Q&A on MSP Trends: AI, Billing Rates, Technician Density, Cloud Spend, and Remote Work Insights

[00:00:12] Let's hear from you, audience. Today is Question and Answers, your live questions plus questions and comments from the MSP Radio and Business of Tech social media feeds.

[00:00:23] We'll talk return to the office, billing rates, endpoint management, AI sandboxes, cloud spend, the job market, and more, plus anything you want to talk about.

[00:00:36] Welcome to the Business of Tech Lounge, the live version of the Business of Tech podcast.

[00:00:41] It's Wednesday, November 27th, 2024, and I'm Dave Sobel.

[00:00:46] Now, I will be taking those questions and comments throughout the show, so make sure to put them in chat if you've got one.

[00:00:53] I will happily respond to any questions you throw my way.

[00:00:57] Now, I want to thank Sales Builder, our Patreon sponsor, whose support makes this show possible.

[00:01:03] Focus on your IT sales workflow with the power of automation and visit them at salesbuilder.com.

[00:01:10] That's B-U-I-L-D-R.com.

[00:01:14] Now, reminder, I am watching that chat, so I will take any questions.

[00:01:18] Now, first, I want to start out with a question from the audience about my recent interview with Peter Kujawa.

[00:01:24] Peter and I were talking about the MSP market and some of the latest market data, and he had made some points about technician density.

[00:01:35] And a listener reached out to me with this question to understand more about technician density.

[00:01:44] Historically, endpoint meant workstations and probably workstations and servers.

[00:01:50] When we talk about endpoints per technician, is that the number we're counting?

[00:01:55] Or do we also include the network-notch non-user devices that are included in our managed services plans?

[00:02:03] Router, firewall, switches, APs, battery backups, NAS appliances, and printers?

[00:02:14] Now, I went back and I checked with Peter to double-check on this.

[00:02:18] And he let me know that the correct answer is the second one.

[00:02:22] That any devices that are covered under a managed services plan is included when he talks about endpoints per technician.

[00:02:30] And Peter had given some guidance in that interview about the different kinds of endpoint density.

[00:02:35] Now, what I wanted to give some thought to and pose to my audience to think about is, as we continue to invest in automation, and particularly AI and machine learning-driven automation, will we see those numbers continue to go up?

[00:02:50] It's one of those things that I have been having conversations with Peter at Service Leadership about, and one of those things that I think will be interesting to test.

[00:02:59] Can you expand those densities that per endpoint to technician numbers through further investment in automation?

[00:03:08] Now, generally, that number has been true, that yes, you can continue to do that.

[00:03:13] How much can we achieve more density when we add the new AI and automation that's coming through some of the large language models or some of the advanced machine learning that we're seeing being infused into those platforms?

[00:03:29] It'll be an interesting space, and one of the reasons why I wanted to highlight that as an area we wanted to understand.

[00:03:35] So if you're interested in understanding how to track this, what you should be looking at now is making sure that you're counting all of the endpoints, as Peter highlighted.

[00:03:45] All of the things, not just workstations and servers, but any devices of any kind that are included in your managed services plan.

[00:03:53] A reminder, I am watching chat if you've got questions and comments throughout today's discussion.

[00:04:00] Now, my second question of the day that I wanted to spend some time on was about charging and rates.

[00:04:06] This listener wrote to me and said, how much should a new company charge per hour to attract new small business customers?

[00:04:15] Could I offer some guidance and what does the data say?

[00:04:19] Now, this listener works for a company who charges $320 per hour and as they're striking out on their own did not feel like they could charge that much for a new business.

[00:04:32] Now, I want to highlight a couple of things that are really interesting to think about when we're thinking about billing rates.

[00:04:38] Because oftentimes, particularly when you're starting out, you recognize that any business is good business.

[00:04:45] You're just trying to bring dollars into the door.

[00:04:48] So I want to highlight that that is a priority that you will often think about.

[00:04:52] And one of the things you'll do is you'll go around to your market, you'll look at what everyone else is charging and try and understand,

[00:04:59] well, can I come in in the median of that, the mean of that right along everyone else's rates?

[00:05:05] Or maybe perhaps I'll come in a little bit lower.

[00:05:08] Now, I want to give you a particular set of metrics that we use to determine when we're looking as analysts at a business to understand if a services business is healthy.

[00:05:20] We're looking, when we look at your profit and loss statement, we want to see 2.5 times your salaried people or higher to understand if you are making money versus losing money.

[00:05:34] If the bill rates total in revenue fall below 2.5 times the salaries of your employed people, I know that business is not making any money.

[00:05:48] And in fact, the more that we can get to from above that, the more profitable that is.

[00:05:55] So that's a really hot, important metric.

[00:05:58] Now, for someone who's like this, who's looking at starting out, they may say, I am not going to, I'm going to struggle justifying $320 per hour.

[00:06:07] Well, is that true?

[00:06:09] Is that the number that you need to bill in order to keep the doors open on your business?

[00:06:15] And I want to say, particularly for those of you that are starting out, it is very difficult to raise your rates over time.

[00:06:22] It is very difficult to do that.

[00:06:25] And oftentimes you start so low that it is very difficult to bring that further up.

[00:06:32] Now, David Campbell has thrown out a question and I want to bring that up to the front.

[00:06:36] He wants to get some more insight into product and proposition management, specifically for technical services.

[00:06:43] Things like technical writing, building a taxonomy, ideas for collaborating with remote teams.

[00:06:48] Those are areas as well, too.

[00:06:51] Now, I will tell you, David, I think this rule that I've just talked about in terms of billing rate applies in any technical services.

[00:06:58] So the insight you're looking for is around billing rates.

[00:07:01] I'll tell you that I think it's completely aligned with that.

[00:07:05] Now, if you're looking to divide that out into a particular service offering, I'd certainly like to hear a little bit more about what you're thinking about.

[00:07:13] Now, additionally, I'll note that you've also thrown into the chat there that you'd like to get a little bit of ideas about how to position managed services like MSP services, how to pitch it to customers.

[00:07:24] There are lots of guidance out there in terms of what you want to do for in terms of giving the positioning out there.

[00:07:31] Oftentimes, we talk a lot about the idea of linking the uptime of the business to the services that are being provided.

[00:07:40] I'm going to deliver a set of services and we're going to measure success based on the uptime of your business.

[00:07:46] That is oftentimes the way this is done.

[00:07:48] And these are the pain points that we're going to take away for your business.

[00:07:51] And we're going to deliver that on a monthly recurring revenue basis.

[00:07:55] I will tell you that my favorite way of having conversations about any technical services is the way that you can link it to some portion of the profit loss statement.

[00:08:05] I've got a whole video on my YouTube channel about this, but I'll expand a little bit about what I call my good, better, best model.

[00:08:12] Oftentimes, you want to make sure that you're talking about your services as it links to one of three portions of a profit loss statement.

[00:08:20] It's good to connect yourself to the basic portion of administrative costs.

[00:08:27] Hey, Mr. Customer, I understand that you need to keep the lights running and we're going to make sure that we do that and we're going to be included in your administrative costs and we're going to link ourselves to that portion of the profit loss statement and we're going to help you there.

[00:08:41] It's better if you can start talking about the things that you do with your services that reduce the cost of their delivery.

[00:08:49] I can we make your people a little bit more productive?

[00:08:51] Can we save them some time?

[00:08:53] Can we implement workflows that help them be more efficient?

[00:08:56] And we're going to measure that return on investment against the cost of delivering those services.

[00:09:01] I think that's a better way of having these conversations with customers.

[00:09:05] And the best way to have this conversation with customers is to link it to their top line revenue.

[00:09:12] Your investment, Mr. Customer in technology is going to drive additional revenue by selling more of your widgets, allowing you to bill more hours, allow you to bring in more membership.

[00:09:24] If you're saying association will allow you to have four more patients a day, doctor, whatever that is, tying it to the revenue line item is the best way to possibly do that.

[00:09:37] And so that's the way that I think about positioning services.

[00:09:39] And I find that is most useful.

[00:09:43] Now, next up on my hits list and keep the questions coming if you've got them.

[00:09:48] My comments on return to office caused a firestorm on one of my YouTube shorts.

[00:09:54] So I pulled some samples for you to get a sampling of what people were saying.

[00:09:59] Amazon must know something.

[00:10:01] So silly how everybody wants to work out of their bedroom.

[00:10:04] Who is going to lead?

[00:10:06] Nobody.

[00:10:07] And when that happens, the last person you want leading will be there.

[00:10:11] This is a bad move that will cost Amazon its best employees.

[00:10:16] Already some of the best tech companies have moved to a fully remote setup because tech is results driven.

[00:10:22] You commit to work at the beginning of a sprint and you either deliver by the end of the sprint or you do not.

[00:10:28] If you deliver high quality work on time, nobody cares how you got that output.

[00:10:33] If you do not, you're fired.

[00:10:35] The only people who think that you need to have tech workers in the office to get results are old people with outdated mindsets.

[00:10:43] As long as online video calls, Zoom and Teams meetings are banned and everyone has to physically be at the meeting.

[00:10:52] The meetings must be scheduled to allow attendees to walk from one meeting room to another with bathroom and coffee breaks.

[00:11:01] So I want to address a couple of these because I thought they were super interesting.

[00:11:05] It's interesting to me when a listener reached out and said, Amazon must know something.

[00:11:10] I agree.

[00:11:11] I do think they know something.

[00:11:13] I don't think it's necessarily about culture.

[00:11:16] My theory that I offered on my show was the fact that they were positioning around layoffs.

[00:11:21] And I think that's one of the areas where they're going to see continued reduction of force.

[00:11:26] In fact, it was embedded into the announcement that they made that they were restructuring their middle management, that they were flattening the organization.

[00:11:35] Now, that's code for reorganization that oftentimes includes some reduction of force.

[00:11:41] Now, Jassy has come out on record as saying that he did not explicitly want it to be a reduction in force.

[00:11:46] So a second theory that I'll offer here is, this is about real estate, that they've got real estate that they've paid for and they want to make sure it's not wasted.

[00:11:56] Now, I think the second listener who chimed in there was very insightful.

[00:12:01] I think it is a bad move.

[00:12:03] And I think good employees are going to look for that flexibility.

[00:12:07] They're very results driven and are going to make changes in their own careers to find organizations that do this.

[00:12:14] And I'm going to say, I've been highlighting this as an opportunity for managed services providers, IT services companies to snatch those people up.

[00:12:22] If you've got high performance people that want the flexibility of being able to work where they want, give them an environment that they can thrive in and they'll happily work for you.

[00:12:32] So I think this is an opportunity and to lean into the opportunities that are available in creating that kind of environment.

[00:12:40] And I wanted to respond to that last comment because I thought it was intriguing to focus on the fact that many people have built hybrid work.

[00:12:48] But what they mean by that is like a rigid schedule of two, three or four days in the office.

[00:12:53] And then everyone ends up still on teams and zoom meetings just from offices.

[00:12:59] I want to observe that one of the difficulties about being a flexible organization is actually doing that in a way that's very effective.

[00:13:07] It is difficult to be a manager of asynchronous work, meaning I don't necessarily have to have all my people in at the same time and have reporting at the same time.

[00:13:17] We're going to work on different things and at different reporting timeframes and schedules and not necessarily do that in real time with one another.

[00:13:24] But those organizations that master it are very good at being able to both spread across time zones and be effective at when people need to do it.

[00:13:35] And they're very results driven.

[00:13:37] They've shifted towards work product as the output versus time.

[00:13:42] Now, that's hard to do.

[00:13:44] And one of the reasons why I think this is an interesting space is the fact that those that get good at doing this have a competitive advantage, but more importantly, can lean into offering that as a solution.

[00:13:58] Teaching organizations how to do it.

[00:14:00] And to David's question earlier about positioning services, when you master that kind of investment, you can go to your customers and say, not only are we going to help you with remote working and the ability to do that, we're also going to teach you skills to be effective with the technology itself.

[00:14:18] We're not going to just give you Zoom or Teams or effective workflow in Microsoft 365.

[00:14:23] We're going to teach you how to use it and how your managers can be more effective using the technology.

[00:14:29] And you're going to get better outcomes based on that.

[00:14:33] That's why I keep talking about this space and why I think it's so interesting is that there really is some opportunity to stand out with some very business outcome related stuff.

[00:14:46] We're constantly talking about deliver business outcomes to your customers.

[00:14:51] Yeah, but what does that mean?

[00:14:53] This is an example of delivering better business outcomes.

[00:14:56] The ability to hire more people at different times that are flexible and still deliver work on a regular basis.

[00:15:03] Now, that's a business outcome we can measure.

[00:15:06] Now, listeners, I've got another good one because this question came in and I was super excited to talk a little bit more about it.

[00:15:12] You all know I love AI.

[00:15:14] I'm talking a lot about its impact.

[00:15:16] And one recently I talked about was the idea of launching AI sandboxes in your environment.

[00:15:23] One of the things we've seen so much in our space right now is everyone as an individual is starting to play with these technologies.

[00:15:29] But lots of businesses are worried about what it means.

[00:15:33] It's this idea of a shadow AI infrastructure that's starting to happen in our businesses because employees are trying to learn what these tools do and aren't necessarily offered opportunities to do this.

[00:15:46] So this listener posted this idea about AI sandboxes.

[00:15:51] I have been pondering the topic of sandboxes for AI usage to test out before rolling out to my business infrastructure.

[00:15:59] I am still hesitant giving employees that much info and knowledge.

[00:16:04] There's two parts to this, which is why I thought it was such an interesting conversation.

[00:16:08] The first was this idea of sandboxes in general, right?

[00:16:11] The idea that you want to offer ways for your employees to start experimenting with the AIs now.

[00:16:17] That's a great idea because you want to test that out and give investment from your employees and how to best use it.

[00:16:24] And you'll learn a lot about what works and what doesn't.

[00:16:28] And you can go on that journey with your employees.

[00:16:30] One of the things we're finding is that there is a distinct investment that has to happen in the AI technologies that make a difference.

[00:16:40] I just reported on this last week on the show.

[00:16:42] And by the way, on tonight's episode of the show will be some additional thoughts on this topic.

[00:16:47] But there was a study recently done with some doctors looking at the various outcomes of adding AI to their practices or not.

[00:16:55] And what the test was and the study did was it actually took three groups.

[00:16:59] The first, they were all given cases.

[00:17:01] And the first group of doctors were the control.

[00:17:03] Those were those that worked without artificial intelligence.

[00:17:06] There's a second group that was given artificial intelligence to augment their ability to make diagnoses.

[00:17:13] And the third was the AI alone making diagnostics on cases.

[00:17:20] You probably would guess differently than the results of what actually happened.

[00:17:25] What actually happened is those that were augmented with AI underperformed those doctors that worked on their own.

[00:17:35] But the best case was the AI working on its own.

[00:17:40] It actually did a better job of diagnosing the cases and providing good insight.

[00:17:45] So what's our insight into this?

[00:17:46] It's actually around the idea that there is algorithmic bias built into us as humans.

[00:17:52] Though when we look at that, we're using it much more like a search engine is oftentimes how these doctors were thinking about it.

[00:17:59] And we're using the tools to try and get things.

[00:18:02] And we're pushing back when it challenged their judgment.

[00:18:06] And actually, that's not how these tools are best used.

[00:18:09] These tests are used as collaboration partners or working with you to explore ideas and present lots of options that you then talk through and collaborate on.

[00:18:21] Because the AI actually has more insights in some cases.

[00:18:25] Which brings to the second portion of this, which is an interesting culture portion.

[00:18:30] This listener said they were hesitant to give employees that much information and knowledge.

[00:18:35] I'm going to offer that in some cases, you're going to have to start really understanding and thinking about your data structure and what you're protecting and what you're not.

[00:18:43] It's my general experience that broadly, many business owners protect far more information than they actually should.

[00:18:53] But ultimately, there's a lot less that is actually proprietary information than most of us think.

[00:18:59] And if we can actually provide more insights and more data to our employees, they can make better decisions and they can act on that with better information.

[00:19:08] And if we're holding information back, do we have a governance problem?

[00:19:13] Do we have a security problem?

[00:19:14] Are we concerned about leakage?

[00:19:16] What is the downside of giving that?

[00:19:18] And I would offer to that listener that one of the things that you're going to want to really think about is why are you hesitant and what are the outcomes that you're concerned about?

[00:19:27] In fact, interestingly, it seems like you're more concerned about giving it to your employees than to the algorithm itself.

[00:19:34] That's a particularly insightful thought to say, why am I concerned about this?

[00:19:40] It's also why I'm incredibly excited about the idea of AI governance as it relates to our space.

[00:19:48] One of the things that I keep talking about is data governance as a precept to being effective with AI.

[00:19:54] And what I mean by that is most organizations need to get their hands around what data they have, who can get access to what, and what can it be used for?

[00:20:03] And going through the exercise of determining why we have data, what it's for, and who can use it actually drives to answering those questions.

[00:20:13] First, you have to do it for your own organization.

[00:20:16] But I also think it's an incredibly powerful offering to deliver out to your customers as well, because most of them have not thought about these questions.

[00:20:26] Now, I'm going to keep going here.

[00:20:28] And a reminder, I'm watching chat.

[00:20:29] I want this to be interactive.

[00:20:30] I know I've got several of you all watching.

[00:20:32] We'd love to answer any of your questions as they come up.

[00:20:36] Now, next up, I've got a comment about cloud spend that I wanted to share.

[00:20:43] I agree with the focus on cost management for cloud spending.

[00:20:47] Unmanaged cloud spending can get out of hand very quickly.

[00:20:51] Specific service offerings focus on auto-scaling depending on load or by schedule.

[00:20:57] This one got my attention right away.

[00:20:59] We've been talking on the show about the idea of many of the areas that we've seen investment recently in cloud is about managing cloud spend.

[00:21:07] Oftentimes, organizations are finding that they're spending more than they anticipated by moving to the cloud and then sometimes being very wasteful about it.

[00:21:15] There are definitely offerings about doing cloud spend management.

[00:21:20] I think this is going to be one of those areas that is continuing to be grown.

[00:21:24] See my earlier comments on this show about tying back to the profit and loss statement.

[00:21:29] If you can link into the cost of goods sold on delivering better efficiencies, you're doing a better job, in my good, better, best definition, of helping your clients with those outcomes.

[00:21:43] By linking to cloud spending, it's going to make sure that you're doing a good job of spending their dollars intelligently.

[00:21:50] The cloud's dynamic.

[00:21:51] You can scale up.

[00:21:52] You can scale down.

[00:21:53] But that also is linked to cost.

[00:21:56] And you have to keep an eye on cost management.

[00:21:58] Anywhere, there's a lot of research that's showing anywhere between 20% and 30% of cloud spend is entirely wasted.

[00:22:04] Recovering that for customers, incredibly value.

[00:22:07] So I would tell you that as a listener, I was really encouraged to see that there was that excitement there as well.

[00:22:13] Listeners, I'll keep going.

[00:22:15] I've got a couple of more of the pre-arranged questions that have been sent out or pulled from my socials.

[00:22:20] Make sure to catch me live here with any that you've got.

[00:22:24] So how about this listener who was thinking about the job market and some of my recent job data and then brought up this point that I wanted to talk about?

[00:22:34] Great insights on the tech job market.

[00:22:37] It's intriguing how AI influences hiring.

[00:22:40] I recently started using AI for professional searches, and it's been incredibly efficient.

[00:22:46] It simplifies finding job postings and company insights without the hassle of navigating through multiple platforms.

[00:22:54] There's the insight, everyone.

[00:22:55] It's about using the technology to consume more information, process it better, and present it back in terms of the way that you can consume it and then execute on it.

[00:23:06] By able to eliminate the navigation through multiple platforms, this listener is the one leveraging it in order to get information better.

[00:23:14] And I found that to be particularly useful and insightful, and it's why I wanted to bring it to you.

[00:23:19] I actually will say that one of the things that worries me a little bit is the idea of using AI to process job applications entirely where we've removed humans from the loop.

[00:23:30] But in a scenario like this, where we're actually presenting humans with more information that they can then execute against, I think that's a great application of the technology.

[00:23:40] And what we're finding is that the best that have done a good job of figuring out that way of augmenting humans effectively is making the big difference.

[00:23:49] Again, back to that doctor's research, it's not necessarily about giving the tools.

[00:23:53] They have to understand how it's used, and it isn't just an amplified search engine.

[00:23:59] If anyone tells you that AI is autocorrect on steroids or an advanced search engine, they aren't necessarily using it correctly.

[00:24:08] Now, I've been going on and on.

[00:24:10] If you've got a question, I've got a little time here to answer those before we wrap up today.

[00:24:15] I've got all through my additional ones, and I will tell you that I do keep an eye on all my social media feeds to get opportunities to interact like this.

[00:24:23] If you ever watch one of my shows or you're watching the recording, besides the ability to send in a question at question at mspradio.com,

[00:24:30] you can also post on the social media feed of your choice.

[00:24:34] In particular, I keep an eye on my LinkedIn feed as well as my YouTube feed.

[00:24:39] Post there, and I will not only post there, but I may bring it in to one of these question and answer sessions.

[00:24:46] This has been great fun.

[00:24:47] I'll be hanging out for a little while longer, but I want to preview an episode that's about to drop that I think you're going to be very interested in.

[00:24:54] Dennis O'Shea joined me for a conversation.

[00:24:57] Now, he's the CEO of an award-winning MSP called Mobile Mentor.

[00:25:02] Dennis shares his insight on the generational divide in security and privacy attitudes, the evolution of mobile device management,

[00:25:10] and the critical importance of data governance as AI becomes ubiquitous.

[00:25:16] He also discusses how regulation are driving different security approaches across regions,

[00:25:21] and we get some of his advice on the top priorities for businesses to focus.

[00:25:26] Here's a preview of that interview.

[00:25:28] By that, I mean automating provisioning, automating the five lifecycle processes,

[00:25:33] how you provision a device, onboard a new user, deploy all your applications and content to it,

[00:25:38] automate all your OS updates, automate your patching, automate the end-of-life retirement,

[00:25:43] so that you can free up IT time to then think about data security

[00:25:46] and do some of the work on data classification, data governance.

[00:25:50] Because most organizations we work with,

[00:25:52] and if you say, you know, you've got the leaders who have done all that,

[00:25:57] the laggards who will get to it in five or ten years' time,

[00:26:00] that the mid-market, the middle market, they're all working through this,

[00:26:03] but very few of them have already have fully automated all their day-to-day IT operations.

[00:26:09] So they don't have the headspace to go and work on the data governance yet.

[00:26:14] So that's where we think that the greatest gains are.

[00:26:18] I was excited to hear that he was thinking the same way that I was around data governance.

[00:26:23] Now, my Patreon supporters already have this if you want to listen right now.

[00:26:27] It'll drop on the weekend on YouTube and the podcast feed.

[00:26:31] If you're interested, I really encourage you to listen.

[00:26:33] Visit patreon.com slash MSP radio for more.

[00:26:38] And David, thank you for listening.

[00:26:40] I really appreciate it.

[00:26:41] I'm glad you love the show and think up those questions for the future.

[00:26:44] If you're interested, you can always send in questions at question at mspradio.com.

[00:26:49] Now, I want to thank Sales Builder, our Patreon sponsor, whose support makes this show possible.

[00:26:55] Focus on your IT sales workflow with the power of automation and visit them at salesbuilder.com.

[00:27:00] That's B-U-I-L-D-R dot com.

[00:27:04] Vendors, you too can get your name mentioned on the live show.

[00:27:07] It's a simple monthly subscription.

[00:27:09] Visit patreon.com slash MSP radio for more.

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[00:27:15] Like, share, and follow on your favorite platforms.

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[00:27:25] And you get access to all my videos early.

[00:27:27] And like David, if you've got a question and you want to bring it to me,

[00:27:30] you can send in a question if you're listening to the recording to question at mspradio.com.

[00:27:37] Thanks for joining me today for the Business of Tech Lounge.

[00:27:40] And I will see you next time.