The Future of MSPs: Adapting to Big Business Trends, Leadership Changes, and AI Advancements

[00:00:14] New data says America may not be a country of small businesses. Does this mean anything for MSPs that focus on small businesses? How about those changes over at ConnectWise? Should we think more about what's going on with the leadership changes? Or how about new charter's acquisition of an AI-focused company?

[00:00:32] Nelson Gomes, former MSP and Provider Strategic Advisor, joins me today. Welcome to the Business of Tech Lounge, the live version of the Business of Tech podcast. It's Wednesday, February 12th, 2025, and I'm Dave Stubble. We do love a little live interaction because it makes the things a little bit more exciting. And I'll take questions and comments throughout the show, so make sure to put them in chat. If you have a question, we'll happily respond to it.

[00:00:57] Now I want to thank Sales Builder, our Patreon sponsor whose support makes this show possible. Focus on your IT sales workflow with the power of automation and visit them at salesbuilder.com. That's B-U-I-L-D-R.com. Now a reminder, I am watching the chat. We'll be taking questions and comments throughout the show. Nelson Gomes is the CEO of Battaglia Group, bringing over two decades of experience in the managed services provider industry, particularly within the healthcare sector.

[00:01:24] He founded Priority One Group in 1997, which evolved into a specialized healthcare MSP and later merged with Medicus IT in 2019. Over his tenure, Medicus experienced significant growth, growing from $17 to nearly $75 million in revenue. And in 2024, he transitioned from Medicus IT to established Battaglia Group, now focusing on providing strategic guidance to MSPs. Nelson, welcome to the show. How are you doing? Thanks for having me.

[00:01:53] I'm excited to have you. I love because you talk to so many interesting MSPs all the time and additionally have real world experience and a sizable one. So this is always fun to have you here to mix it up. I'm going to start right off the bat because I noticed an article in the Washington Post that I covered on Monday's show. And I want to sort of highlight this one because it's around data of the country and its demographic breakup from a business perspective.

[00:02:18] The paragraph that I'll start off was, before the Great Recession, most Americans worked for businesses with fewer than 500 employees. And today it's reversed with 53% of Americans working for businesses with 500 or more workers. Now, I don't think this is catastrophic in terms of day-to-day operations. But I'm starting to look and say, okay, if this trend continues over time, maybe we need to take it into account. What are your thoughts thinking about sort of the change in demographic of American businesses?

[00:02:48] I have several ones. So I think from the MSP perspective, we all started in our garage or in our basement or as a side type of thing, right? That's kind of the common denominator. Have things changed? Absolutely. But I think those numbers reflect a little bit of how the market is changing when there's a lot of consolidation of smaller businesses.

[00:03:13] And I think the entrepreneurs that are out there are starting smaller businesses. But look at the MSP space. You know, last year, what, 1,400 new MSPs came to market. So it's pretty impressive.

[00:03:27] I think that in our market as MSPs, now that that small business is not predominant and that, you know, you have to go after organizations that are much larger than as an MSP, you need to pivot from a sales perspective. I think that's going to be very important. I think you're right. Now, again, I don't want to like talk about this as a catastrophic thing. And I don't want MSPs to take that away.

[00:03:52] I just want to observe that, you know, we've always said, oh, small businesses are like the backbone of America. And I think philosophically that but data is not quite there anymore. And so that's where I have an eye to this. The other thing I kind of wanted to get your sense on was there was a quote in the article that really made me pause and think about it. What it said was the rise of the Internet posed another obstacle to small business.

[00:04:14] A few national gatekeepers think Facebook, Amazon, Uber and Google have been able to squeeze small businesses who need their platforms to sell or advertise. Is there an element of the platform play, particularly like big tech, that we have to factor in in a different way that perhaps we haven't been when we think about building our managed services businesses? I think I think I think I think we do.

[00:04:38] And I think it's about going back and understanding what worked and what didn't work and pivot, to be quite honest. But I think that, you know, as entrepreneurs, we learned a certain way on how to do something. And sometimes it's hard for us to kind of shift the perspective and being the perspective where if, you know, these these these businesses are growing and, you know, you have certain elements that really are going to challenge you.

[00:05:06] How do you pivot as an organization to be able to leverage those, you know, type of help you and to help grow your business? So I think as you know, as you look at what's happening today.

[00:05:23] I really think that it's an opportunity, especially in the MSP business, where instead of pivoting and thinking to being regional, providing those type of services, you know, what can you do on providing that service outside of your region and go into different markets? And I think part of that is understanding what those markets are and what your differentiator is in those markets that can really make a change. The technology is there in order to do it.

[00:05:55] Yes, Facebook and a lot of these other platforms that are that are using to advertise and do a bigger outreach are going to be challenges. But, you know what, leverage them for yourself. And, you know, I think that's going to be imperative. Now, it's interesting you bring that up. And I want to get a little bit of your insight, both from operational when you were within your organization, but also now you're starting to talk to MSPs and advisory space.

[00:06:20] Oftentimes the MSP beat of sales is the, you know, hey, we're doing lots of close relationship selling. We're doing lots of, you know, like we're either heavy on our word of mouth. We're then leaning into, you know, targeted marketing. Everyone always talks about event strategies, about like going out there speaking, those kinds of things. I don't think we talk enough about digital and what's happening from a digital acquisition perspective, the ability to run targeted digital ads, the ability to drive people to your website.

[00:06:49] How much are you having conversations or have seen in what you've done digital as a component to those strategies? It's a very straight to the point answer. Unfortunately, MSPs that are of a certain size, right, I would say, you know, sub $5 million in top line revenue are not really leveraging digital marketing as they should, where it's, you know, they can use intent-based marketing or account-based marketing from a digital perspective.

[00:07:19] And I think that it's a matter of them getting them educated, that it's not SEO. It's a number of different aspects that you need to do. And digital is a big piece of it, especially if you're providing services in a certain specialty that differentiates you as an MSP. You need to leverage those types of tools from an advertising standpoint. And I think digital advertising is going to be an important component.

[00:07:48] And it's something that I have conversations with MSPs that are looking to go up market is one of the things that you're doing today. And, you know, digital is certainly part of that go-to-market planning from, you know, from their perspective. And from my perspective, I think it's an important element of their strategy. It makes sense.

[00:08:11] Now, I'm going to pivot us a little bit here because I want to talk a little bit about one of those bits that always feels like a bit of MSP catnip, right, is when we talk about leadership changes. Now, we know that we have just recently had CEO changes both at Kaseya and then now also at ConnectWise. Jason McGee has moved on. Manny Ravello has now taken over there.

[00:08:29] And CRN on Monday confirmed that several executives from ConnectWise, particularly Raghu Bangula, Jake Fraghizi, Amir Karim, and Rafael Marty have all left ConnectWise on Monday. And I kind of wanted to get a little bit of your sense of, you know, hey, news like this comes out. What's your reaction, you know, particularly someone who's involved in the ConnectWise ecosystem? Like, what's your take on leadership changes like this?

[00:08:56] Listen, for me, it was a changing of the guard, right? We have previous leadership, and I think they did a pretty amazing job, took the organization to really new heights, building an amazing ecosystem. And I think on both sides, both on the Kaseya side and on the ConnectWise side.

[00:09:14] They knew that the market for managed services was an important market, and they needed to, you know, to build solutions, an ecosystem to provide, you know, those services back to the community. Who likes change? Nobody. And it scares people. I think in certain instances, you know, when the whole change of ConnectWise got acquired and everybody's like, oh, it's never going to be the same.

[00:09:45] Of course, there's always going to be some changes. Those changes are made to better the organization. I think it's a matter of truly understanding how that's going to impact you as an MSP. I don't see it as a bad thing. I think that there's some great leadership there that came in and that set up ConnectWise to, you know, to really excel. For me, it's the whole Lee Iacocca thing, right?

[00:10:09] Lee Iacocca came, you know, when he took over as CEO, he said, you know, my job is to find my next replacement and to take it to that next level. So I'm very confident of where ConnectWise is going and the leadership that they brought in. So I think that you're going to see some great things come out of ConnectWise. I think you're also the other part of that is we have to remind listeners that oftentimes leadership changes to the CEO level also mean that they're bringing in their own lieutenants.

[00:10:36] You know, oftentimes that they have they either, you know, have people that they have worked with over the course of their career or they have a particular strategic direction. And they're looking to make sure that the people around them are aligned with that. And so you do some reorganizations, you do some changes that I don't think there's I don't think people should read too much into these leadership changes.

[00:10:58] Although at the same time, the other thing I kind of wanted to get your take on a little bit was the news, you know, from a market standpoint that, you know, there was the flip at the top. After 29 years at the top, ConnectWise was the was the number one in the space. And as we move into 2025, that position has been taken by Kaseya. Are you sort of thinking that this is just we're moving into a realm where like the two top players are going to play back and forth? Or are you looking more to see like, hey, there's also some young upstarts here.

[00:11:27] What's your take on what's going on from the MSP platform perspective? I think that, you know, ultimately they they compete in a space that MSPs want to be able to lean on those type of platforms to integrate solutions that ultimately they're going to use to provide better service to their end clients.

[00:11:47] For me, that partner that has those solutions to provide to make it easier for me to manage my day to day partners and has an ecosystem that supports that value, I think is going to be on top. So I think both ConnectWise and Kaseya are making some very impressive investments, whether they're acquiring organizations to enhance the level of service that, you know, they can provide to MSPs.

[00:12:18] You're seeing that obviously from the Kaseya side a little bit more aggressively than ConnectWise at this point in time. But I think it's going to be a back and forth, right? I think they both have their benefits and, you know, their shortcomings. And, you know, you can bring in 10 MSPs. They're going to be like, yeah, ConnectWise. And they're going to be like, oh, yeah, Kaseya. And I'd say, OK, let's make this a rumble and get in a ring. But ultimately, I think they're at the top for a reason. They got there for a reason.

[00:12:48] So I think it's a matter of being able to provide those types of services that we as MSPs want to be able to do more of. And again, make sure that we're providing a high quality of service back to our client base. Ultimately, I think it comes to that to be that simple. And ultimately, how does it make it easier for me? And then as an MSP, you know, I want to add profitability to it.

[00:13:14] And if and it has to do with some of the solutions that the platform ecosystem can provide, then that's what I'm going to go with. And you're seeing flip flops going back and forth from one to the other. And I think that those are one of the reasons. And a reminder for viewers, if you've got a question, throw it in chat and we will definitely address it over the course of this conversation. Now, I want to ask one more thing before I move on to some of the other topics I wanted to get to with you.

[00:13:39] My take on the Kaseya strategy is that it is very much about applying price pressure to the rest of the market. That what they're doing is they're leveraging both their position and their cash flow to position themselves from a price perspective as the most attractive. They're very deliberate about their integration strategy. They're careful about not pulling together. But ultimately, I think they're leading with price more than anything.

[00:14:06] That compares with the traditional, hey, we're going to be a platform, integrate with everything that ConnectWise has been running. And obviously, we've got to note that they have switched positions based on this. Am I missing something in the basic strategies here of these companies or am I reading it right? Dave, I think I'm with you. I think that Kaseya is taking the price route.

[00:14:31] And I think that ConnectWise, for me, and this is from my experience, has always taken the value route. I think that Kaseya understands that it's very important to have value as well. But they know that the majority of MSPs that are out there are smaller. And cost is going to be something very important to them. So I think they're capturing those types of MSPs to be part of their ecosystem.

[00:15:00] And I think the strategy is working. I mean, obviously, the numbers don't lie. Yep, that's fair. And again, the one thing, the reason we're having this conversation is about understanding what the strategies are so that we can learn from them, make analysis, and make decisions based on that. You talked about the raw, raw elements of both. That's not where I want to play. I want to play with the I'm making analytical decisions about their strategies to understand what it means for listeners and their business. And that's why I bring it up.

[00:15:29] And so I'm going to pivot us a little bit in here because there's somebody who's made a move on strategy that really caught my attention. I'm going to highlight this story because it really did make my ears perk up here. New Charter Technologies acquired Orchestrate AI Labs to enhance their managed service provider offering. So the acquisition was announced on Monday, and their goal here is to integrate artificial intelligence into service delivery.

[00:15:58] And for those that aren't familiar, New Charter Technologies is a private equity-backed managed services provider. They're backed by Palo Alto's Oval Partners. And what their goal here is is to bring it all together. They're taking Orchestrate's CEO, Ryan Barton, and he's now going to serve as the chief innovation officer at New Charter. And his focus is the transformational impact of AI on the industry.

[00:16:21] Barton said that he believed that the advancements here will create new opportunities for businesses and are essential for navigating the evolving landscape of IT services. Nelson, I wanted to kind of get your reaction to this. My first take on this was the, okay, this is super interesting for a private equity-backed business, not to be spending those investment dollars purely on expanding geographies or buying more service providers to be bigger,

[00:16:48] but also dying a deliberate investment in a technology offering to build that out, you know, to build out their AI and automation. What was your take on kind of this acquisition and what it means? I thought it was innovative and, to be quite honest, genius. And here's why, right? As MSPs, we always look at ways to provide that better service. And we keep hearing AI, AI, you know, can change how you provide services. And what do we do as MSPs?

[00:17:18] Okay, who has the, you know, what vendor has the best AI tool that we can use? These guys thought outside the box and said, why buy it? You know, why bring in a vendor when we can really acquire an organization that we can build a solution that is to our liking? We don't have to go by the rules of whatever that vendor is. I think it's a bold move.

[00:17:40] I think it's a game changer that, in my opinion, you know, making that decision tells me that you're doubling down on how that experience on how they service their clients comes first and foremost. Now, and I'm totally with you because this feels really interesting to be building your own technologies.

[00:18:05] I know one of the things we were talking beforehand, you know, you've talked to a couple of different other providers in this space who have traditionally been thinking this way. And I kind of wanted to get a sense of like, you know, there are certain challenges to building out your own technology that are things that you really need to be deliberate and thoughtful about. You know, you've mentioned previously, you've talked to a couple of providers that have built their own kind of cloud service, cloud SaaS.

[00:18:30] Are there lessons or things you'll be watching for in new charters execution that you've kind of learned from previous space here? Yeah, I think it's interesting to see how they're going to leverage this acquisition ultimately to incorporate in how they deliver service.

[00:18:56] So, honestly, I'm not sure what the outcome is going to be. I think it's a bold move to be able to do that because they're thinking big picture. And I think that's ultimately what you want. Okay. Now, I want to get your reaction to something that I've been looking and thinking really hard on.

[00:19:15] Because the idea here of investing heavily in automation and in AI really speaks to the possibility of some real disruption that might be possible in the services market. I'm going to tell you a little story of something that I spotted recently on LinkedIn that just completely fascinated me. Two MSPs were getting together, one visiting the other of size and note, both of them running world-class help desk organizations.

[00:19:43] The visiting MSP was having trouble connecting to their colleagues' Wi-Fi network. And rather than call their own help desk, opened ChatGPT and interacted with this. I heard about this one. And then posted this on LinkedIn. And my immediate response was, literally, you own a world-class help desk and even you aren't going to use it.

[00:20:07] I think this is kind of a telling directional problem for service providers that are relying on help desk and traditional IT consultative solutions. Obviously, I think you may be thinking the same way I am. What was your reaction? My reaction? Again, my reaction, I related to it. Okay. And here's why I related to it.

[00:20:33] Because sometimes it's so much easier to say, let me just run and buy ChatGPT. It'll just give me what I want instead of going through the logical process. So I understand why that person did it, to be quite honest. And I think it had to do, it comes down to, can I get it done quicker doing it this way? Sure. It comes to that simple factor of being able to do it. But here's the thing that I've always found. ChatGPT is not human. It doesn't have emotion.

[00:21:02] I don't think that it can do that piece of AI. Just as it can't, you know, it's being introduced into healthcare. I'm going to use that as an example, right? It's not something that can be used today from a diagnostic perspective, sure. But clinically, it can't do it, right? It's not human. You can't understand that. So is it going to have an impact in how we service? I think so.

[00:21:31] But is it going to be something that we need to adopt tomorrow? No, but I think we need to keep a pulse on it to say, ultimately for me, if I'm making an investment in AI, it's how does that provide a better service back to my client from an efficiency perspective? Yep. By the way, I'm with you. And I always quipped that analysts like me always get the timeline wrong, right? So I look at things and I'm like, oh, directionally, I see exactly where that's going. And I'm always wrong on the timeline.

[00:21:58] But I will observe, I think I'm right directionally on the intention here. That if you think out directionally, knowing in the future, and I don't know how far out the future is, technologies like this, which are really good at summarization and reforming information and presenting it back, is going to be quite good at working with knowledge bases and former tickets and being able to say, I have seen this problem.

[00:22:26] I can identify it and give you a solution. I think we need to, as providers, they need to be thinking about the, hey, what happens when that automation and interaction eats away at that? And the interesting thing is, is I love your healthcare parallel, but there is also some, because there are elements of doing IT support that mirror help desk. But at the same time, it's easier to allow the technology to work on other technology because

[00:22:55] it isn't healthcare, right? Because I don't necessarily want a bot repairing my heart. But if it's making recommendations about how to fix my Wi-Fi, lower stakes, I'm kind of okay with that. When you think about it, knowing it's not tomorrow, but it's probably not 20 years out, how do you think this pace will go? It's hard to predict the future. But here's what I can tell you.

[00:23:23] I got in the last month, three investment opportunities to invest in AI solutions that have to do with something in the MSP space. Okay. People see the value of doing something in the MSP space. So it's a rat race, I think, too. I think it's going to happen. The matter is, how does it integrate into your day-to-day operational?

[00:23:52] And from a value perspective, is that part of your core values that you want that type of technology to go through and through? Or there's a need to be human interaction? I think that the human interaction still needs to be part of it. And I think sooner than later, as technologists, we're built a different way where we feel as if

[00:24:20] we need to make an investment in that technology so that we can keep the pace. My recommendation is, make sure it's the right technology that you want, not just another shiny object that you think is going to solve some of the problems that you have from an efficiency perspective. I think I'm right there with you. As we wrap this up, the other question that I've been pondering a little bit is, a move like this, I'm with you, the new Charter's move is pretty bold.

[00:24:45] But what this also sets up is a potential space for those that have invested in their own IP technology. We've seen this previously with cloud, with some organizations that invest in building out their own cloud SaaS platforms. And then the others that have nots who are waiting for the vendors to supply them. And I think what I think about right now is AI is moving at a much faster clip than some of these other technologies.

[00:25:11] And we are moving toward a world where that gap between the haves and the have nots may get a little bit further out. As somebody who's thinking about advice to MSPs, what are you thinking about as contributing moves they should make to make sure they lean more toward the have pile than the have not? I think it's minding that gap. The gap between how technology continues to evolve and how far are you from that gap of

[00:25:39] keeping up with that technology in order for you to be able to service your client base. I think the best ideas that come out of this industry are solutions that people are going to solve. I want to give a plug to my friend Alex Mavroff from Strategy Overview. He built this product because he saw the need of something that wasn't in the market. He was tired of putting these spreadsheets together to do this QBR stuff. And he said, I'm going to build my own.

[00:26:08] So I think those MSPs that, you know, leadership that think in that way, whether they use a product that mimics what they're trying to do or builds their own, congratulations. Keep down that path. That's who we are as an industry and as a community. But mind that gap. Don't wait for a solution to come out from a vendor in order to address some of the things that you may be lacking. You'll be left behind.

[00:26:36] And if you're going to be left behind, then you're not keeping up with what you should be doing as an MSP. So my advice to those MSPs is that needs to be an evaluation, you know, that you evaluate. It's something that you need to evaluate on a regular basis. Do I have the right technology today to be able to provide that level of service to my clients? Now, the other question becomes, well, that's going to, you know, there's costs associated

[00:27:03] with, you know, acquiring or bringing in those types of solutions. But then that's why you need to have some strategy behind it. Kind of sweeping it under the rug or not paying attention to it can really affect you, you know, in the long run. So it's a matter of, you know, keeping that top of mind. Well, I think that is exactly the advice to end on because that is really good actionable stuff to be focused on. Nelson, this is fantastic. I really appreciate it.

[00:27:33] You're with the Portalia Group. If anyone is interested in reaching out, what's the best way to find you and reach out? Okay. So they can reach out just to send me an email on nelson at the Portalia. Let me repeat that. Nelson at Portalia Group dot co. Or you can just, I'm going to put my number out there. 201-952-3748. I'll be at a lot of these trade shows coming up. So feel free to hit me up on LinkedIn as well. Look at that. Somebody who's given out his phone number.

[00:28:02] Nelson, this has been great. I appreciate you joining me. Thank you. I want a preview for everyone. An interview that's going to drop this weekend. Justin Cain, who is the founder and CEO of DoubleCheck, spoke with me about delivering specialized managed security services for SMBs without the traditional managed service provider model. He discussed how his approach addresses cybersecurity needs while keeping cost manageable, and he delivers no managed services besides that.

[00:28:31] Here's a preview of that interview. So we focus on 5 to 250 employees. We really find that sweet spot is in the 25 to 75 employee range. They typically aren't as advanced as the larger organizations. Maybe they have that IT person on staff, but doesn't have that cybersecurity knowledge. And so we really focus on that. Industries that are really important to us. Legal industry is a huge one. They just hold so much information.

[00:29:00] Industry, anyone with compliance, medical industry, HIPAA, things like that are really good customers for us. And then, you know, unfortunately, my terrible sales pitch is anyone that is in business today needs to be doing something for cybersecurity. You are a target. It doesn't matter. Justin breaks down how he goes to market, what his offering is, and his thoughts just on being an MSSP for those smaller companies.

[00:29:30] My Patreon supporters already have access to this interview if you want to listen now. It'll drop on the weekend on YouTube and the podcast feed. For those who aren't already Patreons, if you're interested, I really do encourage you to check this one out. You can visit patreon.com slash MSP radio to get access right now. Now, I want to thank Sales Builder, our Patreon sponsor whose support makes this show possible. Focus on your IT sales workflow with the power of automation and visit them at salesbuilder.com.

[00:29:58] That's B-U-I-L-D-R.com. And vendors, you too can get your name mentioned on the live show. It's a simple monthly subscription. Visit patreon.com slash MSP radio for more. And listeners, here's the number one way you can support the show. Make sure to like, share, and follow on your favorite platforms. It makes a huge difference. Just hitting that subscribe or follow button is a massive impact that you can make.

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[00:30:54] Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.