How Blue Mantis Navigates AI and Security Demand Without Enterprise Budgets – Josh Dinneen

[00:00:01] Managed service providers are being asked to do something genuinely hard. Absorb AI, consolidate security and serve mid-market clients who want enterprise-grade outcomes without enterprise-grade budgets. Today, one of the fastest growing MSPs in North America on what security first actually means when you grow up as a reseller and where the AI readiness conversation is really headed for the mid-market. This is the Business of Tech. I'm Dave Sobel.

[00:00:32] Josh Dinneen, you are the CEO of Blue Mantis. Welcome to the Business of Tech. Thanks for having me. Blue Mantis just landed number 18 on the 2026 MSP501 and you're now serving more than 2500 mid-market enterprise customers. But the number I was focused on is that 60% of your revenue is now recurring managed services. And you built all that while still growing the data center hardware and software side.

[00:00:58] So I'm really dying to know, like how do you manage the tension between a recurring services model and that traditional product reseller motion living inside the same company? Yeah. So I think, you know, once again, you had mentioned that we service the mid-markets and I think that's key to what we're doing as a business. So as an IT services company, hardware is a key part of that whole equation.

[00:01:25] And our business really focuses on outcomes and helping customers navigate the ever-changing landscape of emerging IT and also taking advantage of their investments already. So how do you bridge those gaps? And hardware plays a huge part of that. And we've always subscribed to the mindset that a hybrid data environment, a data center environment is the right way to go. And it certainly does serve the mid-markets well.

[00:01:54] All right. I'm dying to know which of those two motions do you think is actually harder to run well? And which of the ones you think your people are really wired for? Yeah. So it's very different motions, as you know, right? So our engagement motion with our customers is assess, modernize, manage. And so when you look at how we engage with customers today, we're coming in to understand where they are in their maturity curve,

[00:02:20] where they are in their spend and how they're trying to transform their business to meet the new demands of the modern business model. And so with that, we come in and we do a lot of advisory workshops that help our customers navigate what's next and how to get there, building roadmaps and plans to help them modernize. And then we come in and we help them do that with our professional services business. So when you look at our business, we're not just an MSP.

[00:02:49] We're not just a VAR, a value-added reseller. And we're not just a professional services organization. In fact, we're one of the largest CSPs in North America as part of our recurring revenue mix. And so when you look at our ability to come and service our customers, we can truly help them navigate the entire spectrum of modernizing their environments to meet the business requirements. And we do that with the lens of cybersecurity first and foremost in everything we do.

[00:03:15] So being a full stack cyber shop, everything from helping customers with their strategy and posture to aligning that to frameworks, to helping create policies right down through tool sets, right? And our ability to then manage that after it transfers to a run state or transfers to operations. So when we look at really helping our clients in the mid-market, we think of that as the entire continuum of what we need to do.

[00:03:41] With that being said, if we were to shift this to a more transactional engagement model, that becomes challenging because you have the quicker or easier path to revenue is typically selling hardware. And the more, the longer sales cycles for us selling manned services, we really have a more intimate engagement with our customers. So there's a higher level of scrutiny around our ability to deliver.

[00:04:09] And certainly customers want to understand before they go all in with a manned service providers that we have the skill set and certainly the capabilities to deliver what they need. Now, back in September, you launched the Blue Mantis Protect offering. It's a fully managed cybersecurity service pairing, AI powered threat detection with your human analysts. Talk to me a little bit about the gap in the market that you were targeting and what your thought on specifically, who is the buyer for that kind of service?

[00:04:38] Yeah, so we partnered a lot for driving these products into our customer base. And what we found continuously was our customers were asking for something a little more flexible. They were looking for more of an enterprise flexibility in our larger mid-market customers. And we felt that we had an opportunity given our global delivery centers. We have a large global delivery center out of India and a large global delivery center out of Canada,

[00:05:08] and certainly our onshore, which is here in the US. And so being able to create an offering that really satisfies our clients' flexibility needs and how much they want to be involved or how little they want to be involved with enterprise class capabilities in our offering. And then being able for us to really manage it from tip to stern here.

[00:05:32] And our customers are enjoying the flexibility, but also the fact that we're actually accountable for this from start to finish. Gotcha. Now, I also want to know your customer retention sits above 97%. Like, strip away the marketing from there. Like, how does your team actually deliver at that operational level to sustain that kind of number? Yeah, the important thing is not just the retention, which is great.

[00:05:59] Our 98% retention over 48 months has been really key to our investing and being a modern MSP, right? And delivering the services and continuing the feature functionality updates as customers need them, right? So very much taking advantage of what AI has to offer today and becoming AI enabled in our abilities to service our customers. It's also key that we're aligning our systems to the market here, right?

[00:06:29] So we're very, very much making sure that our customers have the level of feature functionality they need. We also surround our customers. It's a relationship business. And oftentimes, when people ask me what I do, I'll let them know that I'm in the customer service business. We just happen to have that flavor of IT, right? So our job is to service our customers. We're a client-first organization and make sure that we align what they're trying to accomplish to our ability to deliver on that. And that's key for us.

[00:06:58] And it comes into productization. It comes into the fact that we really swarm our customers with technical account managers, with customer success managers, and we have an intimate relationship there beyond just the sales process. And so how do we nurture? How do we grow with our customers? We do that through a lot of the industry tactics like QBRs and monthly and weekly meetings to make sure we're staying aligned from their business needs into what we're delivering at the moment and what's coming down the horizon.

[00:07:27] And so at the end of the day, it's really a relationship game that makes us successful. But the key here is it's not just the retention. I mentioned this earlier. It's the growth. And the growth that we've had, our CAGO over the last 48 months has been 20% as well. So when you look at the growth, which fuels innovation and allows us to service our customers better. And that continuum continues to make us better and aligns to our customers in the addressable markets that we're going after. We'll be right back after this message.

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[00:08:27] And we're back. So how are you thinking about AI and automation in that framework? You talked a lot about people, but in order to get to real scale, there's an automation line. And obviously there's temptation to do more and more with the AI, more and more with the technology. How do you think about that balance and how do you proceduralize it? Yeah. So it's a double-edged sword, as you know, especially in this market where AI is a significant disruptor, but it's also an amazing advantage.

[00:08:57] And so we started our AI journey about three years ago, you know, adopting co-pilot and driving a lot of different iterations within our business. And as we entered into this year coming out of last year, our goal by the end of this year was to be fully AI enabled as a business. And what's that mean? So we don't look at AI as a cost cutting measure here at the firm. We look at it as how do we amplify our workforce? How can we do more with the folks we have on the bus?

[00:09:25] How can we create better outcomes faster and more reliably with our business and truly leverage the technology to deliver a better service for our customers at a competitive price? And so that's the journey we're on. We've had a lot of iterations of this over the last 18 months as we've advanced our position here.

[00:09:46] And by the end of the year, when I say that we'll be fully AI enabled just outside of MSP and the delivery model itself, which is which is getting the majority of our investments is also our workforce at large. Everybody in the firm will have an AI teammate by the end of this year, and we'll be leveraging those teammates to deliver better, better productivity from the for the folks we have here at the firm. All right. I got to ask, say a little bit more about measuring the outcomes, right?

[00:10:12] Because one of the things we're all struggling with is we're investing all of these in these technologies. But how do you measure where success is? Talk about having an AI teammate. Like, how are you measuring the outcomes and success of those investments? Yeah. So we subscribe to a 3x model and 3x model is we want to be able to get three times ROI on our workforce. Right. And now we're not going to get that from every function of the business. Right.

[00:10:39] There'll be some like sales folks and billable resources that are well beyond 3x and there'll be some that aren't. And so how do you get that as an aggregate for the business? So we measure based on the 3x model. We capture that data per function and per department and per product. So making sure that we run a healthy business is important for us to be able to invest effectively and make sure that we're staying in line and ahead of the curve in most instances around the advancements of technology.

[00:11:06] So as the tip of the spear for our customers, we have to evaluate technology. We have to integrate technology to deliver business outcomes for them. And that's we're no different. And so that 3x model is really how we're measuring the business at large down to each function and role. And how do you translate it into measuring for customers? You know, you obviously your own operations are difficult, different than implementing for customers.

[00:11:32] Customers are asking the same question. How are you helping them measure success on their AI projects and deployments? Yeah, as you as you know, in the managed services world, there's no shortage of KPIs to measure. Right. So and things to look at as a customer, whether it's average speed answer or average speed resolution or, you know, I can go on and on here. But obviously, those are there's industry benchmarks that we look at and we measure ourselves against.

[00:11:57] We also measure ourselves against our own performance, you know, day over day, week over week, month over month, quarter over quarter, year over year. Right. So we're continuing to keep an eye on that and where we want to make sure that we're always in the right percentile of success for our customers. That's really how we're measuring that. And so when as we introduce new technology, as we introduce new processes and new approaches, we have to make sure that we don't deviate from what's making us really effective with our retention and our and our customer set.

[00:12:25] When you look at our NPS scoring and when you look at our, you know, other ways to measure us against the quality we're delivering to our customers, we were world class in all categories. And that's and that's important for us. If we start to see degradation in that, we're looking to find out why, you know, is it just a temporary blip? Is it we've onboarded a bunch of new customers that we're learning? Is it the technology is disruptive and we're still not 100 percent effective with leveraging the technology?

[00:12:55] Or maybe we have to tweak the technology to meet the better demands of the customers. All those things. The question why is the big question. And until we understand that, we can react to it quickly. I'm curious how you're rolling out a I readiness, right? Because I know with a lot of customers, there's a whole readiness portion. Like, is that a durable recurring service line, like something a customer pays for month over month? Or is it still project work and advisory work that you're looking to convert into managed services?

[00:13:25] Like, talk to me about the way you're delivering a I readiness for customers. Yeah. So when you look historically how we've made acquisitions in our inorganic investments to make sure that we're meeting the demands of of A. As it's coming down the pipe to us, it's data enablement and data governance. Data readiness is key. We acquired a company a couple of years ago that gave us a lot of credibility and capability in that space.

[00:13:48] So that's a key part of this. But when you look at the infrastructure needed to support A.I. today and really understanding what that journey looks like, we look at all technology evolutions as a journey and not a point in time. Right. We're going to have to solve this problem. But what's what's next? What happens after that? And really making sure that we have the answers there. So what going back to how we engage with customers, it's it's assess, modernize, manage. And that's an A.I. is no different. So the A.I. readiness is we're coming in and we're doing an assessment.

[00:14:17] This is the what the business is aspiring to do. And we're building them a roadmap to get there. And once it once we do the project based work to get them there and get them ready for it, their teams often need to rely, especially in the mid markets, often need to rely on augmented workforces to deliver that run state. And certainly we participate in that. So so it really it really goes across all of our lines of business here at the firm.

[00:14:47] And by the way, that that includes hardware resell. Right. The modern technology that we need to implement, whether it's edge computing, whether it's more sophisticated network, whether it's better security controls and tools, you know, what have you. Those those need to be implemented along the way to deliver on that outcome the customer is trying to achieve. We'll be right back after this message. 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?

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[00:15:45] And we're back. What are you finding that are separating the deployments that prove value from the ones that are stalling out? Are you starting to already identify key traits that are making the successful ones? It's interesting. You'll have a lot of different ways AI comes to be a topic in an organization, whether it's being driven from the board or is being driven from the CEO or is being driven from IT or business units.

[00:16:14] And so it's interesting, the buyer persona is very different than traditional tech spends that we see, right? Because there's a lot of influence from the business units and within the organization. A lot of influence from the board, a lot of influence from, you know, leadership in the C-suite. So how do you look at that as we come in and help the customer? It's really understanding, you know, what the objective is of the business. And sometimes it's a very pointed solution. Sometimes it's more of a larger transformation.

[00:16:43] But I think the key to success here is to make sure that we're use case driven in the beginning, making sure we have tangible use cases that can can prove ROI. And all of us have heard that 90% of the the AI initiatives in the last couple of years have failed to produce a return on investment. I want to focus on the 10% that did right. And they're typically very pointed solutions that are driving a very specific use case.

[00:17:10] And that's tend to where that's where we tend to to steer our customers to focus on those wins early as you're starting to adopt a bigger AI strategy overall. But, you know, there's easy things that I think all of us could appreciate. Contract management, for example, would be a good use case for AI, right? E-discovery is a good use case for AI. You know, leveraging the tools that are most prevalent within the business today, like Microsoft and Microsoft Co-Pilot.

[00:17:37] And if you're using OneDrive, for example, being able to query your data, but making sure your data is segmented properly so you're, you know, you're not giving access to folks that don't that shouldn't have access to certain data and certain data attributes. So all that stuff becomes very important as we're navigating the success here and then drawing very specific timelines. And we need support of the business units to be successful. And we certainly need support from the leadership of the business to be successful.

[00:18:07] One of the things we've been having a lot of conversations with these days is around the idea of consumption models and how they're changing the use. You know, in particular, we're having a lot of thought having to go into tokens and AI usage, particularly as you start thinking about more and more automation. The more you can have machines burning machine time and the client getting billed for it, that can be potentially really open ended.

[00:18:31] And one of the tensions that I've been looking here at here is, is that in many cases, a lot of the vendors are capturing a lot of that value, but imposing the risk on customers and potentially the, you know, the partners that are helping the implementation. How are you addressing with your existing clients that you're rolling this out with that risk of, you know, consumption model, just eating unended, you know, risk into their budgets?

[00:18:58] Yeah, it's a real challenge, especially in the mid markets. And traditionally, the mid markets have been consuming AI through PaaS and SaaS, but now as they're getting more intentional with their AI strategies and the programs are changing rapidly. You know, Microsoft just made some, some significant program changes, for example. But the, we have a large FinOps practice. I mentioned our CSP business previously.

[00:19:23] A big part of our value add is providing real FinOps to our consumers and really managing that technology expense management as a larger paradigm. And tokens fall into that. And so we continue to innovate.

[00:19:36] We have the ability to look at our customers' environments and their token spends and give them good data to make sure that they can not only predict to some degree when the usage spikes are going to happen or how they're going to grow their businesses against the current programs, but also put controls in place where they'll get alerted or actually we'll be able to shut down for them if they need us to, their ability to consume tokens at large.

[00:20:04] And so I think it's, it's an interesting paradigm when you look at the same thing happened with cloud, right? It's different, different, but similar. A lot of parallels there and our ability to help our customers navigate that and reduce their cloud spend based on how they're consuming, how they're architected, how they're consuming and, and their approaches overall on the consumption models in their business. This, this falls right in line with that. And it's the key is the data.

[00:20:32] And so right now we're continuing to evolve and create new feature and functionality, and we're going to have some really exciting releases in our annual summit coming up in October. You know, Blue Mantis Futures, we bring a large tech summit to, to our customers and, and, and partners. And one of the big releases we're excited about is our FinOps capabilities around token consumption specifically.

[00:20:57] So for an MSP listing right now, who's trying to build their own real AI practice and move more of the revenue to recurring services, like what's the one move you tell them to make in the next 12 months? And the one you'd tell them to stop wasting time on? Yeah. So we get this, this question in a different format, a bunch. And so for us, it's, you know, we, we looked at this and I don't know that I have the answer for everybody trying to start an MSP, but I'll tell you kind of how we, how we did it.

[00:21:23] Um, when you look at, uh, what's most prevalent in your customer's environment, you know, certainly co-pilot is, uh, is very prevalent. It also depends on what type of business we're talking about. If you're, if you're a software company, it's going to look a lot different than a healthcare company, than a finance company and on and on. Right. So, but if you look at the mid markets at large, um, and the majority of folks are leveraging Microsoft in, in their environments in a, in a pretty, you know, wide scale.

[00:21:50] So tapping into co-pilot to get started and being in wrapping your services around co-pilot and how the adoption of co-pilot can, uh, can really help drive some of these AI initiatives in conjunction with the stuff they're already consuming through their paths and SaaS and aligning those efforts. That really is been the key for us and helping our customers navigate, um, this phase of, of AI and, uh, that we're in today.

[00:22:14] Well, Josh Dineen is the CEO of Blue Mantis, a security first IT services provider headquartered in Portsmouth, New Hampshire, the US Marine Corps veteran and 25 year industry practitioner. He founded Norwell technology group in 2015 came in through its 2018 acquisition by green pages now Blue Mantis and became CEO in November of 2023 under his leadership. The company has run at compound annual growth rate near 30% and sustains customer retention above 97%.

[00:22:44] Josh, if people are interested in continuing the conversation, what's the best way for them to reach out? Yeah, you can, you can certainly find me on LinkedIn and, and, uh, I really appreciate you having me on the show this morning. Josh, this has been great. Thanks for joining me. Have a great day. What would you fix in your business with the right playbook? Small Biz Thoughts members get a library of templates and operational resources, recorded member calls, and classes through IT Service Provider University.

[00:23:12] Operational education built specifically for independent MSPs. Start at smallbizthoughts.org. Interested in advertising? Head to mspradio.com slash engage. The Business of Tech is written and produced by me, Dave Sobel, under ethics guidelines posted at businessof.tech. Thanks for listening. I'll see you on the next episode.

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