something that scales. So what, where th- and obviously we’ve saw that, seen that [00:47:00] recently with Integris’ acq- acquisition of First Focus down in Australia and New Zealand, right?

Abacus, I’m on a panel with Abacus at MSP summit at the end of at the end of September. Rich, I think you’re down at the MSP summit as well. So really what’s the trickle-down effect of that? We really see the platforms starting to form alliances globally, right? So that and then we really see the r- from at the bottom, the regional M- MSPs having to invest more in specialization, right?

More in regulated industries, which again are gonna fit hand in glove with a more sophisticated model that we’re gonna see going forward, right? And if you take a regulated, a, a healthcare MSP, they, they’ve already been in the business process automation outsourcing business for years, right?

From bill, billing management to everything else. So w- so we really look at [00:48:00] the day, it’s not doom and gloom with AI. Y- yes, it’s gonna change the model, but we really feel it’s definitely gonna elevate the industry overall

Erick: You’ve adjusted my thinking about an acronym, BPO.

‘Cause I always thought, oh, it’s business process optimization. Now we’re talking about business process outcomes, and we talk about business outcomes all the time on the show. So now I’ve gotta think, oh, is BPO B- it’s the new BPO, right?

Mark: Yes. Managed BPO, right? We- Manage- Like, I think managed AI is one piece, but to the, but to an organization, what AI- managed AI is okay, great, you’re gonna run, you’re gonna, we’re gonna pick the right tools, map to the correct processes secure the data properly, have a common, g- common set of data to work off of.

But then what are you gonna do with it? How many… E- every conversation you ever get in on AI, the word outcome’s said about 17 times, right? By the time you’ve done your [00:49:00] first glass of wine. So it’s just, we really see the reinvention of B- BPO being this negative business process out- outsourcing to outcomes, and obviously automation of the outcome.

So that’s like the, like just from my perspective, I always like to read from the earliest days of N-able, I like to think in terms of the buyer, right? So if you’re coming in to pitch me something e- either a, as a software vendor going in to see a, an MSP, or obviously as the MSP on the ground working with the, the local insurance company in Wichita, Kansas, that company has a set of services that they deliver today.

Account- accounting is a big one as well, right? So we really see, Thrive Holdings Mr. Kushner’s business that backs Shield, I believe it is. R- is it Shield, Joel, they back? Or-

Joel: Yeah,

Mark: that’s right … yeah, Shield.

Joel: Yeah.

Mark: Yeah. Ca- General Catalyst is Titan. He’s not, the two of their big bets are AI [00:50:00] automation for MSP, which is obviously they’re doing with that asset, and AI automation in the accounting sector, right?

Again, another massive industry that’s again you start to look at, a- and you kinda look at signals in the industry. In the United States, I think it’s 300,000 or 400,000 CPAs have retired in the last three years, and 75% of the, of today’s CPAs are retired within the next 10 years, right?

So somebody’s gotta do that start to do that, like really automate bookkeeping, scale it through AI. If you look again at- running an accounting firm, 90% of the business can be done remotely, right? There’s very few even clients that sit inside of an accounting firm that really need audit and deep, tax and assurance work.

So we’re starting to see, again, r- roll-ups or d- or definitely in, in v- private equity doesn’t go into a space [00:51:00] to f- for the good of their health, right? They go in it when they see an opportunity, and I think there’s been something like 50 billion invested by private equity in acquiring accounting firms the last five years.

So that’s another kind of collision point that we see. Will we see Integris when Integris is a $2 billion company where they have a big business process division that de- that does bookkeeping and accounting and reporting for SMB?

Erick: Yeah. Interesting, right? So now in June you wrote about the AI investor triangle and how all three of its corners, the productivity gains, the cost reduction, and revenue growth are in neutral or in reverse.

Can you expand on that and tell us what it means for software vendors and software investing?

Mark: Yeah. That, that was, that, that was [00:52:00] not not just from us, it was actually f- at an event we were looking at where it was, like, the the VP of finance of Cohere, one of the biggest th- company based here up in Toronto that’s obviously a big AI provider gl- globally, and and then also Inovia, one of the, one of the top venture capital firms.

And it was really talking to, both on the buy side but also on the investor side of investing in AI. And basically, if you think about what people were talking about okay, if you invest in AI, there’s gonna be this massive it’s gonna replace all the replace all the people that are doing the jobs today, and there’s gonna be, y- and if you looked at all the announcements that came out, really which I think were as a result of over-hiring by the big tech companies post-COVID they used the AI excuse as being, okay, we’re gonna be a way, way more efficient and and automated. That really hasn’t played [00:53:00] out, right? The productivity gains in AI to date hasn’t materially changed employment, hasn’t materially really changed the cost structure of most businesses.

You can a- you can ask any CFO, right? So that’s one, one challenge at least with the dream b- of AI that we were given. The nec- the next one is the fact that… And obviously we’re starting to see with OpenRouter and there, there’s all kinds of other models that are out there to not have the, the three companies you can name the frontier models being b- being the AI models that are actually processing the basic requirements of questions of AI today.

So there’s been this huge increase in costs in the, in AI as well. And then it’s in implementing AI, b- which again is with the open source models and stuff, I think people are getting a better handle on that. And then the, [00:54:00] the third part of the Bermuda Triangle is really revenue.

Oh the dream is it’s gonna generate all of this re- all of this new forms of revenue. I think for other than the big AI companies going public, we haven’t seen that either, right? I think if anything, it’s it’s put more question marks into the model in terms of outca- outcome-based pricing, which really nobody knows how that’s gonna shake out yet, right?

So if you look at it from a pure investment thesis, we haven’t seen the productivity gains. It’s a lot more costly, and we don’t know what revenue looks like on, if we make the investment. So that’s where we’re at basically if you look at it today for most folks that are investing in a big way in, i- in AI.

It is a little bit of a black hole that we’re still in

Rich: This this kinda sorta brings us back to where we started. So the first question was an end [00:55:00] game exit kinda question from the vendor point of view. I kinda wanna flip that around a little bit and get your take on this from more of an MSP point of view.

‘Cause I was talking yesterday to an M&A advisor who works on both the buy side and the sell side with MSPs and he said, it feels like there are these massive MSPs coming into existence, that consolidation has proceeded a great way down the road. But from his perspective, the market is still pretty fragmented.

There is new private equity money coming into the MSP acquisition and platform building space. There are people still seeing so much upside there that there’s more money coming in right now. And so he’s anticipating years of further consolidation and platform expansion and so on.

But it does raise that question of where does this wind up going? How does … how … What is the end state here? And you mentioned GSIs a little bit before. I’ll go back to [00:56:00] that ’cause it came up in one of your recent outliers’ post, was this idea that if you’re Accenture, maybe this is a way to get into the SMB space.

I’ll go back. This is for both of you. I’ll start with Mr. Exit. L- looking at this from a, from an MSP point of view where do you see these the story of platform growth, platform expansion ultimately sorta headed?

Mark: Yeah, I think it definitely is encapsulated in what we ca- call this new hierarchy of value creation, right?

So the regional MSP that actually truly does, invest in the specialization. So y- there, there’s more to saying you’re an MSSP than just putting it on your website and, going to a few Huntress events, right? There’s significant re- certification, accreditation infrastructure investments that you have to do.

So if that’s an avenue that you’re gonna go down it. If you’re gonna be an [00:57:00] ERP like specialize in other areas of the managed app stack that, that’s another the other area as well, and obviously managed AI we talked about. The ne- so then that’s kind of the specialized layer. The next layer is really this regulated industry.

So I think we’re definitely gonna see a lot more specialization in the regulated industries w- and I’m talking like regulated industry MSPs that are hundreds of millions of dollars in revenue, if not a not billions, right? And then you obviously have the platform MSPs, the Integris of the world.

There’s obviously a number of other New Charter. You’re interviewing a bunch of them. Everybody knows most of them. And then there’s really the global, the, the next stage. So where we went with that is, and again, back to this BPO discussion as well, is that if you look at the top…

if you look at the GSI market overall period, the GSI market, if we think we- we’re having challenges [00:58:00] in with AI, like there’s an industry that the typical enterprise managed service contract is not like an SMB managed service, right? It’s much more people intensive. It’s bodies at Citibank.

It’s it’s a different SLA that’s very hu- more human-centric centered, less automated with tools. So right away AI cannibalizes that in a much more, i- in a much bigger fashion than we’ve seen with our SMB managed services. And then the other piece of it is obviously their consulting businesses have been challenged all over the place, right?

On and even you’re seeing where A- AI gets implemented, it’s going, it’s not necessarily going to Accenture. It’s, in a lot of cases, sustaining the ServiceNow license or the Salesforce license or the ERP software license ‘ca- ’cause of what they can do with automation. So we really look at the, [00:59:00] the top.

Yeah- Accenture’s top of the food chain at 70 billion in revenue, 32% GP, 50/50 on recurring revenue and consulting revenue, 17% EBITDA, right? So there, that’s a business. And then, so th- so I would say the average, the rest of that top 20 list, they’re pretty similar margin profiles from a standpoint.

And number 20 is a $5 billion company, right? So if you think of the MSPs of the world that are that are nearing or above a billion, they’re pr- 80% recurring revenue. They’re 30%, 25 to 30% EBITDA. So it just, it goes to show if you have service catalogs that are starting to map better, if you have an enterprise space that’s now smaller than the SMB space, right?

And obviously the provi- the dominant providers that have scaled to a level where they’re now starting to look at going global, [01:00:00] it just makes sense for that, for that to be an avenue in the future. And I think it’s a much better fit than photocopier companies or telcos or some of the other acquirers that have actually come in to buy larger MSPs in the past.

‘Cause it, ’cause the service catalogs, the, the approach is very similar and getting more similar as we go forward

Joel: Yeah, from my side, again, like such an incredible macro top-down view that Mark is able to provide. The question that I get into with, you know, folks in the the growth equity space on the vendor side when talking about the end market or the channel market at least, is, are MSPs going to be able to capitalize on the opportunity that is managed AI?

And, we think that they are the best positioned service providers on the planet to do so for sm- SMBs. The question is, are they going to have the right tooling, the right [01:01:00] people the right vision to do that? Or are there’s going to be– Are they gonna be disintermediated by another type of service provider that comes in that doesn’t come from the IT space that’s new or that comes from ERP or or is it a combination of these things?

And so that’s the question that we’re, still tracking month over month here as things continue to unfold is, we firmly believe MSPs it’s theirs to lose. And we really, are investing in companies and, really actively supporting in every way that we can to make sure that they can be successful in, continuing to evolve their business from managed IT to beyond that.

Erick: So you guys really invest in vendors who sell to and through MSPs, but I think we just heard a really strong argument for investing in MSPs as well. So here’s my question. Say you invested more broadly than what you’re doing right now, and you had, let’s say, $100 million to [01:02:00] invest. How would you divide that $100 million between MSP software smaller MSP platforms, and maybe the bigger or the biggest MSPs?

Who captures the most upside of the next, say, five years? Put on your hot tub time machine hat and answer that question.

Joel: It’s exactly what we’re, setting out to do this year is have a larger envelope of capital. And all, all of that is to come. The reality is 100 million bucks isn’t gonna get you too far in the PE MSP, tech-enabled services game.

We, the guys are playing with much larger backers and much larger checks than that. At, w- we’re currently less than 50% deployed from our fund one our focus is definitely on continuing to find early stage vendors that can s- help support innovation. But, l- the idea of the, the vendor two years ago, which, if you look at our first three investments in Sticks Intelligence ThreatMate and Cork those [01:03:00] look like th- they’re built in a great time because they are, AI native.

They’re not carrying six or seven or eight years of tech debt with them. So they are next gen AI native companies. But if I look at com- a lot of companies I’ve met with in the last few months it almost feels like the pendulum swinging back to this, like people building features versus people building, what are venture backable platforms.

And I end up telling a lot of founders like, just bootstrap this. Get some money from friends and family ’cause w- what you’re talking about, is … The upside is capped because there’s just not enough addressable market. You are a feature.” And there’s nothing wrong with that.

You can build a lifestyle business there, but that’s not a venture scale outcome that we can invest in to create the scale of organization that would, be attractive to the natural acquirers in the space. But, all that being said, we do see a, a convergence coming. We are excited about working with and broadening our scope and hopefully having a larger capital envelope to do that.

I don’t think you’re ever gonna see us be MSP, [01:04:00] platform roll-up guys competing with New Charter. But certainly, the idea of managed BPO and the extension of where the industry’s going, we’re super excited to support early stage companies of all sorts.

Rich: Oh, all right.

Thank you both very much. I really appreciate it. And I can tell you confidently right now, this was your second appearance on the show. There will be a third, ’cause I always enjoy getting into this stuff with you. You have a unique perspective on some really pressing issues f- for our audience from an MSP point of view and a vendor point of view.

Folks, I will link to those Outliers blog posts that we talked about a little bit on the show. That’ll give you a chance to subscribe and get the future posts as they come in which I encourage you to do. You’re depriving yourselves if you don’t. I will also link to the podcast, The Outliers Podcast, which I should’ve mentioned as well at the beginning of this conversation.

Great show. So Mark, Joel, thanks again for making time with us and joining us on the [01:05:00] show.

Mark: L- love what you guys do as well, Rich and Erick. Th- thanks very much. Thank

Erick: you. I’m looking forward to seeing you guys at the MSP summit,

Rich: Yes.

Mark: Sure, guys …

Erick: next month. Yeah.

Mark: Cheers.

Erick: Yeah.

Rich: For the folks in our audience, if we don’t see you at the MSP summit, we are gonna see you at the other end of this break.

When that is finished, Erick and I are gonna share some final thoughts about this conversation with Mark and Joel from top down, have a little fun, wrap up the show. Stick around. We’ll be right back

And welcome back to part three of this episode of the MSP Chat Podcast. Thank you again to Mark and Joel from Top Down for joining us. Lots of things to chew on there, Erick, but the thing that kinda jumped out at me was the one that jumped out at you as well during the interview, which was when Mark was kinda talking about managed BPO as something that MSPs can and should be doing for their customers, where the O in there is not [01:06:00] optimization, it’s outcomes.

And there’s… we don’t have the time even to get into how nicely, how neatly that enca- capsulates a lot of the things that we’ve been talking about for months on this show, but it does. So much I should say, that we started the show talking about Integris Core. And when I wrote about that on Channelpolic, I described that as a managed BPO offering, ’cause really that’s what it is.

The it is a managed services relationship with the customer that is fundamentally, it includes all the basics, but it’s fundamentally built around business process outcomes, and it’s all in this one mana- So it’s a, a really smart, compelling kinda way to think about what MSPs need to be doing for their customers, and how they need to be thinking about their role in the IT ecosystem going forward.

Erick: Yeah. It’s just gonna be challenging to compete for that acronym in SEO because it’s been business process optimization for as long as I can remember Rich?

Rich: A- absolutely. Yeah. But for now, [01:07:00] first mover advantage, right? It becomes an interesting conversation hook. When we say O, we’re not talking about what everyone else does.

We’re different. We’re the outcome people.

Erick: Yeah. It’s very interesting. And yeah, I think it all… if you built a practice around business process outcomes- You could fit everything in there as an MSP, right? Because everything we do is to either sustain or protect or defend and help improve business process outcomes for our clients.

So that umbrella is quite large when you start thinking about all the services and solutions that you can stack under that.

Rich: And there is an interesting conversation to be had at some point down the road as you’re talking about that because as we said early on in the show, one of the pricing models MSPs are exploring is outcome based pricing.

When you come to the customer and say, “We’re delivering managed outcomes,” essentially, the… It’s either an opportunity or a, a burden to [01:08:00] tie those outcomes somehow to what the customer is paying. But again, interesting thread to pull on at some point down the road. Until then though, folks we have got time for just one last thing and it comes to us from the good folks at Snickers.

Are you a, a Snickers fan like I am, Erick?

Erick: I had a Snickers just yesterday, Rich. So yes, I am a ve- One of my favorite candy bar is a Snicker bar.

Rich: I love Snickers as well, and I’m looking at a press release from Snickers here right now that explains why we love it so much, because it is, quote unquote, “packed with satisfying peanuts, caramel, nougat, and milk chocolate,” which is undeniable.

And in fact, you don’t have to be a person apparently to appreciate or even benefit from a Snickers break, which is why Snickers has introduced what they are calling Hunger AI, or H-U-N-G-R.A-I. It is a n- I… Do we call this a tool or harness? It is a new offering from Snickers, and the idea basically is, we can all relate to this, now and again, you’re, you’ll [01:09:00] be interacting with ChatGPT, say, and it’ll give you, like a, a hallucinatory response or an offbeat, a weird response.

And we all think this is just AI kinda hallucinating and doing what AI does, but what if the issue is it’s hungry? This is the speculation at Snickers, and so you can give it now, using Hunger AI, a virtual, a digital Snickers bar and see what happens. And I was kinda curi- So we’ll link to the page where you can download the digital Snickers bar.

I, of course, was curious to see what would happen. And randomly I just went to a thread in ChatGPT. It happened to be the thread that I was running a few days ago to generate some graphics for Channel Hall. And so that’s, it’s me and AI interacting about what I wanna see in that picture, and then at the end, I uploaded the, the digital Snickers.

And here’s what I got back from ChatGPT. I’m reading now. It says, “I take the digital Snickers, bite through the chocolate, caramel, and [01:10:00] peanuts, and that is annoyingly effective.” Which is like the coded kind of preamble. And then it starts talking to me a little bit about the thread and said, “Okay, I understand what you’re looking for better now.”

And then it says “AI isn’t itself when it’s hungry. Heads up, Snickers provided the snack, the LLM provided the answer, so please fact-check.”

Erick: What a sinister marketing strategy. My goodness, that is, I get, gotta hats off to I don’t know if Nestle still owns Snickers. Who owns Snickers? Is it Mars?

I don’t know. But yeah, that’s a very interesting marketing tactic because now it’s actually, reminding you of how great the Snickers bar is in your chat that you’re in a lot of the day. That’s very interesting, but really funny.

Rich: Yeah, I, again, we’ll link to it in the notes if you’re curious to try it out.

I am cur- I wonder a little bit about poisoning the training process somehow. What’s this?” “What’s with it, with this guy and the Snickers bars? I don’t get it.” And all of a sudden you start seeing candy bars showing up in responses down [01:11:00] the road in unanticipated ways.

But it is fun to play around. I should also say it is model agnostic. So as far as I can tell, you can drop this into whatever your favorite model is and see what it comes back with.

Erick: I’m certain. And Rich, how this shift from being found on on browsers, SE and all that, where that’s all shifting now to, e- everybody optimizing for for LLMs, and all this other stuff.

So I wonder now if people are starting to, use the term hungry, as they’re browsing and things, then we’re gonna start seeing a lot more Snickers stuff come up. Think about how genius this is.

Rich: Very clever Snickers folks. So before Erick and I run off to get a Snickers bar, ’cause the more we talk about it, the more I would maybe kinda like to have one.

It is all the time we’ve got for you this week on the show, though. So we’re gonna be back in a week’s time with another episode for you. Until then, I will simply remind you this is both a video and an audio podcast, which means if you are listening to us right now, but you’d like to check us out on video, go to YouTube, look up MSP Chat.

If you are [01:12:00] watching us on YouTube but you’re into audio podcasts, go to Apple, Google, Spotify. Wherever you get your audio podcasts, you’re gonna find us there too, and wherever you find us, please subscribe, rate, review. It’s really gonna help other people find and enjoy the show just like you do. This show is produced by the great Riley Simpson, part of the team with us here at Channel Mastered, where we help vendors build, grow, and optimize thriving MSP channels.

You can learn about all of the many ways we do that at our website, which is located at www.channelmastered.com. Channel Mastered has a sister organization called MSP Mastered. That’s Erick and his team working together one-on-one with MSPs to help them grow and optimize their business. You can learn more about that at www.mspmastered.com.

Once again all the time we’ve got for you. Thank very mu- thanks very much for joining us. We’ll see you in a week. Apparently I need a Snickers bar right now, Erick. But until we see you next week, I will simply remind you, as I always do, that you [01:13:00] cannot spell channel without MSP.