Maryland's New IT Tax, Microsoft's Copilot Revolution, and Cynomi's Cybersecurity Growth Surge

[00:00:02] It's Thursday, April 24th, 2025, and I'm Dave Solt. Today on the show, Maryland's new IT services tax could reshape digital infrastructure policy nationwide, Microsoft positions Copilot as the AI backbone of modern work, Sonomi's $37 million funding round underscores the rise of agentic cybersecurity, and MSPs face a wake-up call. Get political or get taxed. This is the Business of Tech.

[00:00:31] Maryland's fiscal 2026 budget introduces a new 3% sales tax on data and information technology services effective July 1, 2025. This legislation expands the definition of taxable services in the state to include various technology-related offerings, such as cloud storage and IT consulting. Reporting leading up to the passage also noted cloud-based platforms and software-as-a-service tools.

[00:00:59] WUSA 9 looked at the impact, and Brian Vaughn, Director of Technology Transition Paradigm, noted that the tax will cover essential IT services such as data storage, website maintenance, and cybersecurity. He estimated that businesses could see an increase of $350 to $400 a month on average for services that cost around $10,000. Andy Frazier, Director of Sandglass, expressed concerns that the tax might discourage innovation in Maryland as businesses

[00:01:28] may consider relocating to neighboring states with lower tax burdens. Small businesses that rely on these services will likely pass the increased costs on to consumers. Why do we care? Well, as if it wasn't immediately obvious. Maryland's new 3% sales tax on data and IT services, back to July 1, is more than a regional policy shift. It's a signal of how states may increasingly treat digital infrastructure as a taxable utility.

[00:01:57] For MSPs and their IT vendors, this matters on multiple fronts. First, it's precedent-setting. If Maryland succeeds without significant pushback or economic fallout, other states may follow. They expect scrutiny of how IT services are defined, especially if interpretations expand beyond infrastructure to include managed services and SaaS platforms.

[00:02:20] Margin compression. With estimates like $400 a month on $10,000 of services, providers operating in or servicing Maryland clients will either need to absorb costs, hurting margin, or pass them on, potentially impacting competitiveness.

[00:02:36] It impacts client retention risk. Clients in Maryland, particularly SMBs, may react strongly to even modest cost increases. Providers must proactively communicate the why behind price hikes and differentiate value to justify them.

[00:02:51] For strategic planning, this highlights the importance of tax-aware pricing and geography-sensitive go-to-market strategies. Businesses near state borders may shift operations, purchasing, or even headquarters to friendlier jurisdictions. In Maryland, that's Virginia and the district. Compliance complexity. Well, taxation of services like cloud storage, cybersecurity, and consulting introduces new compliance burdens.

[00:03:17] Providers will need to ensure their billing systems and tax engines can handle nuanced service categorization. Bottom line, this isn't just a local tax. It's a canary in the coal mine for how digital business models will increasingly intersect with state-level tax policy. MSPs and IT services companies have largely operated under the radar of state legislatures. That era is definitively over.

[00:03:44] This tax didn't come from nowhere. It came from policymakers who didn't hear from the people it affects. Hyperscalers and telcos often dominate tech lobbying. MSPs, which serve the backbone of small and mid-sized business IT, were absent. And it shows. This legislation effectively lumps cloud platforms, consulting, security, and infrastructure into the same taxable bucket.

[00:04:10] If MSPs don't challenge these definitions or help shape them, governments will continue to treat them as commoditized, taxable infrastructure, not strategic partners. Maryland may be the first, but it won't be the last. States facing budget shortfalls will look to digital services as an untapped revenue source.

[00:04:30] If MSPs and IT services firms don't begin coordinated advocacy through associations, regional coalitions, or direct lobbying, this becomes a pattern, not an exception. If you aren't a member of the National Society of IT Service Providers, I couldn't have written an advertisement stronger than the news itself. To my knowledge, they're the only group considering legislation and lobbying.

[00:04:55] The response or silence from the MSP community will set the tone for how much say they'll have in the next round of legislation. The takeaway? Get political or get taxed into irrelevance. This episode is supported by Comet Backup. Are you seeking a fast, secure, and flexible backup solution? Comet Backup empowers you to manage all your backups from a simple, centralized platform.

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[00:05:48] Get $100 free credit when you sign up with the promo code MSPRADIO. Start running backups in 15 minutes or less with Comet Backup. Microsoft has launched the Wave 2 Spring release of its Microsoft 365 Co-Pilot, introducing a range of new features designed to enhance productivity. This update includes the rollout of advanced AI agents for research and analysis, as well as a new agent store that integrates various third-party applications like Jira and Miro.

[00:06:19] Among the notable enhancements, the Skill Discovery Agent assists in forming skills-based teams by leveraging employee capabilities. Additionally, the Create feature allows users to generate AI images in line with corporate branding, while the Co-Pilot Notebooks feature facilitates seamless integration of different workflow components. Microsoft also unveiled new tools to help IT administrators manage AI agents, ensuring better control and governance over the technologies.

[00:06:46] The updated Co-Pilot application will introduce AI-powered search capabilities that extend beyond Microsoft's ecosystem, allowing users to access data from third-party applications such as Google Drive and Slack. John Friedman, Corporate Vice President of Design and Research at Microsoft, emphasized the app's overhaul, stating, quote, we're setting the stage for the next wave of computing, end quote, highlighting the importance of the app's memory and personalization features.

[00:07:13] The redesign includes new tools like notebooks for organizing project-related information, and a Create feature to generate images and other content using OpenAI's latest model. Why do we care? Well, the Wave 2 update for Microsoft 365 Co-Pilot isn't just about new features. It signals how Microsoft is redefining work by embedding AI deeper into daily workflows and organizational structure.

[00:07:37] The introduction of the Agent Store, think App Store but for AI workflows, means Co-Pilot is becoming a platform. Integration with tools like Jira, Miro, Google Drive, and Slack shows Microsoft wants to own the orchestration layer, even if it doesn't own all the data. For providers, this increases Microsoft's gravity and raises the stakes on how services are delivered, automated, and governed. John Friedman's next wave of computing comment is the roadmap.

[00:08:06] Microsoft is building the operating system for knowledge work, a persistent, personalized, AI-first environment. If you're a provider and not thinking about workflow automation, AI training and tuning, and cross-platform data federation, you're already behind. Tsunomi has announced a $37 million Series B funding round aimed at enhancing its cybersecurity platform. The funding, co-led by Insight Partners and Entree Capital, follows significant growth for the company,

[00:08:36] which reported a threefold increase in annual recurring revenue in 2024. Tsunomi's co-founder and CEO David Primor stated that the new capital will focus on developing agentic artificial intelligence capabilities and expanding their global market presence. Felene Kuznig, Managing Director at Insight Partners, noted that Tsunomi has shown remarkable growth and product market fit in the managed service provider and managed security service provider sectors. The company aims to automate services and extend support offerings,

[00:09:04] addressing the rising demand for strategic cybersecurity solution among service partners. Why do we care? Well, this funding round isn't just a funding headline. It's a signal flare for where the cybersecurity market is headed, especially in the MSP and MSSP space. Tsunomi's investment in agentic AI, AI that acts autonomously on behalf of users, aligns with the broader shift from reactive cybersecurity to strategic continuous security enablement. And that kind of ARR growth signals real demand.

[00:09:34] SMBs and mid-market clients are increasingly outsourcing security strategy, not just tools. And providers need scalable ways to meet the demand. Tsunomi's traction validates the need. If you're still selling security as a bunch of tools, you're behind. The future is outcome-based, intelligent, and agent-led. The question is, who will get there? Are you ready to get your brand in front of the tech leaders shaping the future of managed services?

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