Episode 87: Growing or Dying

Erick and Rich discuss the multiple issues (and yes, AI is one of them) leading more MSPs to consider joining forces with a rollup rather than go it alone, plus three criteria MSPs should apply when evaluating vendor partner programs. Then they’re joined by Canalys analyst Jay McBain for an insight-packed look at the massive opportunity for MSPs in AI, and why getting in on it early is so important. And finally, one last thing: Why you should probably do a little research online before agreeing to meet with a diplomat from Westarctica.

Discussed in this episode:

The New Rules of Partner Programs are Still TBD

10 Tips for Modern MSPs to Evaluate Vendor Channel Programs

Man posed as an ambassador and ran a fake embassy, Indian police say

 

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, it’s Rich Freeman, I’m Chief Analyst Channel, mastered the program or the company, excuse me, responsible for this program.

I’m also wondering if you’re two co-hosts. I’m joined this week, although not physically by your other co-host or CEO and chief strategist at Channel Mastereded Erick Simpson. Erick, how you doing?

Erick: I’m doing well, rich, and I’m so sorry that I can’t be with you right now as I had planned to side by side with you.

Remind us what event [00:01:00] you’re at, rich.

Rich: I am right now the curtain people are seeing behind me if they’re watching us on video is in a conference room at a hotel in Dallas. I’m attending the twenties Vision conference. The 20 is it’s a couple of different things, but among other things as an MSP roll up and they are hosting their annual conference in Dallas, as they do every year around this time.

And it’s a great opportunity every year for me to get in touch with the m and a landscape. They always have great speakers. We’re gonna have one of those great speakers actually on the show with us as our interview guest this episode that would be Jay McBain. Yeah, great. A great place to be and you wanted to be here.

Things got in the way and so you’re participating virtually.

Erick: Thank goodness for technology. Rich, my fingers are crossed. Your wifi remains stable.

Rich: Yeah, so far so good. Why chem fate? Let’s put this behind us before the wifi has an opportunity to quit on us. Let’s just dive right into the story of the week and these are some I’ll call them half form, half formed thoughts.

Erick, I’ve [00:02:00] been here not even 24 hours at the conference. I’ve had a lot of conversations with folks including Tim Conel, the CEO of the 20, and and others who are here. And a theme that has come up numerous times for numerous people at the show is what I’m thinking of right now as the power of numbers.

Now. If you are. Tim Conel and you are encouraging MSPs to get engaged with you and if you’re running a good company to become part of the 20 to sell into the 20. If you are part of evergreen Services Group or new charter or any of these large organizations that are amalgamating in various ways MSPs, you have something of a vested interest in the idea that it’s difficult now and will get more difficult over time to go it alone.

As an MSP, at one point during the interview I did with Tim, yesterday I said, you go back a little bit in time and there are MSPs out there who were maybe looking for an exit. They were looking for someplace to sell, and they were considering all these kind of private equity [00:03:00] and other options.

There, there were the people who were maybe looking to scale their business and they were considering these options. And then there were a bunch of MSPs who were just dead set against that kind of a route. They wanted to stay on their own and that was really the majority of the field.

And I just asked him, from your perspective, are you seeing those percentages change? And he said he’s seeing them change a lot. There’s a lot more interest in a lot more MSPs among a lot more MSPs right now in finding some way to become part of something bigger than themselves. And I asked him is that because there are so many of these big companies out there now and more coming along and it’s.

Difficult and getting more difficult to compete with them. And he said that’s a piece of it. But there are a number of other issues as well that are starting to get on the minds of MSPs and have them looking more seriously than they did before becoming part of a roll up or some other community, larger organization.

And one of those is just the risk factor that people are more [00:04:00] conscious maybe these days than they were even in the past of the fact that you could spend 10 or more years, 20, 25 years of your life building something that is actually very valuable to today, and you have one really bad security incident and it’s all gone, enormous amount of risk.

You could have, a giant client a customer responsible for 20% of your revenue got away and go away and all of a sudden your business isn’t worth nearly what it was before. You could, and we’ve spoken certainly many times on the show, Erick, about the wisdom for smaller MSPs who are looking to compete.

You want to specialize in a vertical industry, for example, as a means of maintaining your marketability and your relevance to your customers. There’s risks that goes with specialization too, right? As we saw in 2020, when any MSP out there, just as a, for example, who is specialized in the hospitality industry, restaurants, and hotels.

Suddenly didn’t have customers. So there’s a lot of risk out there. And then there [00:05:00] is also the issue that more and more MSPs are becoming aware of something that we’re gonna be talking about with Jay McBain later on the show, which is just this whole AI question, which is just, do I have the resources in-house going it alone?

To apply AI internally the way these bigger companies are gonna be able to, and leverage the efficiencies that they’re gonna be able to. Maybe even more challenging to take AI to my customers and build solutions, bring solutions to to them, be that AI strategic consulting partner to them. Can I do that and compete with these other companies that can’t?

And if I can’t do that, what kind of competitive position am Igon going to be in? And so these are all questions. I’m not actually gonna, encourage anyone in our audience right now. You need, if you’re going it alone, you are doomed. Get out of it. Find, sell the business roll up, do something.

But I do think just, based on the short time that I’ve been here and the conversations I’ve been having that [00:06:00] it is a good time to, to think about from a longer term perspective, if you are not a year or two away from an exit, what is your strategy? For, going it alone, if that’s what you wanna do in this AI era that we’re entering here, and, what are you doing basically to build towards that strategy?

How confident are you that’s going to work for you? Because I do think there are questions every MSP has to think about right now, and not just in terms of the risk, not just in terms of competing with massive coast to coast MSPs, but around AI and what it’s gonna mean for you and for our industry and for the end users.

Erick: Yeah, rich, I think this is a very salient and timely story for this episode. We’ve all heard the adage, if you’re not growing, you’re dying. So not to put it in such bleak terms, if you’re just operating at your business at a, at the same level or maybe you’re losing revenue, you’re churning out clients, and it’s more difficult for you [00:07:00] to compete.

You’ve got a big decision to make as a business owner. Myself in several iterations in past lifetimes, and currently I understand that, if we’re not innovating and if we are not delighting our clients with something that they haven’t thought about before, if we’re not teaching them and introducing new solutions to have them engage with us and increase our strategic and business value to them then we open the door to competitors to come in.

Again, like you positioned it, it’s like we’re not saying, you guys need to do this or that, the other thing. But, my, my response would be more of a challenge. It’s what is your plan? Just like you couched it, like what is your plan if you’re not exiting in the next two or three years to remain competitive, to grow the business?

Because if we’re not growing again, we could be considered dying. And if we’re not increasing, not only our top line revenue, but our [00:08:00] bottom line profitability, that really negatively affects our ability to compete and to not churn out staff because, they’re getting better offers elsewhere.

And things like that. And staying competitive. And being strategic what is the next three to five year plan for the company? Ultimately, rich, the partners that I’ve talked to, the MSPs, there is a small percentage that say, you know what, I’m just having fun doing what I’m doing.

I’m enjoying it. I’m not thinking about an exit. But ask them two or three years later down the road, then their thoughts start to think differently, right? Because, if it were me, I’m like I’m not somebody that’s gonna retire. I want something new and different. I want a new challenge.

I want a new project. I’ve done this, I’ve built this company. I want to see what else is out there for me. I have other interests. So it’s it’s a timely topic. And, there’s no confusion about the interest of a lot of folks wanting to acquire [00:09:00] MSPs. I think I’m on every marketing list for folks that want to acquire MSPs and roll them up as anybody else.

And I’m sure Rich, you see this as well. It’s and the partners that we serve and listeners in our audience, I know your inbox are getting flooded with, these emails of interest. So is it a distraction for you right now? And if it is, great, work your strategy for growth.

But when you’re ready the decision has to be okay. What makes sense for me? Am I gonna leave this company to my employees and create an ESOP and sell it to them? Am I, do I have family members that are gonna, my kids are gonna inherit the company, or, am I going to engage with, someone like the 20 or someone else?

And grow my business that way?

Rich: And I can confirm exactly what you were just saying before Erick. And it’s one of these very amusing things. As a member of the media, I go to lots of conferences like this one and register for them. And then the registration lists get shared with a bunch of people who use it for marketing purposes and just assume anyone who registered for the show as [00:10:00] an MSP.

And so I get inquiries from potential acquirers if I’m looking to sell my managed services practice, which of course is totally non-existent. So yeah, it’s a very active market out there even if you’re not in it. But let’s move on to your your tip of the week. Erick here, and this actually circles us back a little bit.

A few episodes ago we had our colleague Ryan Morris, on the show. He is our Chief Channel program strategist at Channel Mastered, the organization Erick and I helped run, and that is responsible for this podcast. We were talking with him about the evolution of partner programs. It was mostly. From the perspective of the vendors and the thinking that they’re doing around how they need to build and structure and design partner programs for today’s channel.

But your tip of the week has to do with looking at this from the MSP’s point of view.

Erick: Yes. Rich. And it and you’re exactly right. It was born from that very interesting and valuable conversation we had with Ryan just a few episodes ago. And I [00:11:00] pivoted it to say, okay what are 10 tips that modern MSPs, should look, how should they look at vendor channel programs?

And I wrote about it in my latest newsletter. You’ll find it on LinkedIn. So I just, I’m gonna pick three out of the 10 and maybe we can talk about it a little bit. The gist of the conversation with Ryan. Focused around the changing needs of today’s MSPs, like the MSP landscape, rich, you can imagine, and, ’cause you’ve been in it as long as I have, is so much different than when I had my MSP and we sold it off in 2007.

And so what is important to today’s modern MSPs is different than what was important to MSPs even three or four or five years ago, right? So here’s a quick three. So the first one out of the 10 that I cherry picked these three out of I’ll share today, is the need for MSPs to engage with [00:12:00] vendors that reward not only sales outcomes, but pre-sales influence.

And this was a really interesting part of the conversation, rich, if you’ll recall, that we had with Ryan, where he said, vendors should be thinking about rewarding. MSPs along the journey for everything they do to create that sale, not just for closing the business. So this means that, we as an MSP putting my former MSP hat on for this part of the conversation I am investing a lot of time, energy, effort, and money in creating sales in the pre-sales motion, in the marketing, in the meetings, and the solution architecture of the design in procurement after the deal is closed and implementation and all that other stuff.

So all of the things that happen before the actual sale is closed, which we typically get credit for in in, typical channel programs today is just performance and maybe [00:13:00] there’s like a commission or a spiff or something like that, or a benefit I want. Credit and some incentives and maybe some points towards these new modern channel programs.

We even heard recently, that is really coming into play here where vendors are thinking about adding points, programs and more like a loyalty program along with everything else that are in their channel programs. That’s what would be really interesting for me today. And so that’s the tip number one, is for partners to start asking about these types of incentives and looking at, and evaluating their partner program relationships from that lens.

Number two, and I think this is one that, every MSP would agree to, rich, is I want enablement that matters. I don’t simply want access to a partner portal and some sales slicks and, just some online stuff. I want real enablement that matters from a vendor program. How can you help me as an [00:14:00] MSP grow my business?

Not how can you help me sell more of your product or service? Like, how, what else can you provide me and my team in other areas of my business that we don’t, we’re now starting to see that right? Rich. But when I was, in MSP we vendors were just, here I have a thousand licenses and we’ll give you our best price.

It wasn’t, Hey, here’s our training. Come to a workshop. We will help you with marketing, with sales, with, pre-sales, with post-sales. We’ll help you look at your finances. We join our peer groups to help you build your business. All that is super valuable, especially when we talk about building company equity to the point that I, that we just spoke about earlier, so that I can.

Increase my potential for a higher offer at Exit. I want things that help me build my company equity. And if your partner program doesn’t help me do that, and your competitors does, that’s very compelling for me. [00:15:00] And the third one is one that’s always been a high check mark on the scorecard for MSPs is responsiveness from my vendor.

When things go south, how quickly do they prioritize my support? How quickly can I get access to a real person that can help me rather than have to fill out a form or work through chat or just get in a long queue. And this even, goes towards onboarding. If I do join a new partner program, rich, how long does it take me to get onboarded so that I can go to market and.

Generate revenue for both of us in this relationship. It’s not just me, the MSP, but my vendor partner that will benefit from providing me all this extra support and these critical things that I’m gonna say on this program right now should be table stakes moving forward in many partner programs.

Rich: So three really solid criteria to [00:16:00] apply.

And as you said that’s three outta 10 that you talked about in this newsletter. We will include a link to that newsletter in the show notes for this episode here, by the way you you owe it to yourself to read the whole thing, but I wanna focus in on the the first two of those that you identified there.

‘Cause we’re gonna be speaking to Jay McBain of Canals in just a few minutes here. And as it happens, I wrote about this whole partner program issue in the most recent edition of Channel Holic, my blog. And I included a slide from Canals and Jay in that, that I wish I had in front of me and could share with the audience right now.

But basically, canals went out to a bunch of partners. Ask them, here are a bunch of different benefits that you could get from a vendor. Which of these is most valuable to you? And you can imagine what a lot of those options were on the list. And if you can imagine like a bar graph in your mind, all of them were getting roughly the same kind of number.

And then there was this giant bar for one of them, and that was incentives along the entire range of the sales cycle because partners out there [00:17:00] now know that they’re adding value, they’re contributing to sales. They wanna be rewarded for that work to a greater degree than they are. And more and more vendors are doing that.

I think and even bigger number of vendors are aware that this is an issue and we’re beginning to see vendors respond to that by rolling out new partner programs, restructuring programs that find ways, typically a points-based system. But there are other ways of doing it as well that where they will track and and reward you for contributing in any of the many ways that you can actually contribute to a sale.

But that is, so you absolutely want to be doing business with vendors who understand the importance of that. And if they can’t tell you today how they’re dealing with that, they can tell you how they’re going to be dealing with it really soon. And then the enablement that matters. Idea I is I think, really important as well.

Erick, enablement, like you were saying. Training and education and enablement and all that. Nothing new about that from a vendor perspective. But for most of the history of that kind of stuff, it’s really been oriented at that vendor’s [00:18:00] products and, whe and whether it’s selling them or supporting them, but it’s really been oriented around the vendor and their products and enabling you to go out and be a more effective sales force for us.

And what MSPs and others need right now is enablement from these vendors just in terms of being a more effective business in all those different ways you were talking about. And so that the better vendors out there and the ones that are the folks in our audience really wanna be partnering with are the ones who are invested in your success, not just in terms of helping you learn how to sell their stuff, but in terms of helping you learn how to run and grow your business and be a better MSP to your customers.

And there are plenty of vendors out there right now who are doing that, and those are the folks you really wanna be looking for.

Erick: Yeah. That denotes true partnership that, that’s skin in the game, like we’re helping each other grow and we see. Where we can provide you more assistance in some of these areas because, rich MSPs are good at, the tech stuff typically, and we need that additional support and assistance and [00:19:00] provide an inclusive of your program.

Don’t charge me thousands of dollars, right? To get that stuff, make it easier, or make it attainable through some, through some way through some MDF or maybe there’s a little bit of performance in there as well. So I think that there’s a larger conversation that, that partners can have with their vendors to get the most out of the programs that they are subscribed to that do deliver some of that stuff, but also for the vendors that they want to maintain a relationship with that, that, that are maybe not, have not rolled out, something like that.

Have those conversations and let them know what it is that you really need to be successful. And, I’ll bet a buck Rich that. Most vendors will listen. And also last thing that is a great article ’cause I read your article in Channel Holic News. Let’s post a link to that as well so that we can give our listeners both perspectives.

Rich: Okay. You know what? You’re on. We’ll do that. We’ll we’ll link to [00:20:00] both of those folks. But you know what? We’re about to take a break when we come back. Without further ado, we’re gonna go straight to the main attraction. AI is raising a lot of big questions in our industry, and who better to go to for big answers than the man himself, Jay McBain of canals.

When Erick and I get back from this brief break, we’ll be joined by jam at b to talk about AI and what it means for you. Stick around folks. We’ll be right back

and welcome back to part two of this episode of the MSP Chat podcast, our spotlight interview segment where I am extremely pleased to be joined side by side with the one and only Jay McBain. Jay, thanks for joining us.

Jay: Thank you so much. Great to be here.

Rich: I know for a fact Erick wishes that he was side by side with us as well.

There was a point in time where it looked like that was doable, but logistics and life got in the way. But Erick is still available to join us here on the podcast. Jay, I can’t [00:21:00] believe I actually feel the need to ask this question, but for anyone in our audience who does not know you or what you do or where you work, just tell folks a little bit about yourself.

Jay: Yeah, sure. I’ve been in the channel for over 30 years now, probably 31 years. I count a lot of things about the channel as an analyst. But I had worked at IBM and Lenovo for 17 years. I built a piece of channel technology and software and raised money and did the entrepreneurial thing as well. And now I’ve spent pretty close to the last decade looking at our industry and looking at the system underneath it and where all the opportunities, the trends, and, really underneath the covers of our industry,

Rich: Officially chief Analyst at Canals. Erick, I will have, one of the smallest of hundreds of things I learned during Erick’s presentation at the show here was that canals is Latin for channels. Who knew? That’s

Jay: right.

Rich: Now I understand the name name.

But yeah Jay is really just coming off stage at the twenties Vision Conference, which I’m attending this week in [00:22:00] Dallas. As always a very interesting presentation. And I really wanna kind of dive into the AI piece of what you were talking about there. There are people out there who are talking about AI as bigger than cloud, bigger than the internet, massive opportunity.

You spoke about it on stage as a generational opportunity. Put this into scale for the MSPs in our audience here. How big a phenomenon. How big an MSP opportunity are we really talking about here?

Jay: Yeah. This is the hype versus reality type of conversation, but here’s how big it world is. If you look at the world economy this year, it’ll be $115 trillion with a T that’s across 193 countries.

It’s across 27 industries. That’s every dollar of value created in the world. The good news is 75% of that runs indirectly. So channels is a big part of it, but the numbers that we’re hearing, for example, Microsoft talks about a number at six and a half trillion dollars around the tam, and it’s not [00:23:00] Microsoft’s tam, the addressable size.

It is actually the industry that includes nvidia, that includes open ai, that includes all the MSPs in the room here. That includes everyone. So six and a half trillion. His friend over at OpenAI, Sam Altman talks about a $7 trillion build out. What’s interesting about these really big numbers, ’cause a lot of times when we have new trends and stuff, somebody just puts a really big number out there.

But if you’re following week by week in our industry, major governments like the US government committed half a trillion dollars for Stargate. Then the government in France followed, and now all the G seven countries have committed over a trillion dollars in real money real time. You look at the Magnificent seven, they have their earnings a couple of weeks ago.

They’re all spending hundreds of billions of dollars each. That’s what’s created NVIDIA’s the biggest, most valuable company in the world. They just can’t buy enough chips. Then you look at the Fortune 500, the r and d budgets for the big banks, [00:24:00] the big, insurance companies, big pharma and added all together.

We already have two and a half trillion dollars being spent right now. So I’ve walked from a world economy of 115, these big six or $7 trillion projections, we’re almost to the point we got a third of it in. But this is the perspective. Our industry today, tech and telco, all hardware, all software, all services, all telecommunications in the world, all governments, all businesses spend $5.3 trillion and that took 50 years to build.

So we’re talking about an industry that’s building now that’s bigger than that, and we’re talking about something that took 50 years to build that will probably take about three to five years to double in size. So the size and scale and real committed dollars is what’s happening now. This isn’t Internet of Things version two, this isn’t the Metaverse version [00:25:00] two or whatever emerging trend you wanna take over the 10, last 10 or 20 years.

This is the next 20 year era. In our industry after client server for 20 years, cloud for 20 years, and now we’re on the front end. We’re about two years into this next 20 year era.

Erick: Yes. Jay, it’s I’m sorry I can’t be there with you and Rich Live at the event, but it’s great having you back on the show.

Thanks again for joining Rich Live and me remotely, virtually. But once upon a time, Jay, you said that AI was going to be a feature in SaaS applications versus a solution that MSP sell to their customers. Has your view on that changed?

Jay: So that was a prediction from two years ago, and it actually turned out to be a hundred percent true.

So what companies back then were envisioning is that, for example, Microsoft copilot could get bolted on for $5. You could bolt on, for [00:26:00] example, Salesforce agent force. You could bolt it on for a subscription fee, but that was back in kind of generative ai. We got our first view of chat t of Anthropic, of Gemini, of other tools.

As a agentic, AI has taken off, one thing that’s been assigned to it is a different procurement model. It’s not gonna be a subscription because agentic AI is designed to, in some cases, replace human workflows, human processes, human led activities. So how do you charge a subscription if there’s not a person attached to it?

So what’s evolved since then is what we call micro consumption. What if it does an outcome, has a conversation with a customer and delights the customer and they charge you $2 for that? What if it goes off and does a process that humans would’ve been involved in the past, successfully does it?

Everybody’s delighted, great outcome, and charges you a dollar. That’s a version of micro consumption where I used to want a help [00:27:00] desk at. IBM with 1200 people, the average call that came in was $30. So that was, if it was a ten second password reset or a 10 hour system, we built, the average call was $30.

Salesforce right now is getting ready to charge $2. So the question is, if you delight the customer in the same way, is did you just take a 95% savings? So in an agentic AI model, it looks very different than consumption that the hyperscalers would use today, utility based it looks very different than subscription models, a hundred dollars a month per person.

And it looks really different than traditional billing that telco and tech, had during client server days where you buy everything up front. So MSPs are gonna have to look at this model. Think about the economics of partnering inside these models. But one thing we do know for sure today that none of that’s gonna be resold.

It’s gonna flow through marketplaces. And those [00:28:00] marketplaces are gonna have to come up with the compensation or incentive models that would’ve been margin based in the past. And that’s some of the big changes that are happening now. But talking about a prediction that came true is that, no, this is embedded in 250,000 SaaS applications.

Now. I even look at the 261 channel software companies that PRM tools and things, all of them have AI built in now, and I’ve seen their 18 month roadmaps. This is absolutely a feature set, not a product.

Rich: It seems every week, every few days I see another survey indicating a lot of appetite, a lot of interest among businesses in ai.

They’re struggling a little bit to get value from it right now. A lot of failed proof of concepts and a lot of skepticism about the value seems so far, but nobody’s acting away from the idea that this is gonna be a strategically transformative technology for us. And so they, they are [00:29:00] going to want, they do want to talk to MSPs and other solution providers about ai.

And so we’re two years into a 20 year period. For the folks in our audience here right now, to the extent that they are not able at some point within the next year or two to have a strategic conversation about AI with their customers, what kind of competitive disadvantage are they going to be at?

Jay: Yeah, I think we can probably compare this back to the early days of SaaS. If you go back to 1999 and the early days of salesforce.com and what became a $400 billion SaaS market, every line of business executive started spending over half their time on technology. Less than half their time on marketing, more than half their time on building a tech stack.

If you are a CMO in this new world of SaaS, you’ve got major platforms like Marketo, Eloqua, Pardot, HubSpot, but there’s 15,348 other ISVs that sit on top of that seven layer stack that you’re gonna be building. So each of these companies now have AI [00:30:00] built into them, and the conversation now with that CMO looks very different than just a IT conversation.

It’s not about infrastructure, it’s not about cybersecurity, it’s not about managing a bunch of devices. F first of all, man, CMOs don’t care their outcome and what they get hired and fired for is trans. Is building leads, building out MQL that move into SQLs, and that’s, how they’re measured.

So the technology is layered in, and now AI needs to be layered in on how to do that better, how to be 10% better than your competitor. So in the early days of SaaS, because it wasn’t resold, Salesforce got to 40 billion direct, and all the big SaaS companies only sold direct because it was a subscription software.

Because it wasn’t resold. For whatever reason, the channel didn’t jump on top of it. They didn’t see the $6 and 19 cents of services [00:31:00] that come in every Salesforce dollar to get it to work. The $5 and 80 cents that come with every HubSpot dollar. So there were companies, and today Salesforce has 223,000 partners.

They recognize that consulting about a Salesforce deal or to that marketing, CMO is worth a dollar for every dollar of Salesforce. So if they’re gonna buy a hundred thousand dollars a product, I could go sell a hundred thousand dollars consulting engagement. I can then sell a hundred thousand dollars design and architecture work.

I can then go sell a hundred thousand dollars in implementation and integration work. I can go sell if you’re hyperscale or you can go sell a dollar a managed of services. So you start to build out these $6 multipliers and competing for rich services, both from profitability and stickiness is where most of the channel that started collecting around SaaS companies was these are the companies that got jump on AI because explaining Agent [00:32:00] force or now platform inside ServiceNow, were the people already plugged into those line of business buyers and already doing those services before, during, and after the transaction.

So it’s very difficult to come in after the fact and build those relationships and have them. So I’m worried about this moment. Especially the next three to five years of the 20 year era, which will be age agentic. I’m worried about this moment.

Erick: Jay, do you have a forecast or a prediction of how much potential pull through of additional consulting services that MSPs might be able to generate?

Maybe just getting their clients into maybe the very, shallow under the pool with copilot and expanding to some ag agentic consulting services and work. How do MSPs play? How should they perceive this opportunity? Or is it just too early to tell?

Jay: No, we haven’t mapped out till almost the end of the decade.

It’s $158 billion opportunity for all services companies. [00:33:00] That’s the GSIs, that’s resellers, that’s digital agencies. There’s 20 different types of partners that are going to compete. It’s growing at 59.3%. It’s actually the fastest growing service opportunity in the entire tech industry, which is already the fastest growing industry out of all 27 on earth.

So it’s the tip of the spear of growth, being able to not only walk into it buyers and talk about what you just said, let’s think through your workflows that let’s think through processes and things like that. Maybe not at a business unit level, but at a corporate wide level. But then let’s walk into cybersecurity massive, AI inflection point in that industry.

We already own that conversation. So when you talk about, dipping your toes, it’s talking to the same buyer and doing things bigger, better, faster, cheaper by connecting to some of these tools that are out there, like copilot and others that they might take advantage of in their product [00:34:00] set already.

So also not doing that for free. Looking at these models and we get to write this research, which is the multiplier effect. It’s $7 and 5 cents. At Google, it’s $6 40 cents at AWS, it’s $8 45 cents at Microsoft. You gotta look at this differently, that it’s not a margin based business that you’re gonna somehow, make a nickel off every copilot conversation.

You gotta think about this. It’s a multiplier opportunity. If I’m not charging, top dollar for my consulting, if I’m not building my skills and my certifications and my competencies to be able to charge top dollar and compete for that spot in front of the customer, this is where we could get edged out.

If I’m, in there doing design work or implementation work, I gotta be the best at that and I gotta compete with a lot of different people, coming from different kinds of businesses. So your relationship with your customer is the first thing. And managed service providers have some of the strongest relationships in the world because their [00:35:00] every 30 days forever.

It’s not project based. You don’t come and go, a year here, a year there. You’re there forever. It’s a great time on the inside to own that business conversation, own the agenta conversation, and then land and expand.

Rich: Let’s talk a little bit about Egen ai. It’s come up a few times here, and we’re certainly in the earliest days of that and where that’s gonna go.

But already, as you spoke at PAX Eight’s event as well. So already PAX eight has a big effort underway to create an agent marketplace for its MSP partners. Super Ops just last week introduced an agent marketplace. We’re starting to see marketplaces and distributors and vendors create these agent marketplaces built around the idea that MSPs at some point soon are going to start mixing and matching and weaving agents together into solutions that they’re delivering to their customers.

Is that something that you would encourage the MSPs and our audience to be thinking [00:36:00] about training for building towards now?

Jay: Yeah, absolutely. We have recent research that, an MSP is not an MSP is not an MSP. The average MSP checks, 3.2 boxes. They’re doing consulting, they’re doing implementation work.

They look like they’re expanding their services beyond just the every 30 day recurring revenue that comes after the sale. One surprising number that came out of that is 44% of MSPs today are developing software and in an agentic world that’s connecting the dots and they’re not building software to compete with Microsoft.

Microsoft’s probably layer one of the stack. They’re building software to compete probably at layer seven, that last mile, compliance, governance, whatever. It could be cyber, but that last mile ’cause they understand the customer the best, is the best place to flex. These age agentic muscles and age agentic AI will be built on these other platforms and the tech stacks that your customer has already invested in.

If they’re not gonna walk out and buy another product, and that’s what we just talked about [00:37:00] earlier, they’re gonna leverage what they have and the companies they’re already working with and the investments they’ve put in to the stack they already have. You’re gonna be the one that takes that and makes it work faster, better, more efficient, more effective.

Erick: Jay, today these MSP focused vendors, like NEC Wise he enable, are really incorporating AI into their products and solutions to help MSPs become more operationally efficient and things like that. Do you feel there, there’s an opportunity for them to do more in terms of how MSPs deliver and manage their end user solutions too?

And if so, what are your thoughts?

Jay: And that’s one of the other sides if you read fiction or if you look at big magazines and stuff, the threat of 44% of all jobs are gonna be replaced and, those type of things. But this has a, a [00:38:00] strong linkage to MSPs as well.

For the really strong MSPs, the most profitable ones are the most operationally excellent. They know every minute of the day they understand their p and l. They understand exactly how the business operates at a systematic level, and then they start to understand the inputs and outputs to their business of what could be automated.

And in the old sense, they were building RPA robotic process automation tools, connecting the dots. They were building all kinds of tools within PSA and RMM world to do things, faster and more efficiently. But. Now conversational ai and now this ability, to have access to the world’s, information, you start to think about human replacements.

Not to reduce the size of your MSP, but send level zero or level one work, to be more automated and to drive the education, training, certifications and [00:39:00] competencies of your group up scale. This goes back to that multiplier effect again. If I have somebody that would’ve been running around with a floppy disc, in the future there’s, not the sneaker net that we would’ve thought of in the early days of managed services, but as we go forward, we gotta take our talent and make it the talent that your customer can’t compete for.

The whole reason that 82% of end clients today in the world, from a small flower shop to the biggest banks outsource their IT some or all of their it, and growing that at double digits is ’cause they can’t find. The talent themselves. They can’t do it bigger, better, faster, cheaper than somebody coming from the outside.

So we wanna take this next era and make sure that we’re upleveling our team and making sure we’re doing level two, level three, level four work. And I don’t mean tech support, ’cause a lot of that again, is gonna be automated. It’s going to be the work that I just outlined in the multiplier. [00:40:00] I have to be able to deliver a consulting engagement like an Accenture would or a McKinsey or Bain could.

But I’ll do it in mid-market. I’ll do it in medium sized business where they’re probably not fishing around. I need to deliver the design and architecture work that a more advanced company would be doing. I gotta be there for the implementation integration, which is a lot more ag agentic work when you’re connecting the dots, especially in headless software, which is part of the output of ag.

Agentic is getting rid of this subscription model, ui, UX based sas. You hear Microsoft talk about AI eating software, so it changes the format of how, back and side doors are gonna work in these age agentic models, but we have to be the ones designing the logic and implementing agents.

And if it’s PAX eight or if it’s another bigger distributor, if it’s with Microsoft AWS, or Google directly, or one of the big SaaS companies, we’re gonna be working inside these platforms, always paving that last [00:41:00] mile, which is what we’ve been doing for 44 years.

Rich: I wanna go dive into pricing a little bit with you ’cause you were talking about outcome-based pricing and that is at least initially that’s the pricing model most commonly associated with agentic ai.

But there are all, and in a agentic AI and beyond, there are all sorts of different pricing models that are being experimented with and talked about. I interviewed Tim Conel, who’s the CEO of the 20, the host of this event yesterday. And he, at multiple points, and I think he did it again on stage today, he’s got this idea in his head that you can, as an MSP, you can go to your customer and you can say, I can demonstrate to you that this AI solution I’m proposing to you will cut your payroll 10% or save you 10% of your time.

And the way I wanna get paid for that is out of those savings. So if I’m, delivering 10% savings, you give me 1% or 2% and that’s my. Lots of different ways to think about pricing these AI solutions. What models are you [00:42:00] seeing as the most promising or interesting? Where would you direct people to think about if it’s gonna be a different pricing conversation with their customers?

Jay: Yeah, so I would caution that advice for two reasons. One is yesterday, MIT brought out by Fortune Magazine had a major piece of research in agentic AI and generative ai and showing a 95% failure rate where companies that are invested in these proof of concepts and other things are not seeing ROI 95% of the time.

So I’m pretty sure in this early adopter stage, I don’t want to be the one selling outcomes or sorry, selling revenue share models. On a 95% failure rate. The first two years of this model, this generative AI moving into agent AI has been disappointing for the industry from a financial perspective. If you look at the biggest companies in the world that you think would be the front end of this opportunity, which are the GSIs working with the big [00:43:00] banks, big pharma, big insurance, they’re the Accenture’s and Deloittes and Capgemini’s, KPMGs ey, all the way down the list.

They’ve had very dis earnings and they’ve loaded up, like Accenture has 760,000 people working for it. And among 20 companies, they have 10 million people there, competing for this opportunity. Their earnings have been flat, so say that the first two years have been underwhelming, but Bill Gates said at one time, we’re gonna be maybe underwhelmed for the first two years, but we’re gonna we’re gonna overestimate the first two years, but we’re gonna underestimate the first 10.

And I explain what’s coming after Agentic ai, but in, in this world, I’m not sure I wanna jump into that conversation. The only place I’ve ever seen it work is in procurement where a company will be staring at an RFP staring at a bunch of pricing and it costs you a million dollars.

Somebody will come in like Accenture and say, hire us for our procurement services. And when we battle those vendors down to 900,000, we’re gonna share in that a hundred thousand dollars savings. And so that’s a little bit of [00:44:00] a if you could save me 10% further than I could do, and that’s fantastic.

And yeah, I’ll give you a percentage of that. I’m not sure I wanna set up a business model that’s recurring, that’s they’re earning the trust of the client forever on some sort of revenue share model that they now have to, and, may take 18 months to show any return. I would be go where my.

Where the industry’s going. The hundreds of compliments have now come out with micro consumption models because they’ve been actively buying NVIDIA chips, their boards, their investors on Wall Street are saying, you’re spending all kinds of money. How are you going to monetize this? And the decision now is that these outcomes, they’re going to be measurable.

They’re going to be, plentiful. And it’s that micro consumption or utility model that it keeps hitting when you turn on the tap or crank up the electricity in the house. Same type of thing. I want to be, I’m not trying to make margin on that. I’m trying to set that up where I [00:45:00] can make the multiple on that.

So while it is a model, I want to be at that basis where I’m selling services before, during, and after that. And when I can get it to a point to be repeatable, reliable, and scalable, now I can move that into my managed services and start charging that every 30 days forever.

Erick: That’s exactly how MSPs like to play, so appreciate that.

Yeah, that’s some that’s some amazing data. 95% Jay. So Jay our next interview will be with Ranya sucker, the new CEO over at Kase. Is there anything you’d like us to ask her on your behalf, or maybe tell her on your behalf?

Jay: No I was very public on LinkedIn and other places, and I think one of those posts went pretty viral, like a million views.

But I talked a lot about the, and I used to work for Autotask. So I actually, early on my career, I’m actually worked for Kaseya in, in one odd [00:46:00] way or another. But I’ll say that, this is a collection of a lot of companies. It’s a collection of a lot of baggage. You don’t have to go far into Reddit or other places to to see that baggage.

But it’s a company that’s in, in a, high degree of change. We saw it, we were together at the Kaseya event and we start to see a changing culture. We start to see, people at the top that, have been MSPs, that have built some trust that are running product and running different parts of the organization.

We’ve seen them invest in communities, most recently Robin Robbins, but Gary Pika and all the, communities that we would’ve known and loved in the early days of managed services. So as a company itself, she doesn’t have to come in as an MSP. What they need is somebody who can take this company, evolve that culture to be, customer first, start removing some of this friction around their contracts and some of their business practices and stuff.

And, start showing this industry platform [00:47:00] leadership. And one of the areas that I study a lot is platforms. Cyber and hyperscalers and SaaS, what does it take to build those partnerships and alliances, integrations to be that platform and she needs to take that into Wall Street and become a public company.

Data was a public company came back out, but we need to educate a lot of non-tech people. This is Goldman Sachs. This is Merrill Lynch. One of the problems with Datto taken on the MSP ticker wasn’t that it wasn’t a great company and great community and everybody loved it. It was that no one that sat behind any of the 401k or pension funds knew what the heck managed services is.

They had no idea that managed services is one and a half times larger than the entire SaaS industry. Salesforce, ServiceNow, Workday, 250,000. They have no idea that managed services is one and a half times larger than the entire hyperscalers, not just the big three. Alibaba, IBM, Oracle, all the way down.

It’s one and a half time larger than these massive markets that have [00:48:00] created trillion dollar value companies and it’s growing at double digits. You walk down, the streets of New York and ask people to, what does MSP stand for? And they wouldn’t be able to tell you. So there’s a huge education that she, that, along with ConnectWise, along with Ninja, who’s got some great investments from, the founders of ServiceNow and Snowflake and great companies and enable and Halo and 20 others, all need to collectively raise the bar.

If this industry is as big as it is with 82% of the world’s customers relying on it and growing at double digits in a tech industry that’s grown at seven in a world economy, that’s grown at two. We need to shout from the mountaintops and I think it’s people that might be one step removed from being in those, little holiday inns in, 1999 and, seeing the little industry form as it did, as we all saw it form.

[00:49:00] We need serious people that can build serious capabilities. And I trust that, that she’s the right one to go do that.

Rich: Jay, as always extremely interesting. You there are lots of demands upon your time I really appreciate you carving out some for us here on the show.

For for folks who wanna get in touch with you, wanna keep up with what’s on your mind writing and I’ll point out one place they should go. ’cause a lot of people, I follow you on LinkedIn and every day or two you’re posting something very interesting there. So find him on link.

Where else should people go to to get in touch and stay in touch?

Jay: Yeah, so I go to bed every night with a zero inbox. The little red circles on your phone. I have none of them when I go to bed. So if you send me a Facebook message, a LinkedIn message, you send me a X tweet message. A million different places.

I will respond, or I will somehow get you to somebody who can respond. I love this industry. I love the numbers, the system below it. I love seeing, this be the fastest growing industry. I love how services are growing faster [00:50:00] than the industry itself. The MSPs that we know and love and serve are the tip of the spear, for the, at least the next 10 years.

And I’m just happy to serve the industry as well. If somebody’s looking for a number or looking for a, key trend or something. I don’t have a day job, so I can maybe connect the dot for them.

Rich: So for my, say anything else we’re gonna have you back on the show at some point just to have a productivity conversation.

I want to hear how you get to zero with all the, all these different people getting in touch and all these different platforms. I wanna find out how that works. That is for a future time. For this time. Thank you so much Jay for joining us on the show. Folks, Erick and I are gonna take a quick break.

Now we come back on the other side. We’re gonna share some thoughts about this very interesting conversation with Jay McBain of Canals. Fun wrap up the show. Stick around. We’re gonna be right back

and welcome back to part three of this episode of the MSP Chat podcast. And [00:51:00] truly, it is always a pleasure to to speak with Jay, a pleasure and an education. And this time was no exception to that rule. Lots of places we could probably go based on that conversation, but I, I, the thing that’s sticking in my mind right now is just that.

While we’re two years into a 20 year period, it’s not as if the world is gonna change around the folks in our audience tomorrow. It, there were several points in there where it became clear that if you’re not moving now, if you’re not starting to work your way into this next era, you run the risk of waking up one morning and being edged out.

As Jay said at one point, if you’re not putting your roots in with the vendors as they go down the agentic route for example it’s gonna be hard to catch up later on. And so this idea that we were talking about earlier on, on the show of having a plan figuring out, what is your company’s longer term plan for dealing with this AI era?

And does it, or doesn’t it involve, joining forces with other people? What kind of skills are you adding internally? I, [00:52:00] I. Forgetting now if it was 42% or 44% of MSPs are Jay said are are doing software development. They’re coding, right? 44%, and you think, I, for years I’ve talked to MSPs and asked, do you do application development for your customers?

And vast majority of them in the past didn’t do that, weren’t interested in investing in that skillset. And now we’re seeing more and more MSPs realize that if I want to remain relevant to my customers, I’m gonna have to help them start developing intellectual property. It’s gonna take more than the kinds of services I was delivering before.

So again, this, we’re not talking about stuff that you need to do tomorrow or next month, but it’s gonna take some time. And so I guess the larger moral of the story that you know, of this week’s episode Erick, is that, get, invest, begin investing now investing in a plan, investing in a roadmap that’s gonna take you into this very promising future.

Erick: Yeah it’s just always a pleasure having Jay on the program and his, his access to an [00:53:00] immediate recall of these statistics really help us visualize the things a little bit differently than we, we may have, perceived beforehand. Like Rich, you and I talk, we’re talking, we talk all the time on the show about AI and the impact to the channel and to partners and things like that.

And, if I were to take, a, some guidance for MSPs from our conversation with Jay regarding building some some deliverables and some and some services around AI to their end customers is simply don’t. Get caught up into a, pay for performance kind of an engagement or some sort of a revenue share at the end of it.

Because you cannot control what you cannot control. You can only control what you deliver. To hear the statistic that, the 95% statistic that he shared about, AI projects not returning on the investment and things like that. Do what you do best. Scope out, a project.

Make sure that you have good [00:54:00] change management and risk control and invoice for change and deliver on that business outcome. This is not speaking Rich to say we’re gonna position it as a typical project. We’re going to pitch it and present it as the business, the positive business benefit that the organization receives.

Jay, even, touched on that, and you and I have talked about this as moving from kind of technical outcomes, or we’ll just say AI outcomes here to more of the business impact on the overall business, not just the business unit like Jay said. So that’s the tip I took away for MSPs and for vendors.

The tip that I, that resonated with me was like, Hey, we gotta do better. As, as a group of vendors leading this channel, which is, the fastest growing highest revenue generating segment of the industries, that that, that run the world. 80, 84% of business owners are outsourcing some component of their support and technology to [00:55:00] MSPs.

So Ms. P vendors and of, hey, we’ve gotta get to that next level. Rising tide lifts all boats for our channel and for the partners that help us grow our channel.

Rich: Before we move on, Erick, I’m gonna take our audience behind the scenes a little bit just to give them a, an extra little sense of how impressive that conversation with Jay was because he actually flew into the conference here in Dallas today from his home in Florida.

His flight this morning was delayed by three hours. So he spent three hours on the tarmac at the airport in an air airplane that did not have the air conditioning on. He got here 20 minutes, I believe, before he had to go on stage and deliver something like a 45 or 50 minute presentation.

And then immediately after he came off stage, he came into the room with me here to do this podcast appearance with us. Briefly, very briefly, before we started recording, he ate his lunch, which was one of those little bite sized Almond Joy bars. It’s been a heck of a day for Jay, and yet you would never know as you said, he, that the numbers were were at his [00:56:00] fingertips whenever he wanted them.

Kudos and thank you to Jay for joining us here on the show. And folks, that leaves us with time for just one last thing, and we’ve certainly spent enough time on this episode talking about ai, and yet it turns out, Erick, there are apparently a lot of people out in the world who have yet to discover Google.

Because I’m looking here at a story from just a few weeks ago out of New Delhi in India where a a fraudster was it arrested by police. There he had been posing to various business people in the community as a diplomat associated with a foreign country, the embassy of a foreign country.

And he was arranging various fraudulent business deals walking away with reasonably large sums of money. But he was presenting himself as an ambassador from, in various cases, the nation of Subor. West Arctica very interested in doing business with these people. And I could imagine if somebody does a convincing case of presenting himself as a diplomat and you’re looking for overseas business opportunities, you might wanna take that meeting.

But [00:57:00] if you hadn’t heard of West Arctica before, you might wanna look it up before actually going into that meeting. And then you might get a little suspicious if you show up to the drab little residential building that was apparently opposing as an embassy where this guy was doing his his meeting.

Do your homework folks before you’re gonna meet with a a diplomat.

Erick: Yeah I’ve been trying to reach out to those those folks that got defrauded to, to introduce myself as the exclusive distributor of Unobtainium Rich and so far no takers.

Rich: Maybe people are wising up. We can only hope.

And folks, that is all the time we’ve got for you. This week on the show. We’ll be back in another week’s time with another episode for you. As we’ve already hinted that one, we’ll feature an interview with Rania sucker, the new CEO at Kase. So looking forward to that. And then I’ll actually be recording that with her tomorrow morning in real time here at the Vision Conference.

But until then, I will simply remind you that this is both a video and an audio podcast, which means that if you are watching us on YouTube, [00:58:00] but you’re into audio podcast, you can go to Google or Spotify, or Apple, wherever it is. You get your podcast. You’re gonna find us there. If you are listening to us now, but you’d like to check us out on video, go to YouTube.

Woke up MSB Chat. Wherever it is you find us, please subscribe. Rate review. It’s gonna help other people find and enjoy the program as much as you. This program is produced by the great Russ Johns. It is edited by the also great Riley Simpson, both of whom are part of the team with us here at Channel Mastered.

They can help you create a podcast if you’d like to do that. And podcasts are only one of the smallest little bits of things we do for our clients at Channel Mastered. To get the whole big picture, you wanna go to www.channel Mastered.com. Channel Mastered has a sister organization, it’s called MSP Mastered.

That is Erick working one-on-one with MSPs to help them grow and optimize their business. And you can learn more about that at www.mspMastered.com. So once again, we thank you for joining us. We’re gonna see you in a week. Until then, folks, we will leave you with the the bit of wisdom [00:59:00] that we always do every week here, which is just to observe that you cannot spell channel without msp.