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Wondering about the future of managed services? Erick and Rich (who’s back after a multi-week absence) explain why new research from Barracuda suggests offering consultative security and AI services to midsize businesses is a big part of the answer. Then they share three specific tips for cross-selling and upselling services like that to your existing client base, before getting a big-picture perspective on AI, security, and more from Mike DePalma, vice president of business development at OpenText. And finally, one last thing: laboratory proof that when it isn’t furiously hallucinating, AI can successfully complete gallbladder surgery all by itself.
Discussed in this episode:
AI-Enabled Robot Performs Gallbladder Surgery
Transcript:
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 and manage services. My name is Rich Freeman. I’m chief analyst and channel master of the organization responsible for the show.
I’m joined as I am every week except the weeks when I’m not here by your other co-host. His name is Erick Simpson. He’s our Chief strategist at Channel Master. Erick, how you doing? Doing well, rich. Doing well. How are you doing? I’m doing much, much better. Thank you very much. We are not gonna get into the weeds of why I disappeared for a little while there on our audience and also on [00:01:00] my audience.
The audience from my blog channel Holic. There were some personal issues going on there. They were difficult, but they are most, not entirely, but mostly behind me now and I am super excited and happy to be back at it.
Erick: Rich, we are glad to have you back. Awesome.
Rich: Let’s dive into our story of the week.
And in terms of things I’m always super excited and happy to be diving into. How about research studies? There was an interesting one published this week as we record this by Barracuda. It’s their 2025. Customer MSP customer insight report. Given that this is from Barracuda, there’s a real sort of security emphasis to it.
All sorts of interesting data points in there, but a few in particular that I think are significant and worth talking about. A little bit on the show here, Erick. What Barracuda did is they went out with this survey to 2000 IT and security decision makers at organizations, end user organizations with between 50.
2000 employees. So they’re in the [00:02:00] SMB zone there, but small businesses and mid-sized businesses as well, and they ask them do you or do you not rely on an MSP for your security needs security support? 61%. Of the companies with between 50 and a hundred employees said yes, we use an MSP for security support.
85% of the respondents with between 1,002 thousand end users said they used an MSP for security support, a significantly larger number. And it’s interesting. I so this is the first of two kind of big points coming out of the study that I wanna emphasize. And one is. Five years ago co-managed.
It was this sort of up and coming interesting sideshow in managed services. It was something that people were beginning to experiment with much, much more recently than that. It was still something in conversations with MSPs where people said we’re getting there. We’re, we’re introducing that here’s some more data from the Barracuda study.
They asked these [00:03:00] IT departments, are you co-managing or working directly with an MSP on on managed services. 49%. Of the respondents to the survey said that or excuse me, these are MSPs that we’re talking to. 49% of the MSPs Barracuda survey said that they’re just doing it for customers on their own.
37% though said they’re doing co-managed it. So still a pretty good size gap between 49% doing things the old way and 37% primarily mostly doing things in the co-managed model. But that co-managed number is up 17% year over year, whereas the other number was just up 6%. So Comanage it is already pulling even with the more traditional we do it all ourselves.
Model. And and, gaining on it all the time. When folks when end users were asked, why are you outsourcing security to an MSP? It begins to add another dimension to the data [00:04:00] here and the number one item. There’s a big, long list of reasons why you might be doing this, and most of them got a reasonable percentage of the audience responding.
But the number one item on the list was lack of internal resources. To manage the growing number of security tools we’ve acquired. So the top issue is we have an increasingly complex stack of security technologies in house. We don’t have the people to manage it all, so we’re outsourcing that to an MSP by comparison.
So 52%. Agreed with that. Only 42% agreed with the idea. We outsource everything to our MSP, so of course we outsource security as well. This tells you that security is a specialized and specific use case that businesses, and as we just saw, especially mid-size businesses, somewhat larger businesses are looking for.
And there is more evidence in this report, Erick. That what end users are increasingly looking for from their MSP is a little bit more sophisticated than just the old [00:05:00] outsource my IT department function. 51%. So the number one item on that list I was just referring to, 52% said it’s the complexity of the stack.
51%. So number two item on the list is they need help from an MSP tool evolve. Security strategy. So again, it’s not bits and bys, keep the lights on. It’s like we need strategic insight on security from somebody outside the company. And similar kind of number. There was some talk about, what do you want or need now from NMSP and what do you want or need or anticipate wanting or needing two years down the road?
39% of the organization surveyed expect that they’re gonna need support from an MSP with AI and machine learning. Again leading edge technology sophisticated. This is not keep the servers running and the endpoints running. This is more in that consultative strategic kind of mode. And as you, there was another really interesting table in here where they were asking people, [00:06:00] how much more would you pay an MSP?
For this kind of strategic consultative advice 35% of the people in the survey said we would pay up to 25% more for an MSP who could help with cyber risk and resilience planning. 35% as well said. We would pay up to 25% more. For an MSP who can help us measure cybersecurity, ROI 33%, they would pay up to 25% more for help with presenting the case for cybersecurity investment to the upper management, the C-suite business owners, et cetera.
And. 36% would pay up to 25% more for help with AI and machine learning. And by the way, very similar percentages in each of the cases I just listed for you said that they would pay up to 10% more. So we’re talking about two thirds ish. Of the survey sample, [00:07:00] willing to pay double digits for companies that can provide this more sophisticated, more demanding kind of assistance than what we traditionally think of in relation to managed services.
And so this is not exactly new to us, Erick, the idea that if you wanna remain competitive in managed services, go going forward, you gotta get more strategic, you gotta get more consultative. You’ve gotta get more specialized. But this really does call out the debris to which that’s true today and rapidly getting more true tomorrow.
Erick: Yeah. These are really interesting statistics and it quantifies what we’ve been feeling just taking, anecdotal conversations and less formal kind of polling and surveys of MSPs. I had no idea until I was diving in, preparing for the tip of the the story of the week here.
Just what a large [00:08:00] percentage of these 1000 to 2000 employee size organizations are are depending on MSPs for cybersecurity. 85%. That number blew me away compared to organizations of between 50 to a hundred employees, 61% relying on MSPs for that cybersecurity. So I find a lot of parallels rich between what these larger organizations are struggling with, along with what the MSPs themselves are struggling with.
So it’s interesting because. They’re, the MSPs are also trying to reduce technology sprawl in their own organizations. I think one of the call outs here in the survey was these enterprises are trying to get a handle on their technology sprawl. I saw another step that, that I don’t know if you mentioned or not, but 92% of organizations are willing to pay a premium for [00:09:00] advanced support in integrating their cybersecurity tools.
For those MSPs that are out there wondering should I be, more directly competing for co-managed IT services? Yes. That trend is that opportunity is increasing. But like you said, rich, very specifically, the fastest growing opportunity is in cybersecurity and specializing in that discipline.
And I was going to ask you. What about ai, because I think that’s the next one behind cybersecurity. I’m curious how many of these larger organizations, mid-market to enterprise organizations would value and outsourced expert in helping them integrate and properly govern AI and data and things like that as well.
I think this is great news for MSPs. I think it’s great news for. For larger [00:10:00] organizations that are realizing that they simply can’t find or hire enough folks internally or justify the cost because of the expertise, and now are more willing and apt to engage with an outsourced MSP. To deliver these services instead of being seen as, traditionally, historically, in the old days, I’ll say competing and fearing that, the MSP is gonna come in and take over my job and exit me in some form or fashion.
Now they’re seeing MSPs as that strategic, value. As long as the caveat would be for me, rich, the MSPs. Are behaving in a more strategic manner, are able to position these services. The other thing is help presenting the value of enhancing our, strengthening our cybersecurity posture to our C-suite.
Can you help us present this to our leadership MSP? How the tables are turning, huh?
Rich: Yeah. And, in terms of your caveat there so what this research is showing the folks in our audience is [00:11:00] the way forward. If you are concerned about the commoditization of the services that you’ve been delivering in the past, and if you’re not, you should do, because the traditional MFP model is already and growing increasingly commoditized If you’re looking for the way to, to move forward.
It is getting into the more demanding, more strategic forms of services, whether that’s the technology slash business consulting advanced cybersecurity or AI and machine learning. 39% of the organization surveyed by Barracuda said they anticipate need help from their MS. P and AI or machine learning in the next two years, and 36% will pay up to 25% more.
The demand is out there if you know how to meet it. This is a growth vehicle for your business at a time when margins are gonna be declining on a lot of what MSPs have traditionally done in the past.
Erick: Rich, are you calling the commoditized MSP model? The break fix of the future as we have to now [00:12:00] evolve into this new generation of strategic MSP managed, information provider, managed security provider type of of an evolution.
Rich: That is a provocative thought. E Erick. I don’t know if I would go quite that far, but I’m right on the edge. On the edge basically. Do you wanna be the last person out of the commoditized managed services tent? Just did you wanna be the last person out of the break fixed tent 25 years ago when you were one of those managed services pioneers?
Erick: To be continued then. Yeah.
Rich: Yeah. To the extent that you are adding some of these more advanced services that we’ve been talking about here, that’s gonna be an upsell and eventually a cross sell opportunity for your customers, which I think leads us into your tip of the week, Erick.
Erick: Yeah. Thanks for that. Great intro, rich. Yes, I think that from a business growth perspective. In my, let’s call them my immature years as a struggling MSP, [00:13:00] we were always focused on bringing on that new client, that new logo, like we were finding revenue by selling kind of the easiest things that we had to sell to more prospects and customers.
And over time, rich, we matured to the point where we said wait a minute. We’re leaving a lot of money on the table because we’re not going wide, deeper, and wider with our existing clients to get them to subscribe to more and more of our existing services. So that service penetration percentage per client was pretty low.
So we came up with this idea that we called the Client Solutions Roadmap, and the idea behind that Rich was it was an Excel spreadsheet. Very, in its most basic form before we started really evolving it over time. And it’s become one of our, most requested downloads that we’ve ever given away since, [00:14:00] because it allows you to list all of your clients down the first column of the spreadsheet and across the top all of the different services and solutions.
That client would ever need in running their business, whether they’re buying it from you or not, or getting it from a third party. I’m talking about not just technology, service and solutions, security services and solutions, rich backup, but things like accounting services and payroll services, printer copier services, like all these other adjacent services where we would go out and find other preferred vendors.
Who would, wink, pay us a referral fee or some kind of a revenue share, which we did not hide from our clients. Like these are preferred vendors because we have a strategic relationship with them. We make sure that they deliver services according to our specifications, and we’ll manage that relationship for you moving forward.
Mr. Or Mrs. Client. So the idea here became not only to identify all these services, but identify. [00:15:00] What the, what we would charge those users based upon things like user count or license count or other things. And so now we were able to forecast how much revenue we were collecting from the clients that actually were consuming some of these services.
So they were, we call it the red light, green light form after a while, because if they didn’t have the service, they would be red. If they did, it would be green. And then we could tell how much revenue. We were not receiving from them by not introducing that service to them and selling it to them. So that was our very rudimentary way of figuring out how much deeper we could penetrate our existing clients with these additional services.
Again, whether we deliver them directly or not, obviously we led with the things that we could do, and then when we saw needs, we would bring these vendors in and we never. Position those relationships with our clients. Rich as you’ve got to sign up for our preferred vendor, we would always say, [00:16:00] look, here’s different options.
We tend to work with this vendor, but we would give them, it, it when needed different quotes, especially for like things like circuits and things like that, which could have some. It could be a variance of 10% either way, on what that cost would be. But we would always, let clients know that we have a great relationship.
If anything goes wrong, we’ll manage it so well. There was no kind of, behind the scenes secret handshake stuff going. I was all above board. And so the tip of the week is really, first of all, is increasing your cross-sell and upsell opportunities. Track that service penetration per existing client with your existing clients.
If you’re an MSP that has 50, a hundred, 200 clients, I’ll bet you a dollar that you’ve got clients in there that are not paying you. Number one, what you would charge a brand new client you signed up tomorrow for some of these services. So first there’s a true up. Then there’s a going wide and saying, okay, what are the required services that I require every new client to consume from you in order to be a [00:17:00] client?
Make sure that you’re bringing that solution to your existing clients. And number two, you’re including technology and cybersecurity and maybe even AI roadmaps in your QBR conversations, because that’s the easiest way to introduce some of these strategies to clients. In fact. We would sanitize a version of our Red light, green Light Client Solutions roadmap, and we would, some of our sales team would actually show it to a client and say, Hey, look, you’re so red, we need to fix that.
And clients would go we don’t wanna be red. What do we do? Just them seeing that in a visual format saying, look, you are not anywhere near our recommended posture for technology and security and all these other things. So we use that tactic to get folks to go, okay, what do we need to do? Let’s prioritize it.
Let’s budget for it in advance. So we know when we’re gonna roll it in rather than asking for things in a reactive matter. Nobody’s always, nobody has budget just in their back pocket, rich, right? So if you’re planning these things out you’re examining your percentage of [00:18:00] penetration of your service portfolio and your existing client base, and you’re getting them to consume more and more of it on the regular, doing it through QBR meetings and road mapping their technology and cybersecurity needs.
Third tip would be. Bundle those services in terms of outcomes. So instead of saying it’s our enhanced cybersecurity program or our backup solution, so for backups, I’d call it business continuity, and that includes these five or six things, right? That’s. Package cyber risk reduction or regulatory compliance, rather than breaking these things out in kind of line items, you can always say it includes these things, but that’s not how we pitch them or Bill for them.
We’re Bill, we’re presenting them as a business outcome with a flat fee or maybe a consumption based fee if necessary, but we’re not breaking things out in line on it and saying, that’s $5 for this license, that’s $7 for this license, that kind of thing, [00:19:00] because that’s an easy way for clients to start.
Negotiating what we can remove because they don’t like the final price. Selling on business outcome, on strategic value, and then going deeper and wider with your clients, you will re, you will realize more incremental revenue growth doing this in a consistent manner than you probably would by signing up a new client every two or three months.
With managed services, it’s consistent, scalable growth that. Definitely increases company equity value when you’re looking at things like an exit in your future.
Rich: Yeah. And that last point, I think is the really critical one here which is that according to pretty much any marketing expert, any marketing metric you choose to consult, it is always cheaper and easier to cross sell or upsell to an existing client than to land a net new client.
And, why work harder than you need to is a question I ask myself all the time. [00:20:00] And for an MSP one answer to that question is that. I’m just gonna cross sell, upsell to my existing clients. I’m gonna build revenue that way. I’m not gonna stop thinking about new clients as well, but this is lower hanging fruit than that.
The other thing I was thinking about as you were talking Erick, and, you were talking about like the. The grid, the spreadsheet with clients on one side and the services on the other axis. And I’ve seen things like that for many years now. We’re starting to see vendors and distributors and marketplace.
We’re starting to see the logic behind that. Show up more in, in a lot of different places and get automated. I’m thinking specifically of PAX eight. PAX eight has invested huge sums of money in this next generation marketplace that they’ve been rolling out the last couple of years now. And one of the things that they like to tout that it will do is essentially build that spreadsheet for you in its own computer mind.
And. Point you to the lowest hanging fruit, the cross [00:21:00] sell, the upsell opportunities in specific areas like security if you want for this client or that client. It, they are automating that process that used to require a spreadsheet. In the past, similarly, on, in terms of the bundling recommendation that you were making, we’re seeing vendors, like ConnectWise and Kaseya in the security world, we’re seeing vendors building platforms.
The idea basically in, in all those cases is we’re gonna push some pull some products together into a bundle. A unified offer, multiple products with one price tag. For our partners to go sell to their end customers. So in, in both those cases, the the vendor world the marketplace world, the distributor world, they’re very much buying into the advice that you’re offering here and actively begin to build it into their tools and strategies
Erick: and hats off to them for helping the MSPs get there faster.
As rich, MSPs, back in the day, like we, they’re busy. We’re busy doing [00:22:00] things. Anything that our vendor partnerships, our distributor, our platform partnerships, marketplace partnerships, can provide us. To make it easier to sell to upsell and cross sell.
It benefits everybody. It benefits the end customer ’cause they’re getting, better services and solutions. It benefits the MSP. They’re getting stickier and reducing churn by adding more value to that client relationship. And they’re benefiting the upstream vendors and distributors and marketplace partners of these MSPs.
It’s good for everybody. I, it’s awesome to see. How the channel has adjusted to meet the needs of everyone from coming from the early days when we called, what we were selling, flat rate it, and having to put together our own, individual, solutions into a portfolio and having to invest, in hundreds, if not thousands of licenses upfront to get the best price and then have to go sell our way out of it and then figure, and then, figure all this stuff out, make all the mistakes on our own. We are [00:23:00] so much more mature now that we’re seeing what’s driving the adoption of more of these managed services.
Just in the Barracuda. Survey. So it’s great to see, and I’m looking forward to how much more efficient MSPs can become as we begin adopting more and more ai and ai agentic ai and orchestrating AI agents for MSPs to deliver, to reduce their cost of service delivery, and then also, again, become much more strategically valuable.
To their clients to go deeper and wider with more of these AI consultative services right behind cybersecurity. Because as Richie, we’ve gotta secure the ai. That’s, that, that’s exposing a lot of data if we do it the wrong way to some of these ai these platforms.
Rich: That’s actually a pretty good lead in to our spotlight interview segment for this episode of the show.
I have been away for a little while, but Erick has been hard at work. [00:24:00] He was at the PAX eight Beyond Conference a few weeks back. He conducted a number of interviews for us, one of which was with Mike De Palma. Mike is a familiar presence, I think to a lot of folks in our audience and in the channel.
Worked for many years at at Datto these days. He is the vice President of business development at OpenText specifically in their security unit. Erick had a chance to sit down with him at PAX eight Beyond Show, and we’re gonna bring that interview to you. Just a few moments from now after the break.
And then after the interview, I will. Come back and Erick and I share a few thoughts about that conversation. Stick around folks. We’re gonna be right back.
Erick: Erick Simpson here from SSP Chat, broadcasting live from PAX eight beyond 2025 with my special guest, Mike De Palm on Mike, your VP of Business Development at OpenText these days.
Mike: Yep.
Erick: Three months in opening it.
Mike: Yep.
Erick: Yeah. Thanks for [00:25:00] joining me. Appreciate it. Tell everybody a little bit about your background though, Mike.
’cause this isn’t your first rodeo here in the channel.
Mike: No, I’ve been in the channel a little over 10 years. Started out with Datto, worked under Rob Ray for about eight of those years and when he moved on and we got acquired by Kase, I came in and was the SVP of channel enablement for Kaseya for three years, and then this opportunity popped up with OpenText and just made the move in March.
So overseeing the channel strategy program, redoing the partner program and a lot of things. So yeah, I’m super excited.
Erick: Yeah. And you get to work a little bit more directly with partners now, or what, how has your role changed from what you’ve done previously?
Mike: Yeah, it is a lot more boots on the ground talking to partners, which what I like, right?
It’s cool moving up the ranks, but when you know, you’re sitting in boardroom meetings and all that’s. Stuff. It’s good, but I like to be out talking to partners more. Yeah. A lot of it is just going to these events, we’re doing just about all of them. I’m trying to get out as much as possible doing these type of interactions and then.
As we’re developing our partner program, I’m trying to get [00:26:00] as much feedback from even our non partners. ’cause we don’t wanna, it’s great to start with a blank slate, but I don’t wanna just put things in there that just check off a box and looks nice when I’m on stage. I don’t want something that’s gonna move the needle.
Trying to interact with as many MSPs as possible partners and non-partner to say, all right, what could we do to make this, better relationship? So it’s been great.
Erick: Awesome. So give us a little history of OpenText, right? Because I know that I’ve seen OpenText at a lot of events.
I know. The organization is out there marketing, but for those folks that aren’t really, up to speed on all the changes and developments and the rollups and acquisitions that now comprise the OpenTech suite of services, can you give us a little glimpse of that?
Mike: Yeah, it’s been probably the number one question I’ve gotten is okay, move to OpenText tell us a little bit more.
But OpenTech, we’ve got 25,000 employees, so publicly traded company, very large in the enterprise space, and the cybersecurity division that I’m overseeing is the MSP channel. And so you’re exactly right. A lot of it’s been through acquisition. People are like, I don’t think I’m an OpenText partner.
Then I’ve said do you use Webroot? We own Webroot Carbonite, Zix Pillar for our EDR and MDR. [00:27:00] And so what we’ve done is we’ve taken that and put it into single platform secure Cloud. You’re able to either bundle ’em together, whether it’s email services and EDR, whatever that is, or you could buy a la carte.
And then we’re also the fifth largest Microsoft reseller. In North America, that’s the App River acquisition. So lot acquisitions, bringing it together and trying to do that. And one, one of the advantages of being a large publicly traded company is we don’t have contracts at all with any of our products.
We have free trials, and that’s not just free trials. If you’re not a partner, it’s free trials for your client. So if you have a new client wants to say, Hey, lemme test out the CVR, see if it’s worthwhile, we can give you a pretrial on that. So we really, wanna emphasize that we’re a very easy partner to work with.
And, we wanna earn your business every month. So it’s been quite a journey. Yeah. I’ll bet. I’ll bet.
Erick: So let’s look into the future a little bit with me, Mike, and tell me what you think the channel is migrating towards, what should MSPs be thinking about and how do they get ahead?
In this kind of uncertain [00:28:00] economic environment that we’re in. Yeah. But what’s the forward thinking ideas that you have for partners? What should they be thinking about as they look to the future to try to, stay ahead
Mike: Yeah.
Erick: And grow their businesses?
Mike: Yeah. I think what’s good is, the maturity of the channel has really shown the small business community that like, all right, I know I need to outsource it.
So the struggle for MSPs, it’s such a flooded space, is how do I differentiate myself? So there’s that piece of it. And so it’s not, here’s my stack of products. I’m like, anybody else? What’s your special sauce as an MSP? The other piece is though, is figuring out where margin’s gonna come from.
Because, AI is great, all these different types of things. You’ve been around the channel a long time. It used to be, all right, I could build a server. I know what I’m gonna make my money, or I’m reselling a SaaS product. Here’s my margin on, on, on each end Here. It’s okay, as things are moving to the cloud, where do I re paste that revenue?
And where do I do that in ways that I’m actually, serving my client because, I know a lot of MSPs and I used to run our MDF programs, so I did a lot of end user presentations and, the fear of an MSP is, oh man, every time I call my clients, I’m trying to sell ’em [00:29:00] something.
My, comeback to that is if you’re not doing your job. Because some other MSPs gonna come in and say, Hey, are you doing regular pen testing? Hey, what’s your security posture look like? And if you’re not at least presenting those ideas. It’s a competitive market and you’re gonna see people kind of swoop in.
So I think the big thing, and obviously this event is great, you’re gonna get a lot of good ideas and interacting, but it’s that, how am I gonna differentiate myself in that crowded market? Because we know they’re gonna be spending money. I even with the economic uncertainty, the good thing about our space is people are always gonna invest in cybersecurity.
But how are you gonna get that piece of it? You know what I mean? Piece of that growth.
Erick: So for an MSP. That hasn’t yet started on that journey to, become that new type of provider that today’s SMB businesses need in terms of focusing on their cybersecurity posture and, being guarding against risk and things like that.
Can you walk us through like maybe two or three steps that MSPs that are considering, entering into. Cybersecurity or anything because it’s almost back in the day we [00:30:00] said we went from break fix to managed services and now we’re going to the cloud, and now it’s cybersecurity.
Yeah. So how should MSPs think about evolving to meet that need?
Mike: I think the messaging, a lot of people are going to market, obviously the shiny object of cybersecurity and ai, but I think the conversation could evolve into not only am I gonna keep you secure, of course that’s my job as your managed service provider, but I wanna make you more productive and show them how you could work with them.
And not just be the, hey, the doom and gloom. If everything goes wrong, here’s where I stand. But no. We’re gonna partner and I’m gonna, you tell me your growth goals, Mr. Business owner, and not only gonna protect you, but I’m gonna show you ways that I could accelerate that growth and make you more productive.
And that’s where AI comes in. And I think that’s really the selling point, and that’s where the profitability is in that kind of consultative partnership as opposed to just reselling. So yeah, you’re gonna put your stack together. I also would say if you’re a brand new MSP, don’t overextend yourself.
Get your stack. Land and expand. You wanna make sure that you’ve got a good engine in place. But I think that’s really where, that’s where the differentiator’s gonna come.
Erick: Yeah. We hear [00:31:00] a lot, Mike, about, go getting away from kind of technology outcomes or transactional outcomes, or moving more into business outcomes so that MSPs can become more strategically valuable to their customers.
Yeah. Is that what you’re talking about?
Mike: A hundred percent. And you could see it, there’s some MSPs that have that, and you could tell, I could tell when I walk into an office. The culture of that MSP and I love doing site visits also. When you go and do a lunch and learn or an event, you could tell by the interactions they have with their clients.
It’s familial. It is like I’m, this is, it’s like you are an actual employee of that company. Like you’re that integrated there. And I think, obviously the stickiness is there, but then you have champions. The best way to get new businesses through referrals.
Setting up referral program and all that, it could be awkward, but when you have just a fan base of clients, they’re gonna sing your praises organically. I see it when you go to these events. So I always say, bring your best clients to these events because they’re gonna be your champion even if you don’t ask them to.
So it’s, and then a lot of that just comes through education and they say, I, my m mssp, not only does he protect me, he’s giving me information. If there’s a story in the [00:32:00] news, he’s letting me know why. Hey, you’re not gonna be affected because here’s what we’re doing. That is, that’s the, that’s to me the hockey stick growth opportunity.
Got it. Yeah.
Erick: So there’s tremendous opportunity. If MSPs begin moving in this direction, what are a couple of things that they should watch out for? What are the pitfalls to avoid?
Mike: Yeah, I, I gotta mention, I think, overextending yourself and promising services that you might not be mature enough for is.
One of the biggest pitfalls, and I’ve seen it, that people like dive in and they go to events and they sign up for all these things and they’re not really ready to execute it. So I think, when you, when I have business conversations, you really need to map out a true business plan. Not, Hey, I want to grow this year.
And you hear that. That’s great, but it means nothing. Yeah. Because then do you have the personnel in place or a lot of vendors. Now, the beauty of it is you could outsource a lot of this stuff, right? Whether it’s managed SOC or MDR and those type of things, like understanding where you could partner with vendors or even an MSSP or other folks.
I, that’s the network I would grow. But to try to sit there and [00:33:00] say, okay, sit in your vacuum and come up with a great stack if you’re not. Getting that feedback from folks. I’ve seen people overextend themselves and now all of a sudden they’re in trouble.
Erick: Yeah. The community certainly has expanded a lot since, I sold my MSP back in 2007.
There’s a lot of. Partnering opportunities, teaming opportunities, outsourcing opportunities the vendors have really come in to help, yeah, MSPs, not just with a solution or training for that solution, but training to grow their business and partnering with them in the pre-sales and post-sales process.
The design and architecture process. Yeah. That’s I’ve never experienced an industry quite like this where everyone feels like the rising tide really lifts all ships instead of being very kind of protectionist like that’s my special sauce there. There is no secrets anymore.
Mike: No,
Erick: it’s how do we get ahead together and at the end of the day, Mike, I think you would agree, it’s the end customer is the one that we’re all serving, right? Through the channel, through the MSPs. And the MSPs always keep that relationship top of mind. That’s why I think [00:34:00] they’re a little bit risk averse sometimes to move forward in a new direction because they don’t want a Guinea pig, anything.
Mike: Yeah.
Erick: So there’s like this chicken and egg thing, right? You’ve gotta get out there and you’ve gotta, look at other opportunities. Talk to other folks, work with your vendor partners. Yep. To try to put that stack deal, like you said, but really to understand what it really costs you to deliver that stat and not over extend, like you said, because if it costs me more to deliver the stack than I can charge for my clients, then the match just doesn’t work out.
I’m not gonna grow. Yeah. So any thoughts on walking into kind of a stack pricing? Situation where I’m looking at what my stack currently contains, identifying what that costs me. And then we talk a lot about sprawl, right? Yeah. Technology sprawl, platform sprawl. Like looking at other solutions that maybe I can consolidate some of these things and make it simpler for my team.
’cause that’s the second thing that I think MSBs think about. First thing is good for my customers? Second, is it good for my team?
Mike: Yeah. Yeah. Yeah.
Erick: So how do you see that?
Mike: Yeah, [00:35:00] I think that’s a key component. It’s when you’re looking at a vendor or anything, it’s total cost of ownership and that comes down to, integrations or how much your team is gonna spend.
I would give, if I was starting an MSP, the first thing I would do is join a peer group. And I only, I, there are a lot of great ones out there, whether it’s Evolve or True Methods, peer and all those things, because that allows you to say, where do I stack up against my competitors? It’s very difficult to price that out if you’re coming in new.
Yeah. And vendors are gonna tell you, all of us vendors are gonna tell you everything’s great. But to sit down and open your books with another Ms. P who says, okay, how many techs do I need to hire once I get to this seat size right? And is that awful? Maybe I’m doing something wrong.
Maybe my delivery method, or maybe my stack of products is so convoluted that it’s not, it’s hindering me from growth. You really have to become more of a business owner than the tech. And I, like a lot of MSPs get in the space ’cause I love the technology. But unfortunately that’ll take you to one portion and you’ve gotta move away from that, become a business owner and start to think of things like that if you really want to grow. So that’s my tip. I’ll give the blanket endorsement of joining a peer group or coming to this. I’ve [00:36:00] done more introductions, peer-to-peer, MSP to Ms. P in the last six months than I did in the previous 10 years, because now you could see and always guarded, like there’s ways, whether it’s just picking your brain or outsourcing work or, hey.
Compliance as a service. Everybody needs to do it. You gotta be an expert in it. There are MSPs that focus on it and work with other MSPs that goes to that. Is it smarter for me to buy all these products, hire this team, or maybe this portion of it I could outsource it. Let me focus on what I do really well.
It’s really understanding your unique value proposition as an MSP and where you strive and then where you know, the other folks can, maybe they outsource help.
Erick: That’s a great advice. Yeah. So let me take it one step further. Yep. Exit strategy. So as we’re thinking about MSP, the evolution, the opportunity, the risk, and all that, how should MSPs be considering what they’re doing now?
Mike: Yeah.
Erick: And its impact in maybe their exit strategy in five years or 10 years or whatever that is. There’s things that, we don’t wanna make mistakes early on because it’s hard to [00:37:00] restructure something when you have a pending opportunity for an exit, right?
Mike: Yeah. And we’re seeing so much of that as, the, it’s crazy to see the growth in the channel and the amount of m and a that’s happening. And seeing that evolution, it’s almost lagging a little bit behind where the vendors were. Like, we saw all that consolidation and, things maybe five, six years ago.
Now we’re seeing that on the MSP side, which is great. And you’re seeing a lot of PE money come into the space. But yeah, look, it’s really understanding your business to your point and under, and so that if you’re presenting to a potential buyer, you’re laying out not only where you are.
I I know sometimes contracts are a bad word in this, but if you want to. Ken x your valuation, you need to have contracts with your clients. You just do. That will be the first thing they’re gonna see, and that’s what they’re gonna wanna to understand and understand the market that you serve, whether it’s vertical specific or regional.
That’s where you’re gonna see. ’cause a lot of times like, yeah, I’m very profitable. Not necessarily attractive. You want that money coming in through monthly reoccurring revenue. So it’s guaranteed money. And you do want to have those folks on our contracts, whether it’s one year or longer. [00:38:00] You just need to,
Erick: yeah.
And I always say everybody has to be on the same contract agreement and everybody’s gotta be trued up. Yes. ’cause you don’t want the, oh, I have 80% of my folks are on. They’re not trued up to my current, like what I would charge. Client I sign up tomorrow. Yes. And these guys are getting, so sometimes, we talk about you have to evaluate your customer list as well.
Because we have, DE and F customers,
Mike: It’s easy for me to say I’m not a business owner, but yeah, you do have to fire your clients. Yeah. You, they’re not profitable. But that, to that point, a lot of times, MSPs, they start out and they have an a la carte. Model. Yeah.
So you’re, but you need to standardize on a package or several packages. You have to, yeah. That’s, and even if you have those folks on a legacy, you have to have a path to get them there, because if you’re coming in and you’re just offering clients different things, again, as an investor it’s less attractive than saying, okay, I got a hundred clients and here’s the stack that they’re on.
That’s something they can almost guarantee on. You know what I mean?
Erick: Yeah. I’m the buyer. I don’t wanna buy myself a job or I have to fix a bunch of things. And the other problem is if you do have. [00:39:00] An MSP that needs a lot of work, then that’s definitely gonna negatively impact the offer that you get if you get an offer at all.
And that’s what the astute buyers are looking for, is oh, where can I add some value and increase, yeah. The profitability of this company. And I think the more opportunities that they have to do that, then that’s. That affects the offer that they get. So if you’re operating on a standardized stack solution stack, like you said, you know what it costs you to deliver and it can scale.
Mike: Yes.
Erick: Then you’re in the best position to command the best offer, I think.
Mike: Yeah. And the standardization is key too, with the vendors that you work with. Yeah. And I know, there’s vendor sprawl and I’m not saying put all your eggs in one basket, but the simpler and stack that you have, and you’re not using multiple black up vendors, you’re not using, because again, now all of a sudden this company’s gonna buy you and they’re gonna wanna standardize.
And they’re say hey, after clients are on this, after clients are on this, how do I train my techs? Your techs are experts. So standardizing within the vendors that you work with and consolidating where it makes sense. And there’s, that’s where the industry’s headed.
Is key. [00:40:00]
Erick: Yeah. No, yeah. Great conversation, Mike. Always. I appreciate it. Yeah. So for folks that wanna get in touch with you wanna learn more about OpenText where would you send them?
Mike: Yeah, I love people to reach out me directly. M de Palma, D-E-P-A-L-M [email protected]. Feel free to re, send me a LinkedIn request and, start the conversation there.
Erick: Awesome. Thanks
Mike: again, Mike. Yeah, thank you so much
Rich: and welcome back to part three of this episode of the MSP Chat podcast. Well done Erick flying solo. For that interview and others both at the the PAX eight event and just a few days later at an Ingram Micro event that you went to. So thank you very much for keeping the wheels moving and the show moving forward as I was away for a little while.
It is always nice when you get a thought leader a vendor leader’s confirmation for what you think and have been telling the audience on the show. And what did we [00:41:00] talk about in part one at the beginning of this episode, if not the importance of strategic advice in business consulting and taking AI seriously and all of that.
Came up in the conversation with Mike. That’s absolutely where folks at the VP level at OpenText Cybersecurity certainly are thinking as well and with good reason. That really is an important part of the plan for MSPs who want to remain relevant and competitive and keep growing.
Erick: Yeah. And as, as you, as you mentioned, we, we, I’ve known Mike for years back, in the Datto days, and that’s where. We started building a relationship together and it’s just, and rich how nice it is to have someone that can speak to the value proposition from an MSP’s perspective and give guidance and advice around, what’s working for MSPs, what their understanding really deeply what their pains and challenges are.
It allowed me to really pick his brain in [00:42:00] ways that I don’t normally get to do with a lot of folks that, that I happen to, you know have conversations with or interview. So that was really nice. And I loved his, advice about joining a peer group. So that was great there at the end.
It’s yes, MSPs, that, that is one area that I definitely got a lot of value in when we had our it practice then Ms. P practice. We were part of the htg one peer group, the very inaugural peer group, which then was later acquired by ConnectWise years later. And we got a tremendous amount of value because we were sitting there and working through challenges and coming up with solutions with, non-competitive other MSPs who were there.
To help each other grow and had everyone’s, best interests in mind as they were sharing very openly. And that’s really where I got my first taste. Rich of, just how awesome the MSP channel is where the vast majority of folks are willing to share and help each [00:43:00] other out. It’s one of the things that I love best about, this community.
Rich: As it turns out in an upcoming post up upcoming edition of my blog channel Holic, I’ve got an article on that topic actually based on a conversation with Abraham Garver of focused investment banking an m and a advisor to MSPs. And he’s got some data that suggests. MSPs who participate in peer groups actually sell they get higher multiples higher sale prices.
We won’t get into that today, but that’s coming up in, in channel Holics. So there are lots of good reasons to be part of a peer group, including the the sale price, what you’re gonna get at exit. Now with that, that leaves us with time for just one last thing, ladies and gentlemen.
And we are recording this episode of the show on July 17th. Do you know what July 16th was, Erick? I don’t, rich, what was July 16th? How did they, July 16th was AI Appreciation Day. Oh, my AI didn’t let
Erick: me know [00:44:00] that.
Rich: What’s going on? Too modest. Too modest. Apparently. It turns out, and this is inter, the story of AI Appreciation Day in and of itself is interesting.
It was invented four years ago by filmmakers in Germany. They made a movie. About AI taking over the world and as a marketing gimmick, they declare that July 16th, 2021 was the first AI appreciation day. Something like 14 months later, chat, GPT arrives, and all of a sudden there is actually a reason for the industry to glom onto that idea.
And last year in particular and this year even more you’re starting to see more attention, more vendors issuing quotes and press releases around AI appreciation day here. Here’s something that someday. I might appreciate from ai, but I’m not sure I’m quite this appreciative of AI today.
This it comes from a an experiment done at Johns Hopkins University. They were curious to see if you marry up AI with a robot and have it do gallbladder surgery, can it do that Pretty much on its [00:45:00] own. And they took, real gallbladders, not real patients, but they actually took the organ out of dead bodies.
They, put the AI and the robot to work performing gallbladder surgery. And by golly, eight out of eight times everything went the way it was supposed to go. The procedures took a little bit longer. There, there was more reasoning and correcting and thinking going on, but the AI powered robotic surgeons were able to to do gallbladder surgery with a 100% success rate, which I appreciate as very interesting.
But Erick, it’s gonna be a while before I let AI and robots operate on me.
Erick: Rich, the whole gallbladder surgery topic is, i’ve got a little experience with that and I’ll say right now I am not anywhere close to saying, yes, put me in the Auto Doc and let it have, invasive surgery on my body yet, like you say, we’re, we’ll get there one day.
We will get there. We’ve got full body scanners. We’re doing, robotic surgery now with surgeons doing it. I guess the thing that I would [00:46:00] say is if you’re gonna. Elect to have a procedure done like that. Just hope that there’s, surgeons standing by him monitoring and they can jump in.
Did something go awry, let’s say?
Rich: Yeah it’s gonna take take a little time until I trust a technology that occasionally recommends rocks as a great pizza topping to, put a scalpel in its hand and go to work on me. But it is, it’s gonna be a helpful thing down the road.
For other people. And folks, that is all the time we’ve got for you this week. Thank you so much for joining us on the show. We’re gonna be back in a week’s time with another episode of this podcast for you. Until then, I will just remind you, this is both a video and an audio podcast, which means that if you are listening to the show right now, but you’d like to check us out on video, you can go to YouTube, look up MSP chat there.
If you’re watching us on YouTube, but you’re into audio podcasts, go to Spotify, apple, Google, wherever it is, you get your audio podcast. Look for MSP chat. There. You’re gonna find us there as well. And wherever it is you [00:47:00] find us. Please subscribe, rate, review. It’s gonna help other people discover and enjoy the show just as much as you do.
This show is produced by the great Russ Johns. It is edited by the also great Riley Simpson there both part of the team With us here at Channel Master, they are already willing and able to help you create an excellent podcast for your business and podcast folks just at. Tiny little piece of what we do for our clients at Channel Mastered.
If you wanna get the big picture of how we help vendors get more successful in the MSP channel, you wanna go to www.channel mastered.com. channel mastered has a sister organization called MSP Mastered. That is Erick working directly with MSPs to help them grow and optimize their business. And you can learn more about.
That organization at www.mspmastered.com. So once again, we thank you for joining us. We’ll see you in a week. Until then, folks, please remember, as we always encourage you to, you can’t spell channel. Without [00:48:00] MSP.
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