The Future of Managed Services Providers with Nick Lorizio

[00:00:00] I have this working theory that there's a young generation of new managed services providers

[00:00:07] out there.

[00:00:08] And let's talk to one.

[00:00:09] Nick Larizio is the founder of a Stu technologist and he joins me today to talk on this bonus

[00:00:15] episode of The Business of Tech.

[00:00:19] Today's episode is supported by Huntress.

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[00:01:11] Well Nick, thanks for joining me today.

[00:01:14] Thank you so much for having me, Dave.

[00:01:16] It's a pleasure to be here.

[00:01:17] I'm really excited about the show and the opportunity to speak to your audience and talk a little

[00:01:21] bit about myself and also learn a little bit more about you and your background as well.

[00:01:26] Well, it's exciting to talk to somebody who has come up through the MSPR.

[00:01:31] Tell me a little bit about your career that led you to where you're at now.

[00:01:37] Absolutely.

[00:01:38] So coming out of school I was a business management leadership major and then I also

[00:01:42] double-majored in management information systems.

[00:01:45] Like many coming out of college, you don't know what to do.

[00:01:49] I partnered up with a small IT shop knowing very little about what an MSP is.

[00:01:56] And how they play in this space and so on.

[00:01:59] But it was pitched to me as a great way to cut my teeth, work with multiple vendors, figure

[00:02:04] out what I like, and then go on from there and explore different things.

[00:02:08] So I worked for a small family owned MSP that served us primarily the greater Boston area.

[00:02:15] And then from there I went to thrive which was a merger of two largest MSPs in the Boston

[00:02:24] area.

[00:02:25] I worked at IT and thrive networks which was, thrive was actually started by a 27 year

[00:02:29] old which was kind of inspiring to me.

[00:02:32] As a younger guy, barely had the three years at a small MSP and then I wanted to kind

[00:02:37] of jump ship and have a bigger experience.

[00:02:40] So I went to the private equity back space where we were growing through acquisition

[00:02:44] which is very common today roughly four to five companies per year were coming into the

[00:02:49] thrive household if you will.

[00:02:53] And it was a really exciting, I learned a ton of material, a lot of things were happening

[00:02:57] really quickly.

[00:02:58] I got to come in and kind of talk to these orders that would stay on for 12 months or

[00:03:03] so work with them directly on integrating their portfolio of accounts to the thrive system

[00:03:10] if you will or on platform products and services.

[00:03:13] So if they were kind of leveraging one tool or if they were using let's say minecast and

[00:03:20] we wanted to switch them to Alpriver, something like that.

[00:03:23] So we would kind of streamline from an operational standpoint and get everybody on the same page.

[00:03:29] That was great experience I learned a lot.

[00:03:31] It's a lot of work working in the private equity world and it moves really fast and you're

[00:03:35] going to work long hours.

[00:03:38] And it definitely from there I saw the benefit of being an owner because these owners

[00:03:43] would come in and stay on for 12 months and then go buy boats or new houses and things

[00:03:48] like that.

[00:03:49] So I said to myself, hey if I really want to make it I'm going to have to be an owner

[00:03:53] someday and I'm going to have to own something.

[00:03:55] And that inspired me too.

[00:03:58] And it was during the pandemic so we were all remote.

[00:04:01] I got ahead.

[00:04:02] You know I was a young guy and I had a book of business at the time of 100 accounts.

[00:04:08] I converted most of the vast majority of them over to on platform products and services

[00:04:14] if you will.

[00:04:15] And I busted my butt.

[00:04:17] And whenever I got a chance of free time, I saw that as an opportunity to work on publishing

[00:04:23] my book, marketing myself and doing my personal brand and continuing to grow as a professional

[00:04:30] both inside as well as outside of work.

[00:04:33] That's where the idea of a suit technologist was born.

[00:04:37] And I kind of started with a website, started with a few blog posts and published my book

[00:04:44] and went from there.

[00:04:45] And then I actually went back to Enterprise.

[00:04:48] I went to work for Experian, the largest credit bureau out of the three.

[00:04:53] And I kind of focused on stopping and preventing fraud and coming up with new strategies and

[00:05:00] ways of doing that because of how closely related that is to cybersecurity which I'm

[00:05:04] excited to talk more about with you.

[00:05:07] Well, what's the core idea behind the suit technologist?

[00:05:11] What's the why of what you're doing?

[00:05:14] Well, I saw a number of problems with legacy MSPs that are 20 to 30 years old and that's

[00:05:20] why a lot of them are selling, right?

[00:05:21] A lot of them kind of spun up as you know around the dot com boom and haven't really changed

[00:05:26] their service model set.

[00:05:27] Right, it's still a lot of, especially when you're at that 20 to 30 person.

[00:05:32] It's still a lot of break fix.

[00:05:33] Still do hourly billing.

[00:05:35] They do that.

[00:05:36] Right.

[00:05:37] It's a very kind of old model.

[00:05:39] I saw a number of challenges.

[00:05:41] First being there's not really an aggregator or a good one that I could find.

[00:05:45] They took the 20,000 MSPs and kind of pulled them together.

[00:05:49] It's still a lot of like channel sales.

[00:05:51] You know, if you Google most MSPs, you already even see many Google reviews, right?

[00:05:55] It's a lot of word of mouth, a lot of long term contracts, a lot of long term business

[00:05:59] deals.

[00:06:00] So I saw that as a first issue.

[00:06:02] Second, I saw a lot of like the gig economy exploding, right?

[00:06:08] Services like Uber where I could go to a fiber dot com and contract out maybe even overseas

[00:06:14] a network engineer at an hourly rate.

[00:06:16] So I saw that those opportunities were there for people who are in purchasing power to

[00:06:22] kind of outsource and leverage other places to get IT assistance.

[00:06:27] So I saw, I noticed those two things.

[00:06:30] And then I noticed a third major problem, which is all of these MSPs now who started

[00:06:36] as help desk for maybe they're augmenting a company that doesn't have an in-house or

[00:06:42] they're doing a function of the IT for a larger organization.

[00:06:45] Right?

[00:06:46] So I saw that a lot of these help desk essentially who became and they went to the cloud, who

[00:06:53] went to when managed services became big, which was the start of a SaaS model.

[00:06:59] Right?

[00:07:00] So they went through all of these changes over this 20 to 30 year period and now they're

[00:07:06] all trying to be security companies.

[00:07:08] And I saw that as a major problem with a lot of AI now automating things like the

[00:07:16] password reset or where's my Faye, where's my file or imaging of computers at the factory

[00:07:22] as opposed to having to send somebody on site.

[00:07:25] So I noticed a tremendous amount of change happened really rapidly and I said now is

[00:07:30] a great time to start a new and build a new service model.

[00:07:34] So it sounds like embedded in that is kind of you think the premise that an MSP, a traditional

[00:07:39] infrastructure post MSP can't really make the lead to security.

[00:07:44] How do you think about your thinking there?

[00:07:47] Well, I think when a large portion of your time as an engineer is focused on troubleshooting,

[00:07:55] servicing kind of on premise hardware.

[00:08:00] Maybe you have a private cloud and you're trying to compete with AWS, Azure, Google, Oracle.

[00:08:08] You're trying to compete with these massive players.

[00:08:10] A lot of them have become resellers but the ones that do have their private clouds, that's

[00:08:13] a huge threat to their business.

[00:08:16] So I can really see them kind of struggling and if they're not engaged in M&A, where

[00:08:23] they're able to buy in and modernize and then they're really, I don't see them surviving

[00:08:29] this next few years here especially with the acceleration of AI adoption.

[00:08:34] So I see myself as a new player having a massive competitive edge today just like when these

[00:08:39] companies started in the .com boom, I see the same thing with the AI boom happening

[00:08:43] right at this very second.

[00:08:45] I had a level to playing the fuel.

[00:08:47] So give me your insights then and how you see this all coming together like what is your

[00:08:51] version of the future of cybersecurity, IT infrastructure, software development and sprinkling

[00:08:58] a little AI on top of that?

[00:09:00] Like how did these come together?

[00:09:01] Where do you think this is going?

[00:09:03] Well, I still see your IT partner as a critical aspect of your business.

[00:09:08] You want to trust that person and know him intimately or her intimately.

[00:09:14] Really it's going to that person, it's leveraging them not for the help desk.

[00:09:19] It's having a business conversation saying let's put a budget together, let's look over

[00:09:24] the next three, five, seven years and what's that going to look like?

[00:09:27] And how do I reallocate my funds where things like help desk is being automated right

[00:09:33] in network support is things like auto config where you can take a fortinet and go to

[00:09:40] a Cisco Marockie and use auto deploy and take those configurations now with AI and replicate

[00:09:46] them to a new device because that's old end of life.

[00:09:49] Whenever it is that drives the sale, since so many of those functions where you're not

[00:09:54] going to get the four hours of high ticket labor for that work, you need to show that value

[00:10:00] somewhere else.

[00:10:01] That's really where I see cybersecurity services coming in where you used to pitch cloud

[00:10:06] or disaster recovery.

[00:10:08] I see that really taking over as a trusted partner, a trusted instance of AI that might

[00:10:14] be not publicly accessible.

[00:10:18] So I see things like that having a lot more value today and the other thing is moving away

[00:10:24] from that hourly billing where you can charge like maybe a success fee or one time set

[00:10:30] up for yourself and that nature.

[00:10:32] But we have to get to a SaaS model, we have to get away from those kind of legacy practices

[00:10:38] or you will not survive as an MSP in my opinion.

[00:10:42] So when it's due to those into work with a customer, how are you positioning and offering

[00:10:47] your service?

[00:10:49] Per user pricing, flat fee, sure things go up over time just like an insurance bill,

[00:10:56] I think right now we're at $200 a month per user.

[00:11:01] So I don't even expect when I talk to a decision maker, sometimes it's a technical

[00:11:07] effect and you know this but typically the decision maker is in control of the finance

[00:11:13] budget.

[00:11:14] It's a CFO, it's a director of operations, COO, perhaps you're sitting in front of a board

[00:11:22] that's rare, maybe it's a CEO that's also rare.

[00:11:26] But they have a big stake in the game, they probably own some of the business or they're

[00:11:30] in control of the budget.

[00:11:31] That person I don't always expect them to be the post technical, I don't expect them

[00:11:36] to, you're right, I want to come in and have a business conversation with that person.

[00:11:40] It says, how do we get to a SaaS model?

[00:11:42] Perhaps we look at your IT expenditures over the last three, four or five years and let's

[00:11:48] break that on into a monthly but from experience I've seen and I'm lean, right?

[00:11:54] I don't have a massive bench right now but I've seen the per user price and go anywhere

[00:11:59] especially in my area from two to three other bucks per seat per month.

[00:12:04] And I think that's very reasonable and I don't expect the buyer to have all of this intimate

[00:12:10] knowledge of what's happening behind the scenes.

[00:12:12] I just want to give them a very simple structure that's easy to understand and replicable

[00:12:18] to go mass market because that's where I want to take it eventually.

[00:12:21] Now tell me a little bit about what you put in your book, digitalization, the need

[00:12:25] normal of the post pandemic world.

[00:12:27] What's your premise for what the digital world and digital digitalization looks like

[00:12:34] in this post pandemic world?

[00:12:36] Well, lots changed right?

[00:12:40] And they say that six years of innovation occurred in the matter of 12 months which is very

[00:12:45] accurate.

[00:12:47] And the world changed overnight right?

[00:12:49] And just like a hundred years ago in the Spanish Bluehead and unfortunately a lot of people

[00:12:54] lost their lives.

[00:12:55] The similar thing, we had a hundred year fluke event occur.

[00:13:01] And I think it put a lot of us into survival mode.

[00:13:04] We were working long hours and particularly in the IT space things were very good, right?

[00:13:09] Business was booming and people and folks that might have still had an on-premise server

[00:13:15] or software applications that sat in an office.

[00:13:19] Now we're forced to access them from anywhere.

[00:13:22] Access their files from anywhere, work from anywhere, otherwise they would risk being sick.

[00:13:28] And the reality is if you did not have those systems in place at that time, you need

[00:13:32] them in place today going forward to prepare for an event like that, right?

[00:13:37] Otherwise you're putting yourself at extreme business risk and we saw first hand how many

[00:13:41] people had to close up shop or were forced to sell, right?

[00:13:45] And a lot of small MSPs even could not sustain with those big one-time projects.

[00:13:52] All those projects went on hold.

[00:13:54] The ones that did survive and thrive if you will, they were able to sustain with that

[00:14:01] SaaS model.

[00:14:02] Sure, some had to go to collections and some customers got behind on their payments and

[00:14:08] they were going to close up anyway and they've got stuck in business, right?

[00:14:12] So really what I see happening is the SaaS model continuing to dominate, right?

[00:14:18] I see the acceleration of services like cybersecurity now that mass cloud adoption has occurred, right?

[00:14:25] The ones that didn't adopt cloud probably aren't still around.

[00:14:28] So all of these things have happened and now it's like what's next?

[00:14:32] So that's the big focus on cybersecurity.

[00:14:35] It's the big focus on targeting financial institutions which I dedicated a whole chapter

[00:14:39] to in my book which is really their ones that are going to make the decision at the end of

[00:14:43] the day and for their portfolio on what their technology decision and partner looks like.

[00:14:50] So it's working with them closely, it's working with the financial institutions, the people

[00:14:53] with the budget control and it's focusing on the SaaS model, focusing on cybersecurity services,

[00:15:02] leveraging a trusted partner as well.

[00:15:06] Let me throw what that conversion for one of your customers to move them to a SaaS model.

[00:15:10] Tell me what that looks like.

[00:15:12] Sure, so I have no problem and I hope people feel comfortable with me and looking at the

[00:15:19] current technology budget and oftentimes you'll ask that question and still the person

[00:15:25] doesn't really have a great understanding of what it looks like because things break

[00:15:30] and they have a lot of hardware, legacy hardware and it's not necessarily always a predictable

[00:15:36] business model which people in finance as we know love to predictable.

[00:15:42] So how do we go from where you are now to getting to that predictable monthly fee and really

[00:15:49] committing to a 36 month term or a four year term as opposed to this kind of beat up your

[00:15:56] IT vendor and it's kind of this tension relationship.

[00:16:01] Let's work together, let's find an over that works well and let's plan on doing this long

[00:16:06] term so that it's a mutually beneficial agreement and not necessarily such a tense one because

[00:16:13] nobody likes to have an unexpected server or cloud server fail or right now it's always

[00:16:22] ransomware attack happens and it's too late your systems are compromised, you didn't

[00:16:28] be proactive in that approach and put something implemented ahead of time.

[00:16:32] So that's a big conversation today and hopefully you can develop that sense of trust with the

[00:16:37] buyer to get them to pull back the books on that.

[00:16:41] And where are you at with the way you're thinking about and implementing AI in your processes

[00:16:47] or organizations and with your customers?

[00:16:50] Well, a big challenge that I'm facing now and this is something I'd really like to get

[00:16:53] to you know you look at companies like ConnectWiz right they started out as an MSP and then

[00:16:58] they spun out into a software company selling to the 20,000 MSPs across the United States

[00:17:05] which is a which is a prime example.

[00:17:07] That's really where you want to be right with your background in SolarWinds you can

[00:17:10] understand that you have a lot of power when you have some intellectual property and you

[00:17:15] have the keys to the software right so you give up a lot of that control when you partner

[00:17:20] with a lot of the RMM solutions out there today.

[00:17:22] So I want to bring that in house as soon as possible right leveraging the services revenue

[00:17:28] to kind of focus on that RDD budget a little bit and get that developed very quickly

[00:17:32] because I'll quite frankly a lot of the conversations that I have with the what the big players

[00:17:38] in the RMM space and you know there's still servicing a lot of that break fix.

[00:17:46] You know a big thing that I would say to depend a good picture here is not one RMM I could

[00:17:52] find integrates with Azure AD so I can't go in and say okay it's named your RMM tool

[00:18:00] I'm not going to pick a bully but not one of them in tie into the Azure Tannum and pull

[00:18:07] over all the user data and information without having some type of server somewhere right

[00:18:13] and for a long time that's that was the bread and butter of an MSP it was selling these

[00:18:18] big high ticket $20,000 SME servers whatever it is right so it's selling those and then

[00:18:24] it's layering the management on top of it.

[00:18:26] Now we have a bigger challenge which is okay we need to layer the management right because

[00:18:31] at the end of the day where brokers were brokering Microsoft or brokering or brokering the

[00:18:35] technology or layering our servers on top of it all the RMM tools monitoring and managing

[00:18:42] solutions are not necessarily meeting the standard of where the market has gone I would

[00:18:47] say and we really need to get there quite quickly how I would say so that's a major challenge

[00:18:54] that we're looking to solve and working on right now which is okay let's tie in and

[00:18:58] let's hook into an Azure AD environment where they maybe have all SaaS apps and still

[00:19:04] provide their party vendor management still provide a level of service where we're okay you

[00:19:09] need a new user great where are they are they at home are they in the office where are

[00:19:13] they will ship it to them it'll be image at the factory have our logo on it there you go so

[00:19:19] it's not you know I'm not looking to grab those big high ticket hardware sales anymore I'm

[00:19:25] looking to leverage and ensure we do provide that we do offer that but as we know it's a highly

[00:19:31] competitive space and hardware is not the most probable so I'm not I'm not looking at that

[00:19:36] is my bread and butter I'm saying okay let's leverage a 365 let's layer services administration

[00:19:42] services on top of it and then package package that deal certainly an interesting interesting

[00:19:48] vision in the future Nithalorezi is the founder of a stupe technologist and he's known for his

[00:19:53] expertise in cybersecurity IT infrastructure and software development with a focus on AI

[00:19:58] and IoT integration he's the author of digitalization the new normal of the post pandemic world

[00:20:04] which explores how technology is reshaping our world next thanks for joining me today

[00:20:10] thank you so much for having me David it's a pleasure and I hope we stay in touch

[00:20:15] today's episode is supported by core view your customers need your Microsoft 365 expertise

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[00:21:05] the business of tech is written by me Dave Sobel under ethics guidelines posted at businessof.tech

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