Inflation, AI Investments, CMMC Cybersecurity, and MSP Growth Insights for Small Businesses

[00:00:02] It's Tuesday, October 15th, 2024, and I'm Dave Solt. Three things to know today. Inflation, taxes, and housing costs dominate the concerns for small business owners.

[00:00:12] TD Cynics reports a channel partner shift to focus on AI. And Defense Department releases their final CMMC rule, paving the way for new contractor cybersecurity requirements. This is the Business of Tech.

[00:00:28] Tuesday is the new Monday as we do a market review.

[00:00:31] As Election Day approaches on November 5th, a GoDaddy survey reveals that small business owners are increasingly concerned about inflation, taxes, and the cost of living.

[00:00:41] The survey indicates that 93% of respondents prioritize addressing wage and cost inflation, while 50% see tax reform as essential.

[00:00:49] Additionally, 32% believe rising housing costs hinder their ability to achieve the American dream.

[00:00:57] The survey also highlights that 18% of small business owners have changed their voting behavior since starting their businesses, with 51% anticipating a moderate to major impact from the elections on their future.

[00:01:09] Despite economic uncertainties, 77% of small business owners aim to grow their businesses in the coming year, although only 27% expect increased revenue in the next six months.

[00:01:21] The impacts of Hurricanes Helene and Milton are also factors to consider, along with the ongoing Boeing strike.

[00:01:28] These events are expected to distort critical economic metrics, complicating job market assessments.

[00:01:34] Goldman Sachs estimates the Boeing strike will reduce October job growth by approximately 33,000 positions, while Hurricane Helene could account for another 50,000.

[00:01:45] The current reference week for October job numbers may also see distortions as workers in Florida affected by Hurricane Milton are not counted if they are temporarily out of work.

[00:01:57] RSM's chief economist, Joe Berlusius, predicts that October's job figures may show flat or negative growth in total employment and an increase in unemployment, indicating that clear insights into the economy may not emerge until late 2024 or early 2025.

[00:02:14] Historical parallels are drawn to August of 2005, when Hurricane Katrina and subsequent events created a similar data fog that obscured underlying economic trends.

[00:02:26] A report by Netscope reveals that 81% of retail chief information security officers have increased their risk appetite, significantly exceeding the cross-sector average of 57%.

[00:02:38] The report surveyed over 1,000 CISOs globally and highlighted that 100% of retail CISOs view conflicting risk appetites within the C-suite as a critical issue.

[00:02:48] Despite this, less than 2% classify their risk appetite as low, while 23% perceive their CEO's risk appetite as low.

[00:02:56] The findings suggest that retail CISOs are increasingly positioning themselves as business enablers, with 98% identifying this role, compared to a cross-sector average of 59%.

[00:03:07] Additionally, 72% believe adopting a zero-trust approach will help balance conflicting priorities effectively.

[00:03:14] The report emphasizes retail CISOs need to focus on business enablement and risk in their strategic discussions rather than reverting to technology-centric conversations.

[00:03:25] Gartner reported that worldwide PC shipments totaled 62.9 million units in the third quarter of 2024, reflecting a 1.3% decline from the same period in 2023.

[00:03:38] This downturn follows three consecutive quarters of growth in the PC market.

[00:03:43] Mikako Kitagawa, director analyst at Gartner, noted that despite introducing Windows-based AI PCs, the demand did not significantly increase as buyers are yet to recognize their benefits.

[00:03:54] The U.S. market saw a 5.6% growth, shipping over 17 million PCs, driven by stable economic conditions and strong demand from the public sector and education, particularly for Chromebooks.

[00:04:06] In contrast, the EMEA region experienced a 1.5% decline, attributed to distractions from political events and major sports.

[00:04:15] Why do we care?

[00:04:16] Uncertainty is the theme, from S&P concerns about inflation to job market volatility.

[00:04:21] While owners are optimistic long-term, short-term spending might be cautious.

[00:04:26] Economic uncertainty often leads to cautious hiring and budget freezes, which could directly affect the IT and services sector.

[00:04:33] If S&Bs are uncertain about hiring, they may look to automation and outsourcing to manage workload without increasing headcount.

[00:04:40] That's ROI to focus on.

[00:04:42] Admittedly, that's always ROI to focus on.

[00:04:45] The cool reception to AI PCs indicates that while the hype is strong, the tangible benefits are still not resonating with the market.

[00:04:54] This mirrors broader skepticism towards some AI offerings that lack clear, immediate return on investment.

[00:04:59] See, a theme.

[00:05:04] Today's episode is supported by Huntress.

[00:05:07] You want to focus on your clients and are always looking for ways to get more time.

[00:05:12] Use Huntress' fully managed cybersecurity platform to fight off cyber threats.

[00:05:18] Huntress is more than cybersecurity software for endpoints and identities.

[00:05:21] It's a 24 by 7 security operations center.

[00:05:25] It's security awareness training, community engagement, and dedicated partner support with an average CSAT score of 99.3%.

[00:05:34] Technology can only get you so far.

[00:05:37] Human expertise is what's needed to truly elevate and protect small businesses.

[00:05:42] And you get that with Huntress.

[00:05:44] Secure your clients and help them thrive with the number one rated EDR for S&Bs on G2.

[00:05:49] Visit Huntress.com slash MSP radio to find out more.

[00:05:56] TD Cynix's third annual Direction of Technology report reveals that channel partners are increasingly prioritizing investments in AI and generative AI technologies,

[00:06:06] with nearly half planning to offer AI-driven solutions within the next two years.

[00:06:10] The survey, which involved over a thousand technology resellers and managed services providers globally,

[00:06:16] highlighted key trends influencing the IT market, including the importance of cybersecurity certifications at 58% and AI specialization at 45%.

[00:06:26] Despite challenges such as increased competition and margin pressure affecting 52% of respondents,

[00:06:40] the need to balance innovation and core technologies, with security remaining a top priority for partners.

[00:06:48] Looking ahead, 50% of respondents aim for organic growth, while 42% plan to engage further with the channel.

[00:06:55] 65% of respondents received requests for generative AI proofs of concept in 2024, while 75% reported closing deals involving AI.

[00:07:06] And Syncro has released the results of a benchmark survey conducted by Topline Strategy Group in August of this year,

[00:07:13] revealing that 90% of managed services providers expect growth in the next 12 to 18 months despite economic concerns.

[00:07:20] 30% expressed some concern about a recession.

[00:07:24] The survey, which includes 219 MSPs with employee counts between 3 and 100,

[00:07:30] indicated that 71% of respondents reported growth over the past 18 months.

[00:07:35] Notably, 90% of MSPs do not plan to reduce their foundational technology investments even amidst recession worries.

[00:07:43] The primary business objectives for providers remain growth at 73% and profitability 64%.

[00:07:51] Key concerns include cybersecurity threats, competition, and maintaining profitability.

[00:07:56] 75% of providers struggle with billing inefficiency, leading to a loss of revenue.

[00:08:03] Why do we care?

[00:08:05] Well, the surge in AI and generative AI adoption is not speculative.

[00:08:08] Nearly 50% of partners plan to invest in these areas, signaling that accelerated demand for AI expertise.

[00:08:15] Providers should frame their AI offerings as part of a broader solution stack,

[00:08:20] with cybersecurity and traditional IT services remaining top of mind for clients.

[00:08:25] I remain convinced that data management is the real differentiator as it spans cyber and AI.

[00:08:31] The Department of Defense has released the final rule for its Cybersecurity Maturity Model Certification, or CMMC program,

[00:08:41] marking a significant step toward enhancing the security of controlled but unclassified information held by contractors.

[00:08:48] Official publication is set for October 14, 2024, initiating a 60-day Congressional Review Act period,

[00:08:55] during which Congress can block the rule, though observers deem this unlikely.

[00:08:59] CMMC introduces a third-party certification process for contractors to demonstrate compliance with the National Institute of Standard and Technology's Cybersecurity Standard 800-171,

[00:09:11] replacing the previous self-certification method.

[00:09:15] The rule spans 470 pages and outlines internal and external mechanisms that DOD must implement,

[00:09:22] with comments due for the accompanying Part 48 rule by Tuesday.

[00:09:26] The full rollout of CMMC will commence once both Part 32 and Part 48 rules are finalized, anticipated by early 2025.

[00:09:36] Mike Semel of Semel Consulting reached out to me and highlighted this passage.

[00:09:40] Quote,

[00:09:41] If an OSA or Organization Seeking Assessment, the defense contractor, utilizes an ESP, an external service provider,

[00:09:49] including a cloud service provider, that does not process, store, or transmit controlled unclassified information,

[00:09:56] the external service provider does not require its own CMMC assessment.

[00:10:01] The services provided by the external service provider are assessed as part of the Organization Seeking Certification,

[00:10:08] the defense contractor's assessment, as security protection assets.

[00:10:12] End quote.

[00:10:14] His initial analysis?

[00:10:15] As long as MSPs or their vendors aren't processing, storing, or transmitting CUI, like with backups,

[00:10:22] you will not need that expensive CMMC Level 2 assessment.

[00:10:27] Why do we care?

[00:10:28] Providers had better know what data their customers have.

[00:10:31] It may be a broken record, but data management lets you know if you're handling CUI.

[00:10:36] With the CMMC requirements becoming mandatory for defense contractors,

[00:10:40] a significant market opens up for providers, cybersecurity firms, and compliance specialists.

[00:10:46] Contractors will need extensive help aligning their systems with NIST 800-171 standards,

[00:10:52] spanning 110 security controls designed to protect sensitive information.

[00:10:56] MSPs can offer consulting, assessment, and remediation services to ensure clients achieve the necessary certification levels.

[00:11:04] And they need to know if they must be compliant themselves.

[00:11:10] Looking to reach an audience of thousands of MSPs and IT service providers?

[00:11:14] Put your ad right here on the Business of Tech, and be on the show that 64% of MSPs report having listened to.

[00:11:22] A recurring top 50 tech news podcast, there are affordable options for you to reach our audience, and we can support any budget.

[00:11:31] Podcast listeners are more engaged, have a higher level of brand retention, and are more willing to listen to ads here than any other avenues.

[00:11:41] Want to know more?

[00:11:43] There's information at MSPradio.com slash engage, including a button to book a time to talk.

[00:11:50] I'm looking forward to that discussion.

[00:11:54] Thanks for listening.

[00:11:55] I don't know how National Cheese Curd Day can also be National Grouch Day, but here we are.

[00:12:02] I'll be doing two live broadcasts as part of SMB Tech Fest on October 17th and 18th, so make sure to sign up and join the event.

[00:12:10] SMBtechfest.com slash go slash Sobel.

[00:12:12] Link in the show notes.

[00:12:14] And if you have a question you want answered, I do take listener questions, send them in, ideally as a voice member or video to question at MSPradio.com.

[00:12:23] And you got a comment or a thought on a story?

[00:12:24] Put it in the comments if you're on YouTube or reach out on LinkedIn if you're listening to the podcast.

[00:12:29] If you like the show, give us a review and make sure you've subscribed or followed on your favorite platform.

[00:12:35] Talk to you again tomorrow.

[00:12:38] The Business of Tech is written and produced by me, Dave Sobel, under ethics guidelines posted at businessof.tech.

[00:12:46] If you like the content, please make sure to hit that like button, follow or subscribe.

[00:12:51] It's free and easy and the best way to support the show and help us grow.

[00:12:56] You can also check out our Patreon where you can join the Business of Tech community at patreon.com slash MSPradio or buy our Why Do We Care merch at businessof.tech.

[00:13:09] Finally, if you're interested in advertising on this show, visit MSPradio.com slash engage.

[00:13:16] Once again, thanks for listening to me.

[00:13:18] I'll talk to you again on our next episode of the Business of Tech.

[00:13:22] First attack...

[00:13:22] ...