AI Drives MSP Success, U.S. AI Governance Changes, and Broadcom's VMware Partner Strategy Shift

[00:00:02] It's Thursday, June 5th, 2025, and I'm Dave Solt. Four things to know today. New data reveals AI and infrastructure maturity as the dividing line between high and low growth MSPs. Government AI governance fractures as agencies, states, and regulators diverge. OpenAI pushes ChatGPT deeper into professional workflows while Anthropic unlocks transparency.

[00:00:27] Broadcoms VMware Pruning signals a control strategy, not partner empowerment. This is the Business of Tech. Some new managed services data to kick off our day. JumpCloud has released its first report focused on managed service providers, revealing that while 89% of these providers are experienced revenue growth in 2024, only 22% achieved high growth, defined as an increase of over 20%.

[00:00:55] The report highlights key characteristics of successful providers, such as a willingness to adopt new technologies and embrace artificial intelligence in their operations. The 2025 MSP Performance Report indicates that high growth managed service providers are more likely to manage complexity effectively and implement strong security policies.

[00:01:16] The managed services market has experienced significant growth this year, driven by advancements in artificial intelligence and a surge in merger and acquisition activity. In the first quarter alone, over 100 deals were made public, surpassing $1 billion in disclosed value, according to the DrakeStar Q1 2025 MSP market update. Artificial intelligence is transforming how managed service providers operating, enhancing efficiency and enabling faster customer support.

[00:01:44] Companies like Zofix have reported a 50% reduction in ticket workloads and a 30 to 50% decrease in operating costs due to automation. Investors are particularly interested in firms that integrate AI into their services, as seen with Sophos acquiring SecureWorks for $859 million and Thrive acquiring $1.5 billion in funding from Berkshire Partners to expand its AI capabilities.

[00:02:10] A significant infrastructure shift is underway in enterprise networks as organizations adapt to the demands of AI and data-driven workloads. A recent study by Cisco reveals that 97% of IT leaders consider a modernized network crucial for implementing AI, Internet of Things and cloud solutions. The research highlights that 98% of respondents view secure networking as vital for operations, with over 61% deeming it critical for growth.

[00:02:37] Additionally, 95% emphasize the need for resilient networks, especially as 77% have experienced major outages caused by congestion and cyber attacks. Cisco's CTO, Chetan Patel, states, quote, The network has powered every wave of digital transformation, end quote, Uscoring the urgency for IT leaders to build networks that will define their organization's future in the AI era.

[00:03:00] As enterprise networks evolve, the emphasis on smarter, more secure, and adaptive infrastructures is clear, with 89% of leaders anticipating that improved networks will directly drive revenue. Why do we care? Well, the data marks a line in the sand for managed service providers. Operational maturity powered by AI and network transformation is what separates high growth providers from the rest. Simply selling tools isn't enough.

[00:03:26] The winners are building intelligent service delivery platforms that actively reduce cost, increase speed, and mitigate risk. For IT services, this means repositioning around outcome delivery, not just technical capability. Leaning into AI not as a bolt-on, but as a foundation of internal workflows and external client value. And prioritizing secure modern infrastructure, not just for compliance, but for growth.

[00:03:51] Those who fail to evolve risk becoming commoditized caretakers of infrastructure, while others reap strategic advisory revenue. The AI-enabled transformation isn't coming. It's already being monetized. This episode is supported by AFI.AI. MSP-focused backup reliable at petabyte scale.

[00:04:14] AFI.AI delivers intelligent backup from Microsoft 365, Azure, Google Workspace, Kubernetes, and AWS. Its AI engine is designed to detect threats and act before damage is done. It performs pre-emptive backups during ransomware attacks, where immutable snapshots ensure data integrity. AFI.AI is the only solution offering full-text search across backups.

[00:04:41] It also features single management portal to manage all clients and workloads, granular access roles, automated reporting, and APIs for integrations. Administrators can restore entire accounts or individual items with a single click, and cross-tenant recovery simplifies migrations between domains. With AFI.AI, organizations gain faster, more reliable protection, and unparalleled visibility into their cloud data.

[00:05:05] Start your free trial at AFI.AI slash office dash 365 dash backup. The U.S. Department of Commerce has officially renamed its AI Safety Institute to the Center for AI Standards and Innovation, shifting its focus from safety to national security and international AI standards. Secretary of Commerce, Howard Lutnick announced this change, emphasizing the need to combat unnecessary regulations abroad and enhance U.S. innovation.

[00:05:35] Originally established in 2023 under former President Joe Biden, the AI Safety Institute aimed to create best practices for mitigating AI risks, collaborating with major companies like OpenAI and Anthropic. The new institute will prioritize risks such as cybersecurity and biosecurity, as well as investigate foreign influence from adversaries' AI systems. This move aligns with the Trump administration's broader strategy to accelerate the growth of American AI companies and deregulate the sector.

[00:06:05] The U.S. Food and Drug Administration has launched a new generative artificial intelligence tool named ELSA, aimed at stringlining clinical reviews and scientific evaluations within the agency. This initiative is part of the FDA's broader strategy to integrate artificial intelligence into its operations, enhancing the efficiency of regulatory processes.

[00:06:24] ELSA has reportedly shown success in preliminary trials with the FDA's scientific reviewers, assisting in tasks such as reading and summarizing reports related to adverse events and assessments. The FDA emphasizes that this AI tool is designed to function securely with the data being maintained within Amazon Web Services GovCloud.

[00:06:45] Jeremy Walsh, the chief AI officer at the FDA, stated that the release of ELSA marks the beginning of the AI era at the agency, as it seeks to optimize the performance of its employees and adapt to their involving needs. And Texas is about to join the growing list of states with right-to-repair laws, as the state Senate unanimously approved House Bill 2963, which now awaits the governor's signature.

[00:07:10] The legislation mandates that manufacturers provide spare parts, manuals and necessary tools for products sold in Texas, the second most populated state in the U.S. If enacted, Texas will become the ninth state to implement such laws following states like New York and California. Environment Texas executive director Luke Metzinger highlighted the environmental benefits, noting that Texas generates approximately 621,000 tons of electronic waste annually.

[00:07:38] This bipartisan effort aims to enhance repairability, thus reducing waste and promoting sustainability in electronics. Why do we care? Well, these three developments show a new era of AI normalization, but one where governance models are fragmenting. For providers, the job isn't just to deliver AI, it's to deliver AI that works in a fractured regulatory reality, and that aligns with both performance expectations and emerging legal mandates. The federal government wants to go fast.

[00:08:08] Agencies want to go safely. States want accountability. MSPs, who can reconcile these tensions by embedding compliance, flexibility and sustainability into their offerings, stand to gain strategic ground. The winners won't just know how to use AI, they'll know where, when and under what constraints. OpenAI has announced significant updates to ChatGPT, enhancing its utility for professionals with features such as Connectors and Record Mode.

[00:08:37] These allow users to integrate ChatGPT with tools like email and cloud storage, handling the AI to provide more personalized assistance by accessing your data. The Connectors feature is available for paid subscribers, allowing integration with applications such as Microsoft Outlook, Google Drive and Dropbox. Additionally, the new Record Mode allows ChatGPT to transcribe meetings and capture key points, facilitating follow-up actions.

[00:09:02] As the competition intensifies with existing tools like Otter.ai and Fireflies.ai, these position ChatGPT as a more versatile option for users, with subscriptions starting at $1 for a limited time offer and $30 per month thereafter. Anthropic has recently opened sourced a circuit tracing tool designed to enhance the understanding and control of large language models.

[00:09:24] The new tool allows developers and researchers to investigate errors and unexpected behaviors in the models, marking a step towards interpretability in artificial intelligence. The circuit tracing tool generates attribution graphs, which detail how features within the model interact as it processes information. This enables researchers to conduct intervention experiments, modifying internal features to observe changes in output.

[00:09:50] While the tool presents challenges such as high memory costs and complex data interpretation, it opens the door for more scalable and automated interpretability tools in the future. And Coro, a cybersecurity platform headquartered in Chicago, has announced the launch of Coro Compass, a new partner program aimed at enhancing partner profitability and growth.

[00:10:11] Designed for small and medium-sized businesses, the program focuses on simplifying operations and providing tailored support through a tiered structure that offers benefits across revenue growth, brand and marketing support, as well as sales enabled. Joe Sojka, senior vice president and general manager for the Americas and ANZ at Coro emphasizes that the goal is to create a straightforward and rewarding experience for partners stating, quote, we built a program that removes friction and puts the partner experience first, end quote.

[00:10:39] The program includes flexible marketing development funds and a comprehensive deal registration initiative that protects partners during renewals. Why do we care? Well, a set of updates underscores the table stakes in IT services, embedded AI that helps people work faster, auditable AI that people can trust, and partner ecosystems that actually support growth.

[00:11:00] It service providers should seize the moment to build AI services that go beyond novelty, wrapping integrations in secure, explainable, and operationally useful layers. Meanwhile, vendor selection strategies should prioritize partner experience and ecosystem alignment, not just product capabilities. The emerging playbook? Offer clarity where others offer chaos, and make AI work in the real world, not just in the demo.

[00:11:27] Broadcom has announced significant changes to its VMware Partner Program, aimed to streamline operations and enhance channel support. The company will reduce the number of partners authorized to sell VMware solutions across the Americas, Asia Pacific, and Japan, moving from four tiers to three, Pinnacle, Premier, and Select, while retiring the registered tier.

[00:11:47] Brian Motes, Broadcom's Senior Vice President of Global Commercial Sales and Partners, emphasized that the top three tiers account for the majority of customer impact and business momentum. This restructuring will require some customers to transition to new partner relationships with an expectation for selected partners to meet higher standards of performance.

[00:12:08] The initiative aims to create a stronger ecosystem that supports IT modernization and accelerates artificial intelligence initiatives while ensuring partners remain engaged and in good standards. Why do we care? Broadcom's partner program changes aren't about modernization, they're about monetization and control. This isn't a channel strategy, it's channel pruning. For providers, if you're not in the top tiers, diversify away from VMware Now before you're forced to.

[00:12:36] If you're a top-tier partner, understand that you're being used to consolidate market control. Your value may be next on the chopping block once dependence sets in. And for end customers, now's the time to reevaluate VMware commitments and assess alternative platforms with broader partner ecosystems and more transparent vendor strategies. This isn't just a partner realignment, it's another chapter in Broadcom's systemic reshaping of the VMware ecosystem into a gated high-margin play.

[00:13:04] And it's increasingly fair to ask, are partners truly part of the strategy or just tolerate it until they're no longer necessary? Thanks for listening. Today is National Sorry I Was on a Boat Day. I mean, do I need another one? Well, National Moonshine Day works. But National Gingerbread Day and National Veggie Burger Day just aren't holding water to National Sorry I Was on a Boat Day.

[00:13:30] Join me for a webinar sponsored by Nerdio, modern endpoint management with Intune, what works and what doesn't. Visit bit.ly slash Nerdio webinar and the link is in the show notes. The Business of Tech is written and produced by me, Dave Sobel, under ethics guidelines posted at businessof.tech. If you've enjoyed the show, make sure you've subscribed or followed on your favorite platform. It's free and helps directly. Give us a review, too.

[00:13:59] If you want to support the show, visit patreon.com slash MSP radio and you'll get access to content early. Or buy our Why Do We Care merch at businessof.tech. Have a question you want answered? We take listener questions, send them in, ideally as a voice memo or video to question at MSP radio.com. I answer listener questions live on our Wednesday live show on YouTube and LinkedIn.

[00:14:26] If you've got a comment or a thought on a story, put it in the comments if you're on YouTube or reach out on LinkedIn if you're listening to the podcast. And if you want to advertise on the show, visit MSP radio dot com slash engage. Once again, thanks for listening and I will talk to you again on our next episode. Part of the MSP radio network.