AI, Cyber Insurance, E-commerce, and MSP M&A Trends

[00:00:00] 🎵Music🎵 Cyber Insurance, Self-Service, E-commerce, Buy Now buttons and more. Rich Freeman from Channel Holly joins me today. Welcome to the Business of Tech Lounge, the live version of the Business of Tech podcast. It's Wednesday, June 26, 2024, and I'm Dave Sobel.

[00:00:30] This is interactive. I'm going to be taking questions and comments throughout the show, so make sure to put them in chat. We do have a dedicated question section in the show for ones that may not necessarily be related to the topic

[00:00:42] and we'll answer anything. Certainly would love to hear from you. I want to thank Sales Builder, who's our Patreon sponsor, whose support makes this show possible. Focus on your IT sales workflow with the power of automation and visit them at salesbuilder.com.

[00:00:59] That's B-U-I-L-D-R dot com. And a reminder, I am watching that chat, so keep them coming. And now our top story in discussion today, pulling from the Channelholic newsletter. According to a report by IDC, premiums on cyber insurance policies have declined by 6% in Q1 of this year

[00:01:23] and dropped 3% in Q4 of last year. There's a significant change from the roughly 200% increase in premiums across 2021 and 2022. The decline in premiums is attributed to favorable underwriting results, increased caution in risk selection and the underwriting processes, and tighter policy language with more sublimits and exclusions.

[00:01:50] So joining me to talk about it, the author of Channelholic, Rich Freeman, joining me today. Rich, welcome to the show. Well, thank you very much, Dave. Now I got to ask, so premiums are fluctuating?

[00:02:03] You've talked to some experts. What was the sense you were getting from that space? You know, the interesting thing, you alluded to the IDC report. That's what kind of set this story off is back in March.

[00:02:13] I saw this IDC report come out that asked, have cyber insurance premium increases slowed down? And I thought, well, that's an interesting question. I wonder if they have. I started digging into it and discovered, as you said, they're actually going down and not a whole lot.

[00:02:28] But you quoted two numbers, 6% year over year premium decline in Q1, following 3% in Q4 last year. Fitch Ratings, one of the big ratings agencies, said that over the course of 2023, premiums were down 2%. And, you know, 2%, 3%, these are not giant numbers.

[00:02:51] But Fitch pointed out that in the entire history of cyber insurance as a thing, premiums have never gone down. I mean, it's like nine years these kind of policies have been available.

[00:03:02] This is unprecedented territory where the premiums are actually starting to decline a little bit for a number of reasons that you were kind of hinting at there. Now, it's interesting because you spoke to Joseph Brunsman, Joe Cyber on Reddit, for those that keep an eye on him.

[00:03:18] But he said something that sort of made me intrigued by this. And I didn't want to read too much into it because he sort of implied that insurance brokers really don't know what they're doing. This is still a lot of feeling around.

[00:03:30] Like, is this do you was your sense in looking into this that this is strategic, you know, sophisticated thinking or is it more just they've exploded so much that we had to hit the plateau? Like, what's driving the shift? In a way, it's all of the above.

[00:03:48] All of that and more. Right. So, so first of all, yeah, what Joseph said basically is, you know, the deep dark secret nobody wants to talk about is that nobody associated with cyber insurance knows what they're doing. And I think this is true.

[00:04:02] If anyone would know it's Joseph, right? That said, the insurance companies know a whole lot more than they did when they first got into this. They really they knew nothing about security and the threat landscape, which got dramatically worse in 2020 when the pandemic started.

[00:04:19] So like you said, you know, between the beginning of 2021 and of 2022, premiums went up 200 percent. And that that was the insurance industry bringing the pricing on insurance into better alignment with the risk, the risk and the claims activity.

[00:04:38] At the same time, you know, all these other insurance companies see premiums going up 200 percent and they decide to get into the market, too. So another factor that Fitch pointed out is just that there's more competition in the market right now.

[00:04:51] So that's putting some pricing pressure on these folks. And that's kind of a strategic element that, you know, we better be more cautious about price hikes.

[00:05:02] Now, I want to ask, because one of the areas where I had made some predictions around this and it's proving not to happen the way that I thought it would, that the combination of software and insurance would theoretically allow this market to be better served.

[00:05:18] Like in theory, the idea would be like, look, we've got all this security software that's all over the place. It's giving all kinds of incredible telemetry. We can get some kind of sense of how well configured the customers are.

[00:05:29] And in theory, you combine all that data with insurance companies that are looking to make projections. They should be able to know a lot more about situations and be able to do better jobs of ensuring that risk.

[00:05:42] And it turns out what's actually really happening is, is that software plus insurance means they're smarter at onboarding with the insurance, right? Like that seems to be the way. Is there chatter or discussion about it going further as you were poking at this?

[00:05:59] I mean, nothing specific that I can point to. I mean, I know that the insurance companies and I'm sure the security vendors as well want to go in that direction, basically, where it's not just like so today, as you were saying,

[00:06:17] if somebody is applying for coverage, thanks to an alliance between an insurance company, say, and Trend Micro on the other side, the insurance company can validate that the SMB or other business is in fact doing what the application form says that they're doing.

[00:06:38] The promise, though, is and I, by the way, don't feel bad, Dave. I had the exact same prediction as you. We're going to run. Okay. Because these security companies in many, many cases have a real time view into what the customers are doing.

[00:06:56] So it's one thing to say that when this business applied, yes, they were in compliance with the insurance company's requirements. But, you know, that can change like one day after coverage goes into effect, that can change, right? There's configuration drift or somebody shuts off MFA.

[00:07:10] And so really what you want, if you're an insurance company, is to be getting that continuous input from a security vendor. And that's not happening today. I just got to believe it will happen at some point. But I, you know, I don't know how quickly that's impending.

[00:07:31] Well, you did make a bit of a prediction in your newsletter, you know, saying that businesses not using continuous compliance management software will be soon. So perhaps we'll keep an eye on it.

[00:07:40] I think we're both going to hope that the word soon is not doing too much heavy lifting there. Agreed. So I'm going to move us on because you also had the chance to talk to the folks at PAX 8 recently.

[00:07:52] And in fact, you know, you posted about it and then I interacted on comments because it was like, that's another piece that's intriguing to me about the way they're thinking about using software and empowering providers to sell solutions.

[00:08:07] Give me a sense of what your take on their self-service vision was.

[00:08:13] Yeah, so I mean, as some context for that and all of this, these conversations I had with PAX 8, everything I'm going to tell you about this new marketplace is information that I got at their Beyond event in Denver week before last.

[00:08:28] And you go back a year to the 2023 edition of Beyond. And the big story from PAX 8 was we are working on this next generation marketplace that we believe is going to be a game changer for us and our partners.

[00:08:43] And as some context for that, I mean, specifically what Moda and this is a very expensive undertaking that PAX 8 has been doing for several years now, many, many millions of dollars, a lot of it coming from private equity and so on.

[00:08:59] And the context for that is just that there is this phenomenon in the world of software as a service. And, you know, PAX 8's all about cloud software, right?

[00:09:07] There's this phenomenon in the world of SaaS called product-led growth, which is just this idea that you as a vendor can put up a website and direct people through marketing to that website and get them to download a free edition with stripped down functionality or a free trial.

[00:09:24] And then they're going to fall in love with your software and upgrade to a paid edition. And no partner involved, no distributor involved, right? It's just vendors going direct to the end users. Now, in real life, we know that model doesn't, won't really work, right?

[00:09:42] Because it's very rare that a product is so simple and intuitive that some SMB can just load it up and everything's going to work the way you want. You really kind of need a partner in the loop.

[00:09:54] But the vendors don't necessarily know that, you know, the end users don't necessarily know that. They're used to self-serve everything, right? So the marketplace that PAX 8 has created, and it really just came out last week, last Monday, it became available to people who weren't attending the event.

[00:10:14] It's really designed to address the situation and set things up so that going forward, MSPs are still part of the purchasing and management loop on SaaS software, and that they're doing that through PAX 8. So this is about PAX 8's future and the future of their partners.

[00:10:32] There are a lot of different interesting things about that marketplace. The piece of it that you're talking about there is the self-serve storefront functionality that they built into that.

[00:10:44] Which I kind of zeroed in on in my coverage because it turns out to have been the piece of the vision they unveiled at the Beyond event in 2023 that was the most, I'll call it, controversial with MSPs.

[00:10:58] The idea that I as an MSP am going to have a storefront, I'm going to give my clients direct access to that storefront and let them self-serve, you know, research, pull together a quote, place an order. It just doesn't fit with my business model for several reasons, right?

[00:11:17] I'm all about white glove service, for example. I don't want to leave these people doing this on their own. Or I don't want to have to clean up the mess that will ensue when they do this stuff on their own and they buy all the wrong stuff.

[00:11:30] And so there was a fair amount of resistance from the MSPs. I'm not interested in that. PAX 8 was very good about listening to that input. They did a ton of beta testing in the year between last years Beyond and the 2024 edition.

[00:11:44] And they made some changes to that marketplace. So now MSPs have a lot more control. If you, for example, if you want to limit the products that your customers can research and read about and order, you can do that.

[00:12:02] So if you have, you know, standard products, a particular set of vendors that you believe in, you can limit what's available on that storefront to your preferred vendors so that they're not going out and buying, you know, all the wrong endpoint protection software or what have you.

[00:12:17] If you want to be in the purchasing loop, right? Like I'm great with the customer doing research and putting an order together. I just don't want it to go to the vendors on that order until I've had a chance to look at it.

[00:12:29] You can sort of insert yourself into the workflow. You can hide the pricing so you can give the customer the ability to research and indicate click, click, click, here's what I'm interested in.

[00:12:41] And then that goes to you, the MSP, and you can kind of call them up or otherwise contact them and talk about that order with them. And you can do all this on a very granular basis, customer by customer, vertical by vertical, etc.

[00:12:58] So, you know, they have Pax8 has responded to input from MSPs to make sure that these storefronts meet their needs and requirements as expressed during the beta process.

[00:13:11] But to their credit, in my view, Dave, they didn't back away from what I think, and I'm curious to hear your thoughts, what I think is hard to contradict,

[00:13:20] which is just the idea that buyers who are very used to buying everything on their own, on their phone, without having to pick up the phone and talk to somebody are going to want that purchasing experience in the technology world as well.

[00:13:36] And if you as an MSP are not equipped to meet that need, they're going to find somebody else who is. You know, it's so interesting because I think they are 100% directionally right.

[00:13:47] And I about two years ago, I put out actually a pair of videos talking about e-commerce in our space.

[00:13:55] And I made an argument for first off, I'm going to just observe that the vast majority of MSP websites that I look at, and by the way, I have projects where I'm going researching their sites in order to look at their leadership, for example, or their trends.

[00:14:07] Like their websites are horrible, right? Most of them are like two or three pages about what they do. And the best I can do from an interaction perspective is fill out a form that disappears into the ether from a contact us perspective.

[00:14:20] And I argue that e-commerce has a scale, right?

[00:14:23] At a very minimum, I should be able to book a sales appointment, or I might be able to book a network assessment, or I might be able to book my first engagement with them because most of the time, there's an initial offer that an MSP wants to do.

[00:14:37] Network assessments have been around for 15 years. There's no reason why I couldn't just buy it. Your network assessment cost me $1,500 and I can book it, buy it, have ready, schedule it all electronically all over the site.

[00:14:51] And then it gets into, I bet there are a whole bunch of things that my customers will do regularly that I should just automate. New laptop provisioning, I want to be able to onboard people like that should just be simple. I want to upgrade the CEO's laptop.

[00:15:07] You probably have a standard spec, really high-end, nice laptop that you have ready. There's no reason why I wouldn't enable a customer to do that.

[00:15:18] And where this gets really interesting for me is in my vision of this and when I had described this, I had always thought the MSP should own that storefront. That that storefront would live on their website. It would probably integrate with their systems.

[00:15:35] But 11 where this is getting interesting to me is as Pax8, of course, is offering it on their land. Right? If I think about this from a storefront perspective, what they're offering is saying, well, hey, we'll run your store on our land.

[00:15:49] Like you'll run this the same way like an Amazon reseller would be listed within Amazon. This is what it's doing. It's a little subtly different in that they can brand it themselves and they can embed it themselves.

[00:16:01] But you're still building the functionality on top of Pax8's infrastructure, which is good for Pax8, of course. I don't mind saying that. But it ultimately is this piece of the vision where it's like, well, how much will the MSPs be comfortable with?

[00:16:16] But flip side of that, we get to market much faster by not having to build it themselves. When you're having these discussions with the executives, where are they balancing that line in terms of owning the store? Well, I suspect that they would say, oh, you own the store.

[00:16:36] Right? Like you said, your branding is all over it. You're embedding it in your website. They're your customers. You're controlling the backend workflow. It's on our domain. It's on our infrastructure. But you own the site.

[00:16:50] You've pointed to the tradeoff that MSPs are going to have to think through, which is that there are enormous advantages, especially if you're a smaller company, to offloading the burden of creating and maintaining that e-commerce site yourself. So that huge savings of time and money there.

[00:17:12] But the tradeoff is there's a dependency there on one particular distributor. And should your thoughts about them, your relationship with them change, it's going to be kind of disruptive for you. There's no easy answer to that. That's just something you've got to kind of consider. Yeah.

[00:17:31] I'll quit, by the way. And I quit this all the time on this show. We like hard problems, right? Because hard problems are generally the kinds of ones that create value. It's interesting that you bring up the e-commerce store.

[00:17:40] For listeners, you may not even know this as a listener. I run an e-commerce store for my show. Actually, advertisers can fully engage with the business of tech through an entire e-commerce platform.

[00:17:54] So I want to indicate to listeners that, yes, I have firsthand experience here running an online store. And it is exactly as Rich described. Yes, it's complicated. But at the same time, it's actually less complicated than you might think because e-commerce is not necessarily fully new.

[00:18:11] And there's lots of tools to put together your store very quickly. Platforms like Shopify, WooCommerce will make that process very straightforward for you. I love this complexity because there's not one answer. There isn't one. And you're going to make a series of tradeoffs as a solution provider yourself.

[00:18:30] Now, the other thing I wanted to ask about, Rich, because it ties in really closely. Last year, they made announcements about the Buy Now button, right? And the way it had been described to me was this idea like they were going to embed it in the vendor's site.

[00:18:45] So the vendor could offer it then and you'd click Buy Now and then it would get magically routed to solution providers. I got the vision, but we didn't see the implementation. I mean, I asked about it. They're not quite there, but it's also not dead.

[00:19:00] Tell me a little bit more. I mean, they were emphatic. It is definitely coming. And in fact, they're piloting a sort of whatever 2.0, 1.8 kind of version of that right now. I didn't get a specific date in terms of when they think that will go out there.

[00:19:18] But yeah, a big part of the vision in 2023, when they were introducing this forthcoming marketplace, it packs it with this idea that they would give their vendor partners this Buy Now button that they could put on their website and so on.

[00:19:32] And it's a similar kind of tradeoff for the vendors in terms of what we were talking about with leaning on Pax8 to create your storefront if you're an MSP, right? I mean, on the one hand, if you're a vendor, you'd kind of rather own that whole sales motion.

[00:19:51] On the other hand, if you're somebody who is just getting into managed services or you're all about enterprise, now you want to get into SMB. Do you necessarily want to make the investments necessary to kind of build all of the infrastructure required for that?

[00:20:06] Wouldn't it be faster because Pax8 already has this giant channel full of MSPs? Wouldn't it be faster and easier to just take this button, put it on your website, let the customers say, yep, I'm ready to buy and have it flow through into the Pax8 marketplace?

[00:20:26] This is still coming. It did not launch with the rest of the marketplace last Monday. And like you said, I asked about it. And like you also said, there's some magic involved to connecting a vendor's back end with the Pax8 back end.

[00:20:44] And it just turned out to be a more complicated task than I think anybody kind of anticipated. I'm sure they knew this was not going to be a breeze, but it's been harder to do than they thought it would be.

[00:20:57] There were a whole set of requests that vendors made. They wanted better reporting data than they could get initially around. Well, who's coming? Who's clicking the button? And what's my ROI on that? So there's a set list of functionality that Pax8 folks know that they need to add.

[00:21:16] They are either in the process of adding it or they've added it now. Like I said, they're piloting their testing. So that button will be coming. I just don't know exactly when. Yeah, I mean, and again, it's a fascinating bit.

[00:21:29] And I think for MSPs, I'm going to throw this to the community and say, I think the number one question you want to ask Pax8 about a buy now button like this is how much data are they sharing with the vendors, particularly about post sale?

[00:21:44] It's a cool idea, right? It actually is. It realizes the true potential of like vendors are driving a bunch of leads to their own websites. They're going to have end customers that are naturally going to discover it. Helping partner to deliver that makes perfect sense.

[00:22:01] But the immediate thing that I would see would be a next question that a vendor is going to ask Pax8 is, well, which of my partners are performing better on closing the leads and doing it on the other side?

[00:22:15] It's an incredibly natural question that they're going to ask. And I think you're going to want to know like how that does. It will reward high performers. But what happens to partners that are not necessarily performing?

[00:22:30] Look, that may be the way in the natural course of the market goes. But I think it's something that we want to ask about. But Rich, in the interest, I know you've got something that you want to talk a little bit more that you're working on.

[00:22:41] What's next on your head of what you're working on and asking questions about? So my blog, Channel Hawk, I post on Fridays every week. Two weeks ago, I wrote about Pax8. Last week, I wrote about cyber insurance. I'm in the process of writing this Friday's post.

[00:22:57] And it's going to be about what I'll call the M&A landscape in the world of managed services. Actually, like three hours ago, not even two and a half hours ago, I interviewed the CEO of Logically.

[00:23:12] Logically is one of these giant MSPs that has come into existence in the last four or five, six years in particular. I asked, you know, how much revenue are you guys at? What's your EBITDA? They're private equity owned. He didn't want to get into that.

[00:23:29] Abraham Garver of Focus Investment Bank, who knows this space like nobody's business, thinks they're in the 15 million dollars of EBITDA kind of range. Big company. I think he said 300 some odd employees in multiple countries.

[00:23:49] And they are, I won't say on the verge, but they are approaching a milestone that they like to call Logically 2.0. And essentially, they are going to recapitalize probably next year, maybe even the year after that.

[00:24:02] They're going to move from, you know, whoever the private equity backer is now to another one. They're going to raise a bunch of money and they're looking to triple headcount. And, you know, he didn't get into how much they're looking to triple revenue, for example, and so on.

[00:24:19] But I mean, they are they're going to raise a bunch of money and they're going to use it to get even bigger than they are now. And Abraham made it clear there's a lot of this coming.

[00:24:29] So, I mean, we've all seen these really big coast to coast, sometimes international MSPs come into being out there. And, you know, you look at them and think those are pretty big companies.

[00:24:41] We're going to see much bigger companies happening because there's going to be platform to platform mergers and acquisitions. And so these companies that are doing tens of millions of dollars top line are going to start combining with each other and become really, really big MSPs.

[00:25:01] And, you know, according to Joshua Schemes, the CEO of Logically, it's just going to keep getting harder and harder for the smaller MSPs who don't have the kind of resources these big companies have to to to compete. It's just it's going to be a landscape shifting development.

[00:25:22] And we're right on the precipice of that kicking off day. There was what multiple people have in interviews with me called a land grab for MSPs that really kind of kicked into gear in 2020.

[00:25:36] And the way you know, and this is a land grab fueled by private equity companies just snapping up every decent MSP they could get their hands on.

[00:25:44] The kind of standard model with a private equity firm is that they will hold on to an acquisition for four or five years before they look for an exit. And so land grab kicks off in 2020. Here we are in 2024 that you're going to start seeing some exits now.

[00:26:00] And that will be to even larger private equity companies that are desperate to get into the managed services market. You'll see, you know, private equity companies that own maybe multiple MSPs combine those.

[00:26:14] We're really going to see the emergence of mega MSPs over the course of the next few years. So I'm going to smile and always say it's funny how the buyers always want to make themselves out to be the ones that are going to completely dominate the market.

[00:26:28] I wouldn't be would be remiss if I did not observe that there is some self promotion going on there of the buyers of these ones that are creating that saying how they're going to dominate the market.

[00:26:37] And it is impossible to do it any other way. For me, there's a couple of things that come to mind when you bring all that up. The first is, I actually think it will fall out a little bit like lawyers, accountants.

[00:26:50] Like, you know, when I think about those space, there is a tiered structure of very large companies, very midsize, midsize healthy companies. There are smaller ones. There's an ecosystem around that. You know, we're still in a space where, you know, according to the latest service leadership demographic data,

[00:27:06] you know, we've still got a sizable chunk of this market that is doing less than five million dollars in revenue. And I am inclined to believe that there is space for everybody, that there is going to be plenty of space.

[00:27:19] And these guys talk about like a land grab. It's like, well, OK, sure, there is a land grab. But at the same time, that's also because there are only so many businesses sizable enough to hit their standards.

[00:27:33] You know, you're talking about Abe. He's got some some data that sort of shows that, you know, in terms of those three million of EBITDA and up, there's probably only about five, six thousand of those nationwide total.

[00:27:45] So, yes, they're going to play at one another. But the ecosystem of all solution providers is significantly larger than that number. So, you know, yeah, there's going to be some some stuff among that group.

[00:27:57] And then they may start playing large with large, you know, midsize with midsize and some small with small.

[00:28:05] The other thing that I counsel any MSP that talks about this is the big question to ask a lot of these private equity firms is to understand what their thesis of investment is.

[00:28:17] Rich, you brought it up, right? Many of them are looking to flip and turn around in four years. But that's not true of all. There are some that are family investment, that they're looking to create cash generators that spit off cash over time for infinity.

[00:28:30] There are other ones where the owners are looking to continue to roll from one to the next, you know, recapitalizing, but still invested in the next one, extracting some at each recapitalization, but going again.

[00:28:42] Like there's different models of this. And I think it's important for us to understand that the different models do matter. And one of the reasons why they're talking about this so much is that there's actually not enough of the ones that they want to buy.

[00:28:57] The reason that there's such a conversation about like M&A conferences and education is they're trying to help smaller companies get ready for acquisition because there aren't enough of them. So it's really interesting to see that space continue out.

[00:29:11] When you're talking to them, are you getting flavors of those different theses among the different investors that you're talking to? Yeah, I mean, absolutely. It's been sort of a recurring theme in my writing over the course of the last year.

[00:29:25] It's been really interesting to me to learn about the range of options out there for MSPs. So there are tons of private equity firms that are just building roll ups and you sell the company, your brand goes away.

[00:29:40] They apply their template in terms of how they do business and their tools and so on. And you may or may not remain part of the organization going forward. But that's a pretty standard model. But there are also also companies like Evergreen Services Group.

[00:29:59] And I'm guessing a lot of people in your audience have seen Craig Fulton, formerly of Connectwise on the road. He now is part of Evergreen. And that that is a buy and hold strategy there. They're not looking to flip.

[00:30:12] They kind of liken themselves to Berkshire Hathaway, to Warren Buffett, as opposed to a quick buck in and out kind of a model.

[00:30:24] One of the things that Abraham said to me when we were talking about this recently that I think is really smart and important, and it kind of goes to what you were saying before.

[00:30:34] As you think about an exit, whether that's an exit or a sale, whether that's imminent or not. The first question to ask is not who's going to pay me the most? You know, what kind of valuation do I get from this option versus that option?

[00:30:49] The first question really needs to be, what do I want? What am I trying to accomplish here?

[00:30:57] And then you find yourself somebody like Abraham or there are other people out there who work with MSPs, you know, who can kind of steer you towards the kind of sale opportunity that will get you what you want.

[00:31:09] If you're looking to bring capital in and scale your company and accelerate growth and take it to the next level, that might point you in one direction. If you're looking for a big fat check so you can retire and play golf, that might point you in another one.

[00:31:26] Just make sure you know what you want and then find somebody experienced to kind of help you find it. Yep, it's great advice.

[00:31:35] And I'm going to give one more piece to that is that oftentimes you want to also make sure to battle test that and get a real critic of all this. And I'll offer that on my YouTube channel at youtube.com slash MSP radio.

[00:31:47] Look at the interview I did with Brendan below, who's with the Department of Justice, who actually did an interview with me around private equity and some of the downsides of that on businesses. It's an interesting counterpoint to all of that.

[00:32:01] And the reason I bring that up is I want those owners who are considering that to have actually thought of all of the different outcomes of this, both the positive and the negative, so that they're very well informed when they make decisions.

[00:32:14] Rich, I don't want to spend too much time, but I couldn't resist. We're going to dive a little bit into AI because I know we both talked about with Michael George just recently. And I want to get your take on a premise that I'm working on.

[00:32:27] I'm getting a good, clear sense that now that we're enough into this AI portion of what's happening, that we're starting to get real visions of the types of strategies from super aggressive in terms of AI and automation implementations all the way to cautious and deliberate on the other end.

[00:32:48] You've talked to a number of these leaders too. What's your take on that premise of the way the MSP platform companies are approaching AI? This is a fascinating topic.

[00:32:58] Needless to say, any opportunity I get to interview the CEO of any of the big IT management, managed services platform companies, this is something I get into with them. And the way I kind of think about it, Dave, is there is this spectrum of opinion among the companies.

[00:33:16] And I'm thinking here about, you know, ConnectWise and Kaseya and Enable and Ninja and Syncro, which is where Michael George is now.

[00:33:26] And like you said, on the one hand or on the one end of that spectrum are the people who are moving as fast as they possibly can and as aggressively as they possibly can.

[00:33:36] And in my mind, I am not personally aware of any company more aggressive, more out there on this topic than Atera. Because Atera already has functionality out there that like a lot of other companies and third party products will automate workflows for technicians.

[00:33:58] But the way the model works essentially is the AI does some triaging and it comes up with a proposed remedy to the problem. It presents it to the technician and the technician kind of quickly looks at that and says, yes, that looks right.

[00:34:12] Go do it. And then they move on to the next thing that they're working on. Atera, last time I spoke with them, which was six months ago, not even six months ago, they were right on the verge of introducing fully automated AI based ticket resolution where, you know,

[00:34:29] that the ticket comes in from the end user and the AI triages it and realizes this is a password rotation. I know how to do that. And it just does it. And then, you know, closes the ticket and it documents it.

[00:34:43] And that's how you know something happened there. But at no point in that process does the technician actually get told, consulted, asked, is this right or not? So that's one end of the spectrum. At the other end, you've got, I would say, Kaseya and Enable.

[00:35:00] Kaseya is absolutely moving down the road of AI based automation and managed services, but they're doing it in a kind of deliberate way. And I always think back to the interview I did with Fred Vokola, the CEO of Kaseya at DattoCon last fall,

[00:35:16] in which he said, you know, AI is great. AI is amazing. It can also F things up. He was censoring himself. He said F things up. But you can, you know,

[00:35:26] and this is a company that got into a lot of trouble and was involved in some really ugly headlines when that Fourth of July security breach happened. So you can understand why they're cautious there. And so they're moving way slower down the road than Eterra is.

[00:35:42] And then in between, you've got like ConnectWise and now Syncro. Syncro, I would say, is leaning a little bit more aggressively right now that the AI functionality that they just introduced,

[00:35:55] which is called smart ticket management, is more in that zone of give us permission, give us approval and we'll go do this for you. But they are moving in the direction of what they call autonomic computing, where down the road,

[00:36:12] there will be some things that the tool can just do for you because they feel like it's safe to put those tasks in an AI tool or platforms hands. Yeah, I think your thinking and mine are close and I would be remiss.

[00:36:27] I have to do a disclosure. Disclosure. I am a shareholder in Enable. So I've got, you know, you know, so I always do that disclosure when I talk about them.

[00:36:34] Your spectrum and mine are kind of lining up. I actually would put ConnectWise is a little bit more aggressive, you know, in terms of my thinking.

[00:36:41] I'm with you. I think Eterra is right there on the edge of, you know, pushing all the way to they were the first ones to do a lot of it doing it automatically,

[00:36:50] even if it got dangerous. You know, there were some examples where it was responding to, you know, there's a fire in my laptop kind of thing where the generative AI was doing the kind of hallucination I wasn't comfortable with.

[00:37:02] But I'll give them credit for leaning into pushing as fast as they can. ConnectWise, you know, aggressive in terms of getting out a product that is willing to work, you know, to actually analyze stuff, to do stuff on its own without a human intervention.

[00:37:18] You know, they were much more looking at that where then you fall on the other end where it's like, yes, Kaseya and Enable are being much more deliberate. I want to give credit to Enable for putting out, you know, an ethics statement around that.

[00:37:31] You know, I think that's an important step that I've talked about a lot on the show is I think it's important to do that kind of work. But at the same time, that's also not pushing into a lot of product stuff.

[00:37:41] And just, Richard, they all talk to you. It's interesting to me that the ones that are on the more aggressive side of the scale have come on my show,

[00:37:50] talked to me and the ones that are a little less so maybe a little less, you know, have not made those same appearances. So perhaps that we've identified another correlation there. Yeah. Yeah, no, that and that will be an interesting pattern to track.

[00:38:04] Basically, it'll probably tell me something about this vendor's direction or that vendor's direction when they're willing to come on the show. It's kind of true. Well, Richard, how can people track you've got a blog coming out this weekend? How can people track on that?

[00:38:19] You can see all of my Channel Holic writing at www.channelholic.news. There it is anytime you want. And like I said, I do one post a week comes out on Friday. You can get it online on the Web site there.

[00:38:35] You can subscribe and get an email as well. And I hope you will check it out. Well, cool. That is. Yeah, that's awesome. Rich, really appreciate you joining me. I will look forward to having you on more.

[00:38:47] We're going to be doing more of these panel kind of discussions and I will most certainly have Rich back. We'll be keeping an eye on chat. You guys have been quiet today, so I'm assuming we're doing a really good job.

[00:38:57] If you've got any last minute questions, drop them into the chat and we will most certainly take them. But as such, I also want to preview an interview I just did and talk a little bit around it.

[00:39:09] Yusuf Khan, who's the head of data science at Constellation, talked to me in the recent podcast about the increase in research and funding directed around using data.

[00:39:20] He focused on how the surge is evident in the industry through a rise of AI-related content and discussions on platforms like LinkedIn. Here's a preview of that conversation.

[00:39:32] I'm going to ask a little bit more about be smart about your data, because that feels like one of those areas that there's a lot in there. And I would say that is particularly highly valuable and that most companies have probably done a really bad job at.

[00:39:50] What do you mean by being really good at data? Yeah, so keep in mind that almost a good majority of the companies that we would talk to, they would all agree that they have some sort of data that they've captured.

[00:40:04] Whether it's hard fact data or some database that's lying around, data is still data. And data, sometimes we only think about it as transactional tables, but it could be this interview as well, like videos, multi-modal. We need to start thinking multi-dimensional when we're talking data.

[00:40:22] And the reason why I say we need to is also generalizing it because there's a group of people who do think multi-modal. And this is important because these language models are not necessarily tied down to just a single mode.

[00:40:36] They are multi-modal, they are vision-based, they could understand or parse through different types of modality of data. But being smart with data sort of comes down to taking a step back, assessing what the data is, spending some time to come up with a strategy to try to understand,

[00:40:53] is my data proprietary? But more than proprietary, does it add value not just to my industry, but even outside of my industry? Keep in mind, so at Constellation, we have a ton of data on various different things, but we break it down by specific industries.

[00:41:11] So when we personalize a product, the data is not completely broad. It's very contextualized to that specific industry, which sort of allows you to get better responses from the LLMs.

[00:41:26] It's fascinating what Yousuf just described is exactly the model of doing data management and a service offering that I think solution providers should be more focused on. If you're interested in this, that interview already available on my YouTube channel and on the podcast feed.

[00:41:42] So you can get that right now visit businessof.tech and get access to that. And now my Patreon supporters get access to interviews early. There's already come ones coming through the queue right now, including about to release an interview with Peter Kujawa,

[00:41:59] who's from service leadership with the latest profitability data. If you're interested, get access at patreon.com slash MSB radio. Now I want to thank sales builder who's our Patreon sponsor who support makes the show possible.

[00:42:13] Focus on your it sales workflow with the power of automation and visit them at salesbuilder.com. That's B-U-I-L-D-R dot com. And vendors, you too can get your name mentioned on the live show. It's a simple monthly subscription. Visit patreon.com slash MSB radio to learn more.

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[00:43:11] Thanks for joining me for the Business or Tech Lounge and I will see you next time. I.