The Business of Tech Lounge - Wednesday, March 20 2024

[00:00:00] It's Wednesday, March 20th, 2024 and I'm Dave Sobel. Welcome to the Business of Tech Lounge.

[00:00:19] Today on the show we talk about preparedness for CMMC 2.0 with Mike Semmel, with thoughts

[00:00:26] on training your technicians to understand the business with Dan Adams, a preview of my interview

[00:00:32] with Fred Kerry, questions and answers from you and listeners, plus following up on Broadcom

[00:00:39] and VMware partners, Microsoft's self-serve and United Health. I want to thank Sales Builder, our

[00:00:47] first Patreon Vendor sponsor who support makes this show possible. Focus on your IT sales workflow

[00:00:55] with the power of automation and visit them at salesbuilder.com that's B-U-I-L-D-R.com.

[00:01:05] Want to get your logo here? Vendors, you can do so with our Vendor Patreon program,

[00:01:11] a simple monthly subscription and visit patreon.com slash MSP Radio to sign up. I couldn't

[00:01:18] do this show without support and thanks again to Sales Builder for theirs. Now I do take questions

[00:01:26] and comments throughout the show so make sure to put them in chat. I have a dedicated question

[00:01:32] section in the show with Lister submitted questions, so get them in chat and we'll get to them

[00:01:38] a little later. And now our top story. This may not seem like a technology one but bear with me.

[00:01:48] The National Association of Realtors has agreed to settle a lawsuit and change how real estate

[00:01:54] agents are paid, moving from a standard commission to a negotiable one. This could lead to

[00:02:00] increase competition and new business models in the real estate market, particularly potentially

[00:02:06] lowering costs for sellers. The settlement can also reduce conflicts of interest by eliminating

[00:02:12] the requirement for sellers to advertise the buyer agent commission. The changes could be

[00:02:18] implemented as early as July but as with all significant changes it's expected to take some time.

[00:02:25] In the post-settlement world, the method of payment for buyer agents is a bit uncertain

[00:02:32] with possibilities including a flat fee, a percentage of the sales price, or the seller covering the fee.

[00:02:40] Future home sellers on online or discount real estate brokerages stand to benefit.

[00:02:46] But the situation for first time buyers and those on tight budgets is less clear as they may

[00:02:51] have to pay out of pocket for a real estate agent. So we arrive at the tech angle.

[00:02:58] The real estate industry could be disrupted by AI bots replacing buyers brokers providing a

[00:03:06] more reliable service at a fraction of the cost. The US currently has a surplus of mediocre realtores.

[00:03:14] Per the National Association of Realtors in a 2015 report quote,

[00:03:20] the real estate industry is saddled with a large number of part-time untrained, unethical

[00:03:26] and or incompetent agents. An AI trained on the actions of good brokers could quickly forward

[00:03:34] new listings, handle documents and payments, and answer questions 24 by 7 while they couldn't

[00:03:40] conduct home visits that could recommend local inspectors. So why do we care? Think about this for

[00:03:50] a moment. If a robot can provide most of the value at a fraction of the price it could be an

[00:03:56] attractive option for many. And that moment of disruption is why we care. That's what makes it a

[00:04:05] technology story. Did the lawsuit change the market for enough human realtores to offer enough

[00:04:11] value to stay ahead of the AI change? Consider the taxi industry which didn't see change coming

[00:04:20] and offered a substandard product for too long. The realtor industry knew it had a problem

[00:04:28] nine years ago. Both of those are stories that tell us of what's happened before

[00:04:34] with industries that have waited too long to adjust for technological change. And the lesson

[00:04:41] for IT services companies is not to fall into the same trap. Potentially where AI and automation

[00:04:48] can replace too much of the value offered and you've got to make sure to stay ahead of that.

[00:04:55] Now as we think about training techs let's talk a little bit more here. Dan Adams released a book

[00:05:02] late last year, The Tech Nerds Guide to Career Success. It's a parable book and I revisited again

[00:05:10] myself just recently. I asked Dan who he was targeting when he wrote this book.

[00:05:18] Problem caused by the default belief that so many of us have in the industry and especially if

[00:05:24] you come from the technical service side like I did, the belief is that success comes from having

[00:05:30] great tech skills and then making the client happy customer service skills. And if you do those

[00:05:36] two things then career success kind of follows. But after a period of time you see so many people

[00:05:42] with phenomenal tech skills and they kill themselves trying to make the client happy

[00:05:47] and it doesn't tie directly to success. They're getting by, they're not incredibly successful even

[00:05:55] though they're strong in those two areas. And you look around and you see that there's other

[00:06:00] individuals and organizations that are experiencing a high level success and they're doing things

[00:06:06] a little differently. They've got some understanding and knowledge above those two key points.

[00:06:12] The Tech Nerds Guide for Career Success was written to identify what these are to clarify and

[00:06:18] to unify everybody on what those drivers are. And the seven lessons that are in this are delivered

[00:06:25] in an easily consumable parable and they are targeted not just the owner. They're targeted at

[00:06:32] every individual in the organization. It doesn't matter if you're an entry level position,

[00:06:37] if you're a manager or an upper leader. So everyone in the organization can comprehend and understand

[00:06:43] and leverage what those drivers are for greater business and financial success in a professional

[00:06:49] service. So the book helps not only the business increase their results in their performance

[00:06:57] but every individual has the ability to improve their career success as well.

[00:07:03] I wonder if I should start a book club. So let's ask the question, why do we care? Dan's book made

[00:07:10] me revisit the idea of how you could still train into your organization and how you help make sure

[00:07:17] your technical teams understand what it is your organization delivers and ultimately how you make

[00:07:24] money. One of those things that you think about a lot is keeping your people invested and engage

[00:07:30] in what you do. Consider how you give career advice to your teams in your organization.

[00:07:37] Now I want to note that giving someone a book and walking away isn't what's effective in the way

[00:07:43] this is delivered. You need to make sure you're incorporating this as part of a training program.

[00:07:47] But Dan's book was unique because it's focused on something that you can give to your technical

[00:07:53] teams themselves versus something that's purely targeted at the owner. Most sales and businesses

[00:07:59] books really are focused right at those leadership roles. Dan's book was a little different here

[00:08:05] and I wanted to highlight it. A reminder, we are going to be continuing to take questions and I'm

[00:08:10] watching the chat so we'll make this a conversation particularly during our question sections.

[00:08:16] Now I want to revisit the interview from this past weekend. On the weekends, I release

[00:08:21] interview episodes and we have an opportunity to discuss them here on the live show. Let's hear

[00:08:27] from Mike Semmel from the weekend about what might happen due to CMMC 2.0 preparedness.

[00:08:36] Specifically about this. Won't this just won't fracture the market into those providers that are

[00:08:40] capable of delivering in the defense industry and those that aren't?

[00:08:45] Well, yeah I think it will and I think there are several things that you know I mean

[00:08:50] anticipating are going to happen. First of all, there will be some MSPs that simply say we're not

[00:08:54] going to do this. We can't afford it and all that. We only have one defense contractor.

[00:08:59] When I started in the compliance business, I was at MSP in the early 2000s when HIPAA came out.

[00:09:05] I learned about HIPAA. I went and got a training class and passed a certification test on HIPAA.

[00:09:11] And stayed as an MSP. We didn't change any of the products and services we were offering

[00:09:15] but we promoted them as HIPAA compliance services. So we took compliance and used that as a

[00:09:23] differentiator. I didn't have to prove to anybody. I was a best in class MSP because nobody saw

[00:09:27] us as an MSP. They saw us as a risk management company focused on compliance. One of the things

[00:09:35] I did back then was I took all of our rates across every client in every industry and increased them

[00:09:42] enough to cover the costs that I had to incur for the healthcare industry because I didn't want to

[00:09:47] pay for it out of my own pocket. So when somebody says well, it's $100,000 and I only have one customer

[00:09:54] I get that but I would never take the $100,000 and just say it's 401 customer. I'd increase my rates

[00:10:02] across the board. And the reason that I think this is so important is that you're going to be

[00:10:08] beating a lot of other companies that can't answer the bell. And if you don't do it, I think

[00:10:14] this is the opening where we have all these MSPs that have consolidated through mergers and

[00:10:20] acquisitions. I don't know if you want to call them a super MSP or a mega MSB.

[00:10:24] I see those guys as really being able to take advantage of this because they, if they had like

[00:10:30] 20 locations, they could take one location, get it fully certified for CMMC, spread that across all

[00:10:38] 20 of their markets. But then they could come into your market and not just take the

[00:10:44] defense contractors that need your help, that's their wedge to get into your market and take away

[00:10:49] the rest of your business. So I think there's a big risk to the MSPs that are kind of afraid of this

[00:10:56] or aren't ready to do this. It's a big moment in time for the industry.

[00:11:03] Now, you brought up the tool providers. I mean, I would have every expectation that they want to

[00:11:07] have their tools delivered news by defense contractors. Are you expecting them to just get it together

[00:11:13] and deliver on doing a certification and getting FedRAM authorization and delivering their cloud

[00:11:19] in a way that the government will consume? I think eventually. But when you say just getting FedRAM

[00:11:26] certification, that's taking years to get right now. And the challenge that everybody has is that

[00:11:32] CMMC is going to be in contract starting in 2025. So my concern is that the names we all know in this

[00:11:40] industry are not ready. They're not talking about where the guys you need to come to. And here's

[00:11:46] what we're doing to build a CMMC compliant product. Remember, this regulation was only published

[00:11:53] at the end of December. So we're just over a month from that, but I've talked to several of these

[00:11:58] dual companies and they are not ready for this. So it's easy to say yeah, get FedRAM.

[00:12:06] So we have to ask why do we care? Mike brings up an interesting angle to think about wedge

[00:12:14] competition and how CMMC might help certain MSPs differentiate themselves. Particularly if you

[00:12:22] layer on the idea of private equity backed MSPs who might have more money to play with, or be able

[00:12:29] to invest in some of those programs a little bit more differently. Mike lays out a scenario of

[00:12:33] competition where he's worried about one provider being able to use it and move into your different

[00:12:41] market by certifying each of their different spaces. That's not necessarily the only way this

[00:12:46] might play out. Of course, this is an element where those providers that have invested in CMMC

[00:12:52] 2.0 compliance may put themselves in a much better place to be competitive. That could be the

[00:12:59] element that Mike sees. Now the other piece that he touched on that I want to lean a little bit more

[00:13:04] into is the MSP tool vendors themselves and preparedness. As far as I've seen, none of the major

[00:13:12] platform players that service typical SMB managed services market have made themselves FedRAM

[00:13:19] compliant and don't seem to have any apparent plan to do so. So this puts them in a position where

[00:13:25] they're not necessarily able to support solution providers and technology service providers that are

[00:13:31] interested in going after those markets. We may end up in a situation where there is more fractured

[00:13:38] market to what we're seeing. Those companies that are able to go after those deals are going to be

[00:13:44] very clearly separated, not just based on their own capabilities but the tool choices they make.

[00:13:51] We may end up in a space where you're not able to take on federal contracting because of the tools

[00:13:58] that you've chosen. Even if you yourself get to the red point of being ready for that and for

[00:14:03] vendors that talk about enabling their providers to be best in class and service in the industry,

[00:14:10] this isn't a parent gap that they haven't taken on. It could make federal contracting more lucrative

[00:14:16] or it could also move it out of reach of smaller companies. Maybe they're going to be

[00:14:22] relied much more on those prime contractors or have to give complete control over to them.

[00:14:28] This is one of those areas where I've got a lot of questions for those leaders in both

[00:14:34] managed services companies that are looking to take this on but also in the vendor software

[00:14:39] providers that are looking at this space. I think we should consider how much we care,

[00:14:44] particularly if we're concerned about fracturing the market. If you got a question or a comment,

[00:14:50] do make sure to put it into the chat and remember I am going to be taking questions after our

[00:14:56] story round up. Now, I want to dive in to a couple of other stories that have happened that I want

[00:15:02] to follow up on. Our technical reports Broadcom's CEO, Hawk10, acknowledges the unease among VMware

[00:15:11] customers and their partners after the sweeping changes implemented since Broadcom's acquisition.

[00:15:17] The changes include taking over VMware accounts, ending the VMware channel partner program and

[00:15:23] discontinuing perpetual licensing. These changes have disrupted businesses and led to significant

[00:15:30] price increases. Tan defends the subscription only licensing model and believes the changes will

[00:15:36] bring greater profitability and market opportunities. However, concerns remain among customers and

[00:15:42] partners. And a late breaking addition to this story, as I was preparing for this live broadcast,

[00:15:50] there's additional reporting. Per reporting in the register today, Broadcom has offered a

[00:15:57] piece offering to some VMware customers after terminating the cloud service provider program.

[00:16:04] The company has introduced a white label program that allows cloud providers to continue

[00:16:09] operating by partnering with established affiliates, preserving those existing partnerships

[00:16:15] and ensuring VMware services continue to serve customers. However, it remains to be seen if this

[00:16:21] move will boost VMware's profitability as some customers have already switched to other hypervisor

[00:16:27] alternatives. I also have a follow up on a story I covered last year. The Federal Trade Commission

[00:16:36] and the Department of Justice have requested the U.S. copyright office to exempt commercial

[00:16:42] soft serve machines from the anti-circumvention rules of the Digital Millennium Copyright Act

[00:16:48] or DMCA. This would allow for more third party and self-repair options, greater competition in

[00:16:55] the repair market and prevent companies from using DMCA laws to enforce repair monopolies.

[00:17:01] The joint comment builds upon a petition filed by repair vendor iFixit and interest group

[00:17:08] public knowledge focused on the notoriously broken McDonald's soft serve ice cream machines

[00:17:14] supplied by Taylor. The article also mentions the broader exemptions for industrial and commercial

[00:17:20] repairs that require software tinkering and the ongoing push for right to repair reforms.

[00:17:25] United Health is facing increasing calls for accountability following a cyber attack on one of its

[00:17:32] subsidiaries change healthcare. The attack has caused widespread disruption in the healthcare

[00:17:38] industry, highlighting concerns about cybersecurity and the lack of oversight in critical infrastructure.

[00:17:44] Experts point to United Health's extensive control of remedical claims processing as a potential

[00:17:49] vulnerability while others criticize the lack of consequences for such a significant breach.

[00:17:55] The attack's impact may have been exacerbated by federal guidelines covering electronic

[00:18:00] data exchange, which concentrated the use of change healthcare systems. Pressures mounting on

[00:18:05] United Health to take responsibility and support effective providers. Now why do we care?

[00:18:13] Let's talk first on Broadcom getting lessons on how to work with the channel. Interesting to

[00:18:19] think the pressure from their partners has caused them to backtrack and offer new offerings.

[00:18:25] If you think the vendors aren't listening, note they are. When noise gets that loud,

[00:18:30] they'll make sure to react. Now it may not seem ice cream relates to IT services,

[00:18:36] but it's the monitoring and repair toolkit portion of the story that I care about.

[00:18:41] The diagnostic software supplied not only by the manufacturer, but by an independent provider

[00:18:47] as well as a competitive advantage. And if you own your own gear, you want the option of being

[00:18:53] able to repair it and service it yourself. This is very critical to write to repair,

[00:18:59] and I like the stories that are very relatable to lawmakers. We understand the problem

[00:19:05] of the McDonald's soft-serve ice cream machine being down. It's very relatable and it's easy to see

[00:19:11] adjustments. The only thing that concerns me was that one time exception versus trying to

[00:19:17] legislate much more broadly. Now United Health feels like a bit of an under-reported story,

[00:19:23] it's why I wanted to focus on it. They're only now getting their feet under them,

[00:19:28] and this was a massive disruption to billing and patient servicing. The big key thing we're looking

[00:19:34] for is accountability. It's not enough to see pressure. Will we see true accountability

[00:19:40] for what they've encountered and how they've managed the crisis? We are taking questions,

[00:19:46] make sure you can submit them. You can still do so in the chat window or submit for next week if

[00:19:53] you're watching the recording. Make sure to send them to question at mspradio.com or post them now

[00:20:00] and we'll take them. Remember bring your questions live and you'll get a live response. I really

[00:20:07] do enjoy taking questions and of course if you don't want to make sure to submit them ahead of time.

[00:20:13] Let's go ahead and take our first question. What is your take on the potential collision of the

[00:20:20] printer and copier companies that seem to be considering the managed services world? I keep seeing

[00:20:26] this over and over. They try to take their copier repair guys, provide a few certs, and then dispatch

[00:20:33] them. Is this a threat? I love this question and I love this question because I've heard it before.

[00:20:40] In fact, multiple times history continues to repeat itself. I'm going to think back to my early days

[00:20:47] as a managed service provider myself in the circa 2005-2006 time frame when we had this exact

[00:20:53] conversation about the print world coming into the IT and managed services world. This conversation

[00:21:00] comes up regularly as new providers look to come into the space. Telecommunications providers try

[00:21:07] their hand at it, printer and office supply companies come in and try their hands at it. Note that

[00:21:12] it's all about execution. This makes perfect sense for them to move into much more valuable spaces

[00:21:21] and it's going to be a matter of how well they're able to execute and build up their business.

[00:21:26] But like any provider, they're going to be able to do that themselves are only based on their

[00:21:31] ability to build up their business. They have the advantage of an install base that they can go after,

[00:21:38] but they are the same in terms of thinking about building up their capacity here in managed services.

[00:21:44] So from my perspective, this is going to be a continual threat to those pure plates,

[00:21:50] our technology service providers, to consider the way that they want to position with their

[00:21:55] customers. This happens over and over and over again, and you'll see it not just from the printer

[00:22:00] copy or guys but from the telecommunication guys and from any of the related industries around

[00:22:06] technology services. In fact, I would argue that the bigger threat is overall automation coming

[00:22:13] into the space versus those ones that are looking just like pure play providers moving in.

[00:22:20] I really appreciate the question. If you've got any additional ones, make sure to throw

[00:22:24] them into the chat and we will definitely make sure to take them. And if you missed it and you're

[00:22:29] catching us on the recording, go ahead and send it in at question at msbradio.com.

[00:22:36] Let's take a moment. We're going to go ahead and preview what's coming this weekend.

[00:22:41] I spoke with Fred Kerry in a very lively conversation. He focuses on cash flow over profits.

[00:22:50] Here's a preview. I've been to talk to you because we're really fascinated to understand

[00:22:55] your philosophy on business. One of the things you really emphasize is the importance of

[00:22:59] cash flow over profits. I find that kind of striking because it's an interesting approach.

[00:23:05] I appreciate the idea of managing cash flow. Obviously, you can take that to a real extreme. We both

[00:23:11] know that cash flow business without profit isn't the goal because you got a great cash flow but no

[00:23:19] walk me through your thinking and how you balance it and where your emphasis is for us.

[00:23:27] Yeah, generally especially entrepreneurs with smaller businesses, one, two, three million

[00:23:33] dollar businesses, we're looking at the paper that's showing us all the contracts and deals

[00:23:40] that we're getting in. And we're thinking that this is amazing. We're doing great. But a lot of

[00:23:45] times the cash from those businesses doesn't come in when they contract this. And so when we're

[00:23:52] looking at, oh, on paper today, on my PNL, I'm doing really well. But in my bank account,

[00:23:58] I have $78. The reality is the very first thing and the very first thing I tell any CFO that

[00:24:05] I bring on board to work for me is don't let me run out of money. And that's what you get. When

[00:24:10] you start focusing on your cash flow, then you can utilize your skills in the finance part of

[00:24:18] things. Make sure that business keeps growing robustly. The problem is even worse when you have

[00:24:24] really well performing business. But let's suppose your technology company and your

[00:24:30] month after month, you're doubling. And so now you're looking at this $10,000 invoice statement

[00:24:39] and you're doing a rate for it. But you're using last month cash pay for this month's expenses.

[00:24:46] And if you got twice as much business in the following month, that cash is not going to pay for

[00:24:52] the expenses that you're going to have as you're growing to that level. So always be mindful of the

[00:24:56] cash you're having the bank, the cash that's coming in despite what your PNL set up great PNL

[00:25:02] and run out of money and be out of business. A reminder for listeners, my Patreon supporters

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