AI liability: Leadership pressure and unclear ROI drive risk for MSPs — Tiffani Bova, Futurum Group

[00:00:00] 30% of technology leaders say their leadership pressures them to overstate the success of AI. 27% say they're actually seeing substantial return. Same survey, same 775 people.

[00:00:29] Meanwhile, the channel is betting on AI as its next revenue engine. In Informa's MSP501 survey, 57% of MSPs expect AI to rank among their biggest revenue gainers over the next year. So, somebody is going to be asked to prove the AI worked. More and more, that somebody is the provider. Today's guest leads the team that puts those two numbers on the same page.

[00:00:55] Welcome to the Business of Tech Lounge. This is where we break down what's changing in the IT services market, what it means for providers and vendors, and what to actually do about it. If you're running or supporting an MSP, this is about making sense of the environment you're operating in, not just the headlines.

[00:01:12] Now, to make this conversation possible, a message from our sponsor. Here's a question MSPs don't ask often enough. How secure is the tool that has the keys to every one of your client endpoints? Your RMM is the most powerful and most targeted software you run. LogMeIn Resolve was built with a zero-trust architecture specifically to close gaps that other RMMs leave open.

[00:01:40] If the security of your remote management platform is on your mind, and after the last few years it should be, LogMeIn is worth evaluating on exactly that. Visit LogMeIn.com slash MSP Growth. Tiffani Bova is Chief Strategy and Research Officer at the Futurum Group, where she runs the research and strategy organization.

[00:02:04] Before Futurum, she was Salesforce's growth and innovation evangelist and a research fellow at Gartner, and she's a two-time Wall Street Journal bestselling author. Tiffany, welcome back to the Business of Tech. Yeah, I'm thrilled to be here. Thanks for having me. Well, I'm excited to get into it. Listeners, if you're watching live, go ahead and put those questions into the chat. We'll take it as we go over the course of the conversation. But Tiffany, I know I've got a bunch I want to talk about, and I'll baseline here. Futurum's report is called The New AI Workforce.

[00:02:34] ETR, Futurum Survey Arm, asked 775 technology leaders in May how AI is actually landing inside the organizations. Now, mostly larger enterprises, mostly North America, mostly the people that set the direction. I don't think adoption's the question. 78% use AI tools multiple times a day. But the question becomes the proof. 30% report pressure from leadership to overstate the success of AI initiatives.

[00:03:02] 27% say they're realizing substantial ROI. And the report itself says the data can't tell why. It might be a measurement problem, no reliable way to prove the value, or a positioning problem. Leaders who need AI to look successful, whatever the evidence says. So I got to ask you, which do you think it is? Measurement or positioning? You've sat with many of these organizations. When somebody says they're pressured to overstate AI, what's happening in that room?

[00:03:33] Yeah, I wish it was a single answer. You know, it really depends on the culture of the business. I mean, at the end of the day, right, what kind of organization are you working at, right? Are you working at an organization where it's a top-down decision, right? And the executive team is telling you what to do. And, you know, you are being held accountable for whatever that, you know, directive was. And, you know, as an individual contributor, you know, you're like, I want to deliver on that.

[00:03:57] And so you're working as hard as you can, and you're doing what the best you can, and what you can do in a given day. And I wouldn't say that people are, I don't want to give the impression that people are saying, look, I'm lying about things. But it may also just be like, look, I'm doing the best I can. I'm making progress. Like, I want this project to be successful. And so maybe I say I'm a little further than I am right now because I will catch up, right? I'll get there in the next week.

[00:04:25] Did we conclude that we just think people are, you know, fudging the numbers and that's what's happening? I mean, I think people are not doing that. I think it is a combination of a lot of pressure. So you're trying to hit certain metrics. And other parts of it is, you know, projects will, you know, ebb and flow. And so maybe you are balancing that out against how you're reporting it. But the point to be made is they're feeling the pressure.

[00:04:50] And so that does also, you know, crack open those that will really not say where they are in a particular project because they're trying to kind of hold back that oversight that's happening from leadership. So we got to ask, like, do the 30% and the 27% overlap? Like, are some of the same people reporting real ROI the same people reporting the pressure? Are they different groups? Like, what's the overlap there? I don't know what the exact percentage overlap is.

[00:05:19] But I think that ROI is one of those elusive things right now. Like, what does ROI mean in an AI project? Right. You could say, you know, I'm trying to or I'm going to be using AI to reduce my call volume in my call center. So which we've been doing for a long time with bots. But now I'm going to have it take over even a little bit higher complex service calls, right, from customers, not just the basics.

[00:05:43] And I want that to decrease by 10% so that I can reallocate those resources to upselling and cross selling into the basic customers. Something like that. Right. Okay. And now I can say, did it reduce call? Yes. No. Did I go down by 10%, right? Did my net promoter score maintain as my customer satisfaction? Okay. And then on the flip side, am I seeing an increase in upsell cross sell from my call center personnel? That's an easy thing to measure, right? Because those metrics are pretty much in place and you know it.

[00:06:12] It's when the metrics are a little bit more unknown. Like how do I actually quantify and qualify what that ROI is going to be? I think that's where the numbers start to get the technical term a little squishy. You know, where you're like, am I really seeing the ROI? Am I not seeing the ROI? And that's where the investments start to pull back. Because what we are seeing from AI budgets is budgets or IT budgets are not increasing.

[00:06:39] People are using current IT budgets and pulling it over to AI. So other parts of their IT spend are decreasing. So AI is not an increase to budget, but rather a reallocation. And so that's why ROI is going to become much more important because if you want your budget to go up because of AI, you're going to have to show ROI. So I was also fascinated to find that 47% say the CTO, CIO, or CISO own the AI strategy.

[00:07:08] And that's three times the CEO. Yeah. But it leads me to ask, like if the technical leader sets the strategy and also reports the result, who in the org is allowed to say that it isn't working? Yeah. And I think the question there is sets the strategy. That's what you said, right? You said sets the strategy. So sets the AI strategy. Okay. But sets the technical strategy to actually match the strategy of the business.

[00:07:38] So are they matching the strategy of the business? Like we're going to go into new markets. IT, I need you to help make that happen, right? Do we need systems and tools and, you know, people will be there. Like what do we need to move the business into a new region? And so IT is responsible for executing against the corporate strategy. That is different than the way you just framed it, right?

[00:08:02] Where you're saying IT is just setting the AI strategy and saying this is what we're going to do and where we're going to use it and how we're going to use it, regardless of what the rest of the business is doing. I don't think that's a good idea, right? I think that it needs to be a partnership between what is the business's goals and strategy? How will IT support it? How does HR support it? You know, how does finance and legal support it? Like everybody has to support what the corporate strategy is. If AI or sorry, let me say that differently.

[00:08:31] If IT is the one setting the entire strategy, like I don't think that's necessarily where I would recommend because AI is just a piece and part of an overall IT spend, not the only place that spend is happening. Which makes sense. And in particular, that framing is internal. I also want to think about this from an external perspective, particularly with a lot of MSPs that are trying to deliver AI into these companies.

[00:08:59] There's going to be a tension here because the customer's leadership is going to be looking and may have already announced a win along these lines. And I want to get your take on what does the provider do when its own data says the project isn't delivering? Like, are they in that position to tell the truth, risk the renewal or write the reports the customers really need? Like, how's that tension going to play out? Well, I think that this goes back to, you know, I say this often.

[00:09:24] If you're an MSP listening to this right now, like be client zero, especially if you're in the SMB space. Like if you are a small business yourself, you know, where and how are you using it? What's the ROI you've found? Is it helping you be more productive, get bills out faster, serve customers faster, scale your business, sell more stuff, whatever it is, whatever your metrics and ROI return is. It's great to have your client zero story so you can go into other organizations go, look, this is how we did it.

[00:09:54] And what we saw, this is how long it took. But tracking milestones of any project is the way to course correct if there is lack of ROI so that you could say, look, we're not seeing the returner results we thought we were going to see. We think we may need to try this or that instead of waiting till the end, like you said, and you're three months before the renewal and you're like, well, I'm either going to tell them they got no ROI. They didn't get the benefit, which we all know is not the right strategy, right? So there is nothing new here.

[00:10:23] Run an AI project as you would any other project with milestones and, you know, check ins with your clients and be able to change things, make change orders, add, delete, you know, make those adjustments. But ultimately, I think this is where MSPs want to talk about AI and where their clients can actually use it without really deploying it themselves. Gotcha. Now, the report's headline is really interesting because it talks about dependency, not displacement.

[00:10:52] 58% expect to employ fewer technology staff in three years because of AI, but only 14% have actually done AI related layoffs. So what's happening seems to be restructuring instead rewritten roles and new AI hires. But then I layer in that only 4% say their technology team is fully ready for that AI first environment. And the biggest drag on the productivity in the survey isn't bad AI.

[00:11:18] It's checking the AI's work, that fact checking output that can take longer and doing the risk. So we've ended up in a situation, fewer people not ready. And the job that's growing is verification. In the small business market that my audience serves a lot, the one doing the verification can often be the MSP who's having to do that. Dependency, not displacement, it's your report's phrase. So I got to ask, like, dependency on what exactly?

[00:11:46] Like, is that the model vendor, the integrator, handful of people who actually understand how this works? Like, how are you defining dependency? Yeah, I would push back a little bit. I don't think it's the MSP's job to verify, right? We're talking about like, I'm writing a report. And I'm using AI. MSP is not going to verify my work. Yeah, right?

[00:12:06] Now, if you're verifying the model to say like, you know, that the skill should be do one, two, three, four, five, and you're verifying it's doing one, two, three, four, five, right? And you're making sure that the process is being followed. Yes, I agree with that, right? But the output that sort of, you know, trust but verify is AI doing the work, the human coming back in behind it and verifying it going back to not displacing that human because you still need the human.

[00:12:35] I mean, there's a great story out of IKEA, you know, that they had a call center and they were deploying technology that was going to replace that role, you know, of that call center agent. And it was like a thousand people outside the US and not going to just eliminate those roles, but they re-skilled that role to say, what could that person do? So we're going to teach them to now do this digital design work for IKEA furniture. And it's become like a billion dollar business.

[00:13:05] So take those thousand that were doing call center that now technology was, you know, displacing, re-skill, right? Deploy them in another part of the business. Now you could argue technology could probably do that design work that the human doesn't need to do anymore. And so is it a one more time refresh? And so ultimately, if you're looking at AI to just say, I'm trying to reduce headcount. Okay, but if you're going to reduce that headcount or get rid of that role or add something, where does that spending get deployed?

[00:13:35] Where does that resource get deployed? Where does that skill get deployed? And or one of your 4% number, I think it was, they don't have the skills. Are you going to invest in their skill, you know, upskilling them? Because if you don't invest in that, and I say this about MSPs all the time, it's like, who's going to skill the MSP? Because vendors, hardware vendors, let's just say, are skilling around AI of their product, but they're only going to go so far. They're not going to get to the model layer or the orchestration layer.

[00:14:05] So ultimately, like, who's skilling them? And is it going to be a vendor? Are you as the MSP owner going to skill your people? Are they going to have to go get skilled on their own? Like, you have to come up with a plan. And so this is where enterprise mid-business may have a budget to reskill. The smaller you get, the harder that gets. And then you get more nervous about skilling people who may leave, right? And then you're like, I skilled them, I invested in them, and they left. The argument is you didn't invest in them, and they stayed.

[00:14:32] And then they're not actually able to deliver the kind of service you need. Well, that's, I mean, there's a bit of a classic argument there, right? Because we've had the skills conversation. If I invest in my people, you know, they may leave. And you're exactly right. The counterargument is, well, yeah, you don't stay, and they may stay, right? So, but help me understand a little bit about that. You brought up a really great issue there. Like, how are the smaller providers skilling to this? Yeah. In a way, like, what skills make the most sense there?

[00:15:00] Because it would feel like they're going to do less model implementation and much more feature use and process engineering. Like, talk to me about what you're thinking about, what the MSP skill set looks like here. Yeah. And I think the question is, where do you want to play? Okay. You know, I use a metaphor of an oil rig all the way to a gas pump, right? The oil rig is a business of equipment, right? Someone sells all the pieces and parts of that oil rig.

[00:15:29] They manage it. You know, they fix broken parts. They, you know, staff it up the oil rig. They make sure it's operating and it's doing what it needs to be doing. That is an entire business. And then what it does is it takes out raw crude, right? And that raw crude needs to go somewhere. But usually whoever's selling the oil rig is not holding the raw crude, right? They're not, don't have the barrels of the raw crude. And that raw crude in this case, right? You have infrastructure is the data. Like that data is the raw crude. Well, who's going to go clean that crude?

[00:15:59] Who's going to refine that crude, right? Who's going to make it usable, right? And then it ends up making its way to a gas station. Then, okay, who's going to, you know, deliver that gas station or the insights to power the business? Call it the gasoline, right? And then where, if you look at that supply chain, it's kind of like our business. Who makes money? How much margin is in the oil rig business versus the refinery business versus the storage business versus the transportation of the oil business?

[00:16:25] And by the way, nobody, no one company owns that entire supply chain in oil and gas. Not a Chevron, not a BP, not a Shell, you know, they own pieces and parts, but not the whole thing. So now think about tech. Who owns all the way from, you know, installing, integrating, and managing in a break-fix way and infrastructure all the way to the device, the model, the orchestration, the cleaning of the data. A global SI barely does that.

[00:16:53] And so, you know, you see the big providers doing partnerships like Dell just did one with Accenture to actually train Accenture people about Dell frontier AI so that they could go out and do it. But that's not coming back into Dell to train their channel on how to do it. Dell and others, right, are training their channel around the product, that AI, as high as they deliver, right? Like whatever their stack is, but they're using a Dell or Lenovo, right?

[00:17:20] They have infrastructure all the way to device, but they don't have the software in between. So if you're a partner, you're going to learn one end and the other end, but you got to go learn the middle. Where do you go learn that? You could say, I'm going to partner with Microsoft and learn Copilot and, you know, everything around how do I do that? I'm a Microsoft shop. That's okay. Then you got to fill it in there, right? But you then have to direct a multiple skillset certification, you know, journey.

[00:17:44] And now the model companies like OpenAI and Claude and others, Anthropic, are hiring traditional channel chiefs out of the tech industry to build programs for certification and training to solve this problem. And so this is where MSPs are going to have to make big investments on reskilling. So to answer your question, that was a long way to get to the answer, pick where you're going to play in that supply chain. You know, if you're an infrastructure MSP, how far up the stack do you want to go?

[00:18:13] If you're a device MSP, how far down the stack do you want to go? So give me a little sense of speed around that dependency, right? The report is really focused on large enterprise, right? 58% large enterprise, three quarters North American. And the report, by the way, is very specific. It calls itself a leading indicator, not a cross section. Now, if we're trying to scale that to say 20 seat businesses, one of the things that's resonating for me is back in April, you told me that small businesses will move faster on AI.

[00:18:43] So I kind of want to get your take, like, does the dependency arrive at the small business end sooner or does it look completely different there? Well, the reason I made that statement is because the technology load is smaller. Okay. Right. Right. So they don't have to be like, I have to completely rip and replace everything I've done. Right. Many small businesses are very cloud first, right? Everything they've got, they tend to have less of the big infrastructure, you know, and software.

[00:19:12] The average enterprise has 950, it's 970, but 970 unique applications in its four walls. The average enterprise. Right. Okay. Almost a thousand and only 27% of them are integrated. Okay. So there's a, if you're a small business, you might have 10 apps. There's a lot less noise, right? There's a lot less complexity. So the reason I said that is because you could fix and deploy and leverage and maximize AI

[00:19:42] in a smaller IT stack environment. Now, I'm not saying small businesses aren't complex and they don't leverage tech. That's not what I'm saying. But, you know, because they tend not to have their own IT staff and they're using partners, right? Those partners help them keep that fairly narrow and tight. And that is helpful when you're deploying something new. Right. So I think there's, you know, a ton of opportunity for the small business to maximize new technologies

[00:20:09] like AI faster than those that have complex processes and much more larger IT stacks. Now, I want to get your take, you know, before we move into sort of like the accountability side of this, I want to talk a little bit about governance here, right? Because governance knowledge sort of always trails applied skill and what employers say they want. Customers say governance is the gap and then they don't really hire for it. And I want to get your take, particularly as we think about the mid-market and the smaller

[00:20:36] side of that, how much of that is an opportunity for the provider and how much of that is the customer quietly handing off liability? It's a good question because I think, you know, listen, going back to where should the channel play, right? Is governance a place they could play? Like I'm going to help my small business understand what governance actually means when it comes to AI. Are you using a private data LLM, right? What are your security protocols? All those kinds of that.

[00:21:04] That's a great place to start because I think people are very confused about, you know, they load something up. Does it go out? Is it, are you teaching the models? Is it just you? If you're small, you don't want to put your financials up there or confidential information. Like how are you doing that? It's a great place for the channel to add value because it's very consultative, right? And every time maybe there's a new hire, there's a training they put them through, right? They're constantly testing and making sure that governance is being followed and it is

[00:21:33] updated with the changes to the models and all of those things. I think that's a, going back to where do they have an opportunity? That's a great place to sort of think about it. And, and also though, there's a high level of risk. So you want to make sure that it is a partnership that don't let them just sort of hand you off governance. And then you're on the hook for if something goes wrong, just like security, if they're breached or hacked, same concept, right? Like how far do you want to say you're going to put your company right on the line for how

[00:22:02] safe it is for your, for your companies and your, or your customers and their businesses. So I think governance is a great opportunity. And I also think that that's a great place where AI can help you uncover where there is leakage in that governance, right? Are people doing things they shouldn't be doing? I think that's where AI can really help you because there's no way you're going to be able to watch every human in an organization with everything that they do. Gotcha. Well, we're going to transition from that a little bit talking about some of the outcome

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[00:23:48] That's O-V-E-K-A dot I-O slash MSP radio. Now in February, Tiffany's Frontier Partner Research described where providers are headed, away from hours for dollars and towards getting paid on outcomes. The new report closes by saying that organizations need to hold AI investments to honest measurements of that return rather than tell the stories people feel pressured to sell.

[00:24:14] Now, if the provider gets paid on the outcome and the customer's leadership is under pressure to say the outcome happened, I really want to get into a little bit of who's the honest broker here. If the MSP is paid on the outcome and the customer's leadership needs the outcome to look good, both sides want the same number. What's your take on checking it? It's a great question, but I will tell you what, in that Frontier Partner note, and I

[00:24:39] would sort of challenge all of you listening, pay attention to what the SIs are doing, specifically Accenture's doing some interesting things. If you listen to their last earnings call, how they're actually starting to talk about employees not hourly billing but more outcome-based. The acquisitions that they've made, it's kind of outcome-based. You start to hear them signaling moving away from that model. And so I'm always a fan of looking at that canary in the coal mine, right? Because they're large. They have the ability to make big investments.

[00:25:09] They've made a series of M&A acquisitions. And you could see large solution providers like SHI, Worldwide Tech, CDW, making similar acquisitions. And so looking across the market, finding out how they're framing outcomes is a good signal to you on what you maybe can start thinking about. Now, back to your question, like that outcome and how you get measured and then paid, that goes back to what we were saying a few minutes ago. Like, it's very clear.

[00:25:38] If you're like, look, the outcome is I want to reduce call time. I want to reduce call volume. I want to increase it. And that metric is very, it's black and white, right? It's like, did the calls go up or down? Did the customer sack go up or down? Like, did, you know, the sales go up or down? It's hard to fudge, right? It's hard to say, well, could they make it seem? Because everyone had agreed those metrics were good in place. And you can see over time, we deployed here. We did this. We're starting to see it head in the right direction.

[00:26:07] And then we said we wanted this to be at this level by the first quarter. It doesn't really get there. And maybe you're like, okay, what are we going to learn? You make adjustments. And then you say, okay, the next quarter, we're going to get here. And now you're getting closer and closer. And then you say, okay, now it's something that's recurring. It needs to stay in this range. Going back to, right, now the outcome is this range. It cannot be plus or minus 3% of this particular number for these three metric. And that's an outcome.

[00:26:32] If it's something soft and very hard to be able to correlate causation or correlation between the two, that's where it starts to get, again, the technical term squishy on the metrics and the number and the outcome, right? Especially if you're getting paid against it. Now, I want to make this a little tangible. So I want to push on the framework a bit. Like the frontier partner is getting paid on outcomes. But the data we've been talking about talks about all those pressures there. And I want to get your take.

[00:27:00] Like is outcome-based pricing premature for most of the market? Or is this the only thing that's going to force the measurement? And then, you know, is the outcome of that, is there advice for a small partner who's signing their first outcome-based contract? Like what needs to be in there? Well, so like, let's take a frontier partner, right? And they're like, look, we want to streamline a supply chain workflow. And the outcome is, is that we take the SKU catalog from 1,000 down to 300. And in, you know, an X, Y, Z, right?

[00:27:30] It's a series of things. And it's a one-time project. The project ends. The outcome is, did you meet the requirements? I'm done. That's very different than I'm going to build an outcome that's recurring. Like I was just describing. Like where you say, okay, I was able to deliver that. Now we're going to maintain it. And I'm going to be held accountable for maintaining it quarter over quarter or year over year. And that's a recurring, I'm not necessarily saying frontier partners are going into a recurring revenue business.

[00:27:55] I'm saying it may be project-based that's outcome oriented with a higher, you know, sort of end that if you hit this kind of outcome, you know, you get paid X. If you get outcome 1.3X of that outcome, you get paid Y, et cetera. And so it could be streamlining a process, reducing something, a one-time, that exercise I gave around taking a call center team and redeploying them. I'm like, that's a very clear outcome.

[00:28:21] It might be a one-time project and MSPs may not be open and willing to do non-recurring projects. So from a frontier partner and or an Accenture example I gave around the systems integration, it might be a one-time project. And that may not be a business model you're interested in going back into. Some of you never had a recurring revenue business and now you have it and you don't want to stop doing that. Some of you have not built a recurring revenue business and outcome-based might work for you.

[00:28:48] Some of you may have a hybrid of both and this is a great way for you to increase the average sale price of your outcome-based projects. All very viable. But once again, hard for me to answer because all of the partners are starting from a different starting point and have a different business model, different set of customers, you know, and skills and capabilities. But that's what I'd say. Those are some of the sort of waterfall questions I would ask if we were sitting in front of each other, you know, one-on-one with an MSP. Right. Right.

[00:29:15] And we have a whole other podcast to talk about people's business models and stuff. Yep. Tiffany, this is always fascinating. I really love getting down and getting into your research with this. If people are interested in continuing the conversation, keeping the conversation going and learning a little bit more, what's the best way for them to reach out? Yeah. You know, I'm really active on social. So, you know, you can follow me at LinkedIn and or X and or Instagram. I'm on those. And, you know, obviously Instagram will post a thread. So if you're on threads. But ultimately, you know, I'm always looking for feedback.

[00:29:45] You know, I think in the show notes, you're going to get a copy to the study. I suggest that you dig into it. It's really one of the really amazing things about our ETR division is it is very kind of forward-looking. And so we are looking at buying signals from a community of 10,000 IT decision makers. And so a lot of this is what we think is going to be happening in the future, not sort of a look back on past. And so some of it is going to give you some directional indications of where you may be wanting to place your bets. Well, everyone, I've given you your homework.

[00:30:14] Tiffany, thanks so much for joining us again. Really appreciate it. Thanks for having me. It's always a pleasure to be on the show. So thanks for having me. Well, we'll have you back soon. Thanks a lot. And the business of tech is supported by our vendor partners, ABC Solutions, accounting, bookkeeping, fractional CFO, and back office services built specifically for MSPs by former MSP operators. abcsolvesit.com. And Rythmz, carrier agnostic bonded 5G connectivity for events, temporary sites, and business backup

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