Vendor Rebates Move to AI Growth—Anurag Agrawal Details the Margin Fallout for MSPs

Vendor Rebates Move to AI Growth—Anurag Agrawal Details the Margin Fallout for MSPs

Vendor incentive structures are undergoing a significant realignment, shifting both margin pressure and financial risk toward MSPs and IT service providers. Microsoft’s recent policy change—eliminating flat CSP renewal rebates as of October 1 in favor of rewarding seat growth and AI workload adoption—directly illustrates this trend. Techaisle’s survey of 5,450 partners highlights the disconnect: 72% of incentive payouts occur at deal close, but 41% of MSP revenue is linked to renewals, pushing long-term margin risk downstream to the provider.

Evidence from Techaisle shows traditional partner categories (VAR, MSP, SI) no longer predict operational models. Instead, providers are moving toward roles such as data orchestrators and AI outcome underwriters, each with new risk profiles. The episode underscores that incentive programs are often misaligned: co-sell rewards remain inconsistent, partner-to-partner deal mechanics are unsupported, and marketplace participation erodes margins for many providers. Profitability and predictability continue to be cited as leading concerns.

Secondary findings deepen these risks. Three-quarters of partners already use AI in daily operations, outpacing vendor support and enablement efforts. Over half of SMB buyers use generative AI tools to start vendor searches, and only 4% of small businesses manage privileged non-human identities. These factors expand the governance and security gap, while token-based AI pricing introduces billing unpredictability and customer dissatisfaction. Research indicates 35% of SMBs are ready to change providers if their AI needs are not met.

For MSPs and IT leaders, this environment results in tighter margins, unpredictable compensation, and accelerated churn risk without a defined AI offering. Providers must update service models, clarify AI use cases and pricing, and address security and identity risks—especially around non-human agents—to remain credible and competitive. Reviewing contracts, marketplace involvement, and program alignment is advised, as more responsibility for outcomes and risk is shifting steadily from vendors to service providers.

 

Supported by:
GoTo(LogMeIn)
WebPros (CometBackup)
Pax8

NinjaOne On-Demand Webinar: https://go.businessof.tech/p/ninjaone-pod

💼 All Our Sponsors

MSP Radio is supported by our partners:

ABC Solutions · CometBackup · Firetail · HaloPSA · LogMeIn · Mailprotector · Pax8 · Rythmz · ScalePad · TimeZest · Transit AI

Supporting the IT services community through insights, analysis, and transparency.

🚀 Join Business of Tech Plus

Get exclusive access to investigative reports, vendor analysis, leadership briefings, and more.

👉 https://businessof.tech/plus

🎧 Subscribe to the Business of Tech

Want the show on your favorite podcast app or prefer the written versions of each story?

📲 https://www.businessof.tech/subscribe

📰 Story Links & Sources

Looking for the links from today’s stories?

Every episode script — with full source links — is posted at:

🌐 https://www.businessof.tech

🎙 Want to Be a Guest?

Pitch your story or appear on Business of Tech: Daily 10-Minute IT Services Insights:

💬 https://www.podmatch.com/hostdetailpreview/businessoftech

🔗 Follow Business of Tech

LinkedIn: https://www.linkedin.com/company/28908079

YouTube: https://youtube.com/mspradio

Bluesky: https://bsky.app/profile/businessof.tech

Instagram: https://www.instagram.com/mspradio

TikTok: https://www.tiktok.com/@businessoftech

Facebook: https://www.facebook.com/mspradionews


Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

[00:00:14] On October 1st, Microsoft's new partner incentives took effect. The flat rebate a CSP partner earned for a customer that simply renewed modern work or dynamics is gone. The money now pays for seat growth and for AI workloads the customer adopts.

[00:00:31] Six days earlier, our friends at TechIsle published a survey of 5,450 channel partners. 72% of vendor incentive money lands at the moment a deal closes. 41% of an MSP's revenue comes from renewals. The vendor pays at the signature. The MSP lives on the years after it.

[00:00:54] The analyst who wrote that survey sent over 15 questions for today. It ran from what partners want out of vendors to token shock to why he thinks the CISO is now the most powerful person in an AI deal. He's here and we're going to take him on most of these questions in order. Mostly. Welcome to the Business of Tech Lounge. This is where we break down what's changing in the IT services market, what it means for providers and vendors, and what to actually do about it.

[00:01:23] If you're running or supporting an MSP, this is about making sense of the environment you're operating in, not just the headlines. Now to make this conversation possible, a message from our sponsor. Here's a question MSPs don't ask often enough. How secure is the tool that has the keys to every one of your client endpoints? Your RMM is the most powerful and most targeted software you run.

[00:01:52] LogMeIn Resolve was built with a zero-trust architecture specifically to close gaps that other RMMs leave open. If the security of your remote management platform is on your mind, and after the last few years it should be, LogMeIn is worth evaluating on exactly that. Visit logmein.com slash MSPGrowth.

[00:02:16] Anurag Agrawal is the founder and chief global analyst at TechIsle, a global research firm focused on small business, the mid-market, and the channel partners who serve both of them. Both of the pieces we're discussing today have already made it onto the daily show. Today we get the author. Anorag, welcome back to the show. Thank you. Absolutely fantastic to be here with you again, Dave. And this time we made it quicker than before.

[00:02:46] Well, we did because we always have such fun talking about things on this show. We agreed we just need to do it more often. So I really appreciate you joining back to Mix It Up. And if you're watching us live, you want to put something in question or comment in, put it in the chat because it's open and we'd love to hear from you. Now let's start with that survey. 5,450 partner firms, 24 countries. I've read the pieces that come out of it. I got to ask what surprised you most of that data?

[00:03:16] So obviously we covered many, many different topics, but honestly, Dave, what stopped me was how far ahead the partners are. Let me explain that. We went into the survey. We started to analyze the data, expecting to measure how well vendors were enabling partners on AI.

[00:03:44] What came back is that nearly three fourths of partners are already using AI in their own go to market. Some at a very rudimentary level, but at least they are using it. They are writing proposals with it, qualifying leads with it, running their service desks on it.

[00:04:06] Meanwhile, a lot of vendor portals are still offering an intro course on what a large language model is. So the enablement gap has flipped. So what surprised me more was that AI stopped being a practice area. It is the practice. And actually the partners are teaching the vendors now.

[00:04:35] That is what it is. So the scarcest resource in the channel today is attention. And the vendor who makes the partner's life simpler wins it, but they are not doing it. And that's where the partners are leading the vendors. That's what surprised me the most. Wow. Okay. So I love the flip as somebody who always sticks up for the small providers in here.

[00:05:01] I love the fact that the community, the IT providers are leading the vendors. But I also was fascinated by this transition that what came through from the data was that all the old labels, VAR, MSP, SI consultant, they stopped predicting how partners behave. Because you split the channel into two economies. An advisory economy that invests before the sale and an operational economy that earns after it.

[00:05:31] Like, help me out. What replaced the labels and why does it matter which economy a partner's in? Yeah, that's a great question. Yeah. So, you know, for the last 20, 30 years, you know, we have described partners by what they did with the product. You know, whether it was MSPs, SIs, and now most of the vendors are talking about, the analysts are talking about, build, sell, service. And now they've added it as run.

[00:06:01] These are all very clean answers. The trouble is the question underneath has changed. Right? Two firms with the same label, running completely different businesses, different margins, different customers, different growth. It is not predicting anything. What does predict behavior is the new operating model.

[00:06:30] And what we found are three. Many of the partners are not there yet, but this is what they should really think about. And what are the three? First one is the data orchestrator. And what does a data orchestrator, the data orchestrator, and keeps it governed? Because that's where every AI project actually starts.

[00:06:57] Number two is the business process architect who redesigns the workflow. You cannot implement Gen AI on old workflows. That is RPAification. You've got the workflow, then hey, if you're using automation, that is RPA, which is yesterday's news. So the business process architect redesigns the workflow so the AI has something meaningful to do. And the third one, I find it the most interesting.

[00:07:27] It is the AI outcome underwriter. And this is where the distributors need to take a role as well. So the AI outcome underwriter is the partner that takes on the risk of the result of deploying Gen AI. They may go out and say, I will guarantee your account's payable cycle comes down, for example, and I'll get paid when it does. And you brought up these two economies

[00:07:54] which we talked in our last conversation, right? Right. I think what we see is that one economy still sells products and wraps services around them. The other sells outcomes and the product comes along as a consequence. And all of these three operating, new operating models live in that second economy. And that's where the growth is. So what I'm trying to say is,

[00:08:21] and what you asked at the beginning as a question was, old labels don't predict how partners operate. Three new operating models do. So you're using those to figure that out, which I think leads us pretty efficiently to the programs themselves. Partners told you what they want. Profitability first, predictability second. And you asked where the programs fall short and predictability was one of the first two places

[00:08:51] that they fail the most. Your term for this was the incentive trust deficit. Partners will take thinner markets for rules that hold a year later, right? And which make predictably a cheaper lever than a richer rebate. But they're not doing that. I want to make this kind of a little bit, I'm going to use Microsoft as the example because the biggest vendor in the channel pulled the other one, right? They changed their new CSP incentives, retire the flat rate rebate and move the money to seat growth.

[00:09:18] And so I kind of want to get your take here. Which of the program mechanics are the ones that are actively broken? And what does a good program do differently? Wow, okay. So you're talking about where the program mechanics are broken and what does a good program do differently? So let me pick three. Okay. Let's start with core sell.

[00:09:47] Now core sell first. You know, every vendor conversation I have, they talk about core sell. Every vendor has a core sell process. Very few have fixed the compensation underneath it. If the vendor's rep doesn't get paid on the partner-led deal, the rep will route around the partner every time. Fix the comp plan and the process takes care of itself. Everybody says that they have fixed it, they've fixed it

[00:10:15] and they are fixing it, fixing it, but that's the key problem, the core sell first. Second, partner to partner or people you can use a more sophisticated word, ecosystem. But let's use a very simple P2P, partner to partner. Partner to partner deals are becoming mainstream now. One partner brings the customer, another brings the AI skills and you and I, we were just talking offline. I mean,

[00:10:45] I'm not going to put your data, you know, I'm not going to restate your data, you can say it, but you found some surprising results in your own study that you're doing, right? So one partner brings the customer, another brings the AI skills, a third runs it. But most programs are still built for a bilateral deal. One vendor and one partner. So the way deals actually get done is invisible to the program.

[00:11:15] Third, is the marketplace. It's the real channel infrastructure now, but the economics work for only half the channels. The other half watches the fees stack up, vendor, distributor, marketplace until the margin is gone. Now your question was, what does a good program look like? The best programs stop adding features.

[00:11:45] Hey, we have added new partner portal, we have added new features, we are doing this and you can view your incentives, you can view that. No. Stop adding features and start removing cost. The vendor that removes the partner's pre-sales cost wins the deal before it starts. That's why I think concierge, a dedicated hands-on support model is the next program

[00:12:15] paradigm, whether it's human-led or real. It's the program itself and it shouldn't be sold as a premium upsell. And the incentive point in one line which you really talked about, right, as the intro to this program, differentiated, differentiated incentives change behavior. Expected incentives only get paid out, right? That's the vendor and things like that, yes. So,

[00:12:45] you brought up the data that we were talking about offline. I will not leave readers hanging, or listeners hanging, that would be no fun, right? So, one of the things we were talking about was the fact that we've been digging into on the show here the disconnect between what's happening operationally, right? So, you talked about the partners investing in AI, delivering on that. Well, we've got some data that we were looking at in terms of how much they're advertising that, right? And so, we've gone ahead and we've surveyed over 3,500 solution provider websites

[00:13:14] to try and understand how many of them are saying something about AI and our initial threshold was incredibly low. Do you mention or discuss AI in any way on your website? And I can tell you just over 67% of the solution provider space is not mentioning AI at all, right? That's the number one gap which is interesting to me because it's the most, the largest conversation we're all having in technology. Your data tells you

[00:13:43] how they're leading on actually doing something and we're seeing a lot of partners do it and that what I'm pointing out is, and they're not telling anybody, right? Is that if you're not actually putting it on your website, people aren't finding it but then more importantly in an agentic world, you're not even registering, right? Because if an agent is going out and looking for stuff and they're saying like, hey, find me solution providers that deal with artificial intelligence in say small business

[00:14:12] and you have nothing on your website, you have opted out of that search. So that was the data that I'm looking at to sort of say like, hey, there's still a piece of this. I think it relates to your conversations about what economy that you're playing in because my suspicion is the economy of those that are in outcome-based that are driving on this really successfully, I suspect it's a lot smaller than the other one. Am I right there? You are absolutely right. Absolutely right.

[00:14:42] And bingo to all your points earlier. Absolutely. That's true. That's why we're stringing it all together because we're trying to find out like what are the traits along the way of these successful pieces. Now, I think the interesting piece then to talk about is about where they're moving the money around now, right? So I think that's some of the bit that's really important because as the rules are moving and they're moving into vendors want you to invest in AI technologies and they ask the partner

[00:15:12] to deliver that. The last time we were on we talked about pilot purgatory, right? The idea that funding something, committing to it, but you can't get into production. Your number is 37 to 45% of mid-sized firms in this. They're allocating 17% of IT budget to generative AI and planning a 27% increase so we know the money isn't there and what I found really interesting was you rebuilt your cloud continuum

[00:15:41] for AI. You've got four stages from estate readiness through to accountable economy and the finding is the gap between them, right? Demand exists at every stage but partner supply doesn't. So I kind of want to know like what are the separations from the customers who get out of partner purgatory from the ones who stay stuck? Yeah. That's the uncomfortable truth, right? Right. It's a business model

[00:16:11] failure. The technology works fine. The pilots that stay stuck almost always share four problems. And I think that the partner controls every one of them. So let's talk about the first one. One is the success criteria was were vague. Let's see what I can, what AI can do is a whole and you cannot sign

[00:16:40] a production contract against a whole. Right. Two, nobody scope the data work. You know, the end customers want data readiness assessment. Partners are not doing it. and 48% of these buyers tell us data quality and readiness is a barrier to AI. And yet, pilots get launched by the partners as if the data is clean

[00:17:09] because they have to report, hey, we are registering deals and we are doing something in AI. one. Then third is that there is a technical sponsor but no business owner. So when the pilot works, nobody has the authority to say go. And four is the big one. There is no production price from the partner. The partner treats the pilot as a pre-sales cost

[00:17:39] and hopes the big deal would show up later. It really does. Right. So that's the point. All of these four things controlled by the partner, you may ask that, hey, if there's no technical sponsor, if there's a technical sponsor but no business owner, does the partner have an onus on it? Absolutely yes because the partner is talking to one buyer within that organization. There are three, four different buyers. Maybe the business owner does not have the budget but the business

[00:18:09] owner has the influence. So partners getting out to do things differently, they should sell data readiness as phase zero in my view and they should charge for it. They can pick one narrow use case and commit to showing value in 30 days because a pilot with no production

[00:18:38] price is a permanent free trial. I love distilling it to that. Now, I thought what's interesting is you wrote the S&B path is going to be different and it's not necessarily smaller because the AI arrives inside the suite subscription that they already pay for. So I want to make sure that I'm applying the right lens to that segment. If the AI shows up bundled in say Microsoft 365, what do you think the partner is actually selling in that account? Is it the same or how different

[00:19:08] is it? So within the small business, AI arrives bundled within the SaaS applications that they are using. But then what is happening is that once they start to see the value of Gen.AI, then they automatically start to work through which of my business problems can be solved by using Gen.AI, right?

[00:19:38] They can continue to use all the SaaS applications that they are using. They all have Gen.AI capabilities, but then how do they start to integrate the data across all of these? Right? How do they have the shared data? How they can draw insights from them? And as you move up, as you move up the whole stack, then all of a sudden they say, all right, you know what?

[00:20:06] How do I start to move and automate my work, whether it is AI driven algorithmic decision making, where it is customer support, where it is, you know, agentic AI deployment, for example, managing my various franchise operations. So there is a tremendous amount of opportunity for the partner, but most of the time, the partners are chasing

[00:20:36] newer logos, right? Because that's the way the incentive structure is set up. That's where the vendors have encouraged them to go after the customers. And that's a failing value proposition. So I want to then ask, like, how exposed do you think are the MSPs and IT service providers that don't really have an AI answer for its customer status? In dollars and in months, you've given some thought to this. How big

[00:21:06] is the exposure? Very exposed. Okay. And in my view and experience and when I look at the data, I don't think most MSPs have done the math around it. Right? Let's look at it from a customer end perspective. Let's look at the SMB market for a moment. Sure. 35% of the SMBs told us that they would switch partners today if their partners

[00:21:36] could not support their AI plans. Today, not in two years. Right. Right? Picture an MSP with 100 clients. 35% of them are open to a conversation with a competitor right now. And the opening line of that conversation is, what's your AI plan? Right. And here's why it is so sharp. The MSP relationship has always

[00:22:06] been sticky because switching is painful. Nobody wants to redocument the whole environment, but AI changes that calculation. The customer sees AI as strategic, as survival and they won't wait while their MSP figures out a practice. They will go find a partner who already has won. And the good news is the bar to start is lower than these MSPs fear.

[00:22:35] You don't need a data science team. You need a point of view, two or three package use cases and a way to price that you just need it before your customer goes looking. But the point that I started off with, the MSPs have not done the math is 35% of these customers are ready to fire their MSPs over AI. That's the churn number nobody is modeling. Fair enough. And I would be incredibly remiss if I did not point out that we actually have a

[00:23:05] resource to help MSPs here. Literally, MSPs, you should go grab Carl's famous 60 point checklist that has a whole AI section in it now of questions you can ask your customers. I'm going to throw out the link, go to freemspchecklist.com, download it for free. We literally have a resource to get you started with a bunch of questions you should ask your customers on the journey. Now, Anurag, you've also then talked about token shock. So help an MSP owner define it for somebody who sells a flat

[00:23:34] monthly fee who's never really seen a token bill before. Right, right. So token shock is what happens when the customer opens the bill, right? So everybody has been told token prices are falling. And per token, yes, they are. But you know what? An agent does not use a token. It uses thousands per task. Right. It loops,

[00:24:04] it reasons, it checks its own work. So consumption per task is rising faster than the price per token is falling. So the bill goes up and nobody budgeted for it. We see it in the data. Bill shock or the token shock is now the top frustration buyers have with their vendors at 42% and customers are reacting. Right. So what are the SMBs doing?

[00:24:35] 78% of the SMBs are now prioritizing private cloud, hybrid or edge over public cloud. Some of them is obviously based on IP and sovereignty issues. Right. But a big part of it is that they want to turn an unpredictable token bill into a predictable fixed cost. So your question is why should an MSP care? Here is why an MSP should care. The customer wants owned hardware

[00:25:04] economics. Right. But 65% of the firms don't have the facilities to run AI on-prem and 85% do not have the talent. So who runs it? MSP, that's a managed service. On-prem AI fixed, monthly price, partner operator, that's a brand new annuity and owner is sitting there.

[00:25:34] Anyone budgeting agents on falling token prices is solving last year's equation. That's why MSP should care. And hear that passion, listeners. He is focused on where you can make some money. So I want to hold that for a moment because I want to talk after the break about the person who's going to decide all about the deals and all. If you've been watching the backup market, you know pricing has gotten complicated. Veeam feels like legacy overhead.

[00:26:04] Some of the newer platforms have gotten expensive fast. Comet Backup is what I keep seeing MSPs land on when they want modern backup without the modern price tag. Bring your own storage, control your costs, and run it your way. Comet Backup is built for MSPs who want flexibility without the vendor dependency. Check them out at Comet Backup dot com. Cloud minted winners, security minted winners, AIs,

[00:26:34] next. But not for the MSP with the most tools, but the ones who turn intelligence into a business. PAX 8 calls it managed intelligence, a new kind of provider built on the PAX 8 marketplace for the shift almost nobody's built for yet. 47,000 partners are already there. Join them. PAX8.com That's P-A-X the number eight dot com. All right, Anorag, you made a claim that I

[00:27:04] want you to defend, that the CISO is the most important, powerful person in an AI deal. Your identity piece in August says that protecting the identity is now the single highest security priority across the S&B market, and that every agentic deployment mints a new, non-human identity that's highly privileged and rarely governed. Right, there's a number there. 4% of small businesses manage non-human identities today, only four. 19% of the core mid-market, 38% of the

[00:27:34] upper mid-market, and the agent count is about to run past the human count, and Cloudflare is already citing numbers that have more than half the internet is all agents and systems now. So tell me, why is the CISO the most powerful person in an AI deal, and what happens to the customer when they don't have one? Yeah, that's an interesting question. So let's start with, you know, I talked earlier about the fact that the line of business

[00:28:04] and IT and all that sort of thing, right? So line of business picks the AI, but line of business cannot sign for it. For the last two years, everybody has been talking about, last four years, we've been talking about, hey, you need to sell to the LOB, LOB, LOB, guys. Right. But line of business cannot sign for it. The question is CISO, and I'll come to it in a minute. So the two people who decide are the CFO and the CISO. And I find that the partners keep

[00:28:34] pitching to the wrong person. Right? So let's start with the CFO first. The CFO holds veto power in 40% of commercial AI decisions and is the final approver in another 32%. So in most deals, the CFO is in the room where the

[00:29:04] partner sees them or not. So what is the CFO looking for? Maybe ROI, you know, those kind of things, right? But 48% of the CFOs will override their own ROI concerns if the purchase is framed as a strategic imperative. Right? So it's about ROI, yes, but they say, you know what, this is strategic, this is important. Then they will say, okay, you know what,

[00:29:34] cost savings and all that. Most partners go and talk to a CFO, right? He walks in with a cost savings spreadsheet, is answering a question the CFO is not asking. The CFO wants to know two things, will this keep us competitive and will my people get more done? The CFO buys survival and speed. Now let's talk about the CISO.

[00:30:04] Whether or not there is a CISO within the organization, there is somebody who is looking at security. We have found that in six out of ten deals, the partner goes through, they expected the deal to go through, and it did not go through. Six out of ten. And they reported in the CRM system that the customer did not have the budget.

[00:30:34] You know what? It was never the budget because budget has been accounted for. You, yourself, stated of stats earlier. The budget is already there. The deal died at the CISO level because somewhere along the decision-making process, it went to the CISO and CISO asked simple questions. What is the security?

[00:31:03] What is production of my IP? Who does identity management? If the answer, if there's no answer, the CISO kills the deal and it is reported by the partner as there was no budget because the partner was never in the conversation with the CISO. And that's a big, big issue. Right? So, what I tell partners or what I tell distributors or what I tell is the fact

[00:31:33] that because the CISO almost never starts an AID, it routinely ends one. The CISO holds veto power in 45% of AI decisions. That's the highest of any role. It's higher than the CFO. It's 50% in the upper mid market. And it makes sense when you think about what an agent is. It's software that acts on

[00:32:03] its own with access to your data, your system, sometimes your money. Every one of this is a security question. So, the deal gets all the way to the finish line. The business is excited. The CFO is on board. Then it lands on the security reviewer's desk, whether it's a CISO or not, and it sits. The partner who wins treats the CISO as the first buyer instead of the last hurdle.

[00:32:32] They walk in with the security answers already packaged, how the agent authenticates what data it can touch, how you audit what it did, how you shut it off. Hand that to the security reviewer on day one, and you shorten the whole sales cycle. So, this is what I want every partner on this call to remember. Line of business picks the AI,

[00:33:03] IT picks the network, and CISO decides whether it ships or not. Which makes perfect sense, and for those smaller organizations that don't have it, coming in with those questions answered, gets the project all the way across the finish line. And again, I'm smiling going like literally the checklist that we worked on and we talked about earlier is designed to help answer that. So, I want to ask my last couple of questions here because you've done some research around the buyers changing. Your buyers

[00:33:34] journey research specifically says they research with AI first, verify with analysts, and they want experiential proof. And 70% now treat industry specialization as the trust, not generalist implementation. 35% say they're ready to switch partners today, which you've referenced. I think about that a lot, the reason I was citing the 67% slightly more percent of MSPs and IT service providers that aren't even putting that out there because if they're using AI

[00:34:04] first to do the research, you're eliminated. So, I want to get your take. How are SMB buyers finding and vetting partners now? And what does a generalist MSP look like when the first search is a prompt? Right. So, in the summer of this year when we did a study, JNI tools were among the top discovery channel. Right?

[00:34:34] 35% of the buyers started there. Right? Today, it is 52%. 52% of the search for Gen. AI solution starts with Gen. AI. So, if you do not show up in perplexity or Claude or Gemini or whatever, you know, you are invisible to them. And the buyer is 70% of the way through the journey

[00:35:03] before they talk to anyone. I have sat with many, many different customers. Literally, the prompt chat GPT, I am trying to improve my operational efficiency in my supply chain. Can you put together a spreadsheet of the potential suppliers? Right? That's the way they start their query. And if you are not there in that spreadsheet, you are not

[00:35:33] there at all. Right? So, what I am saying is, you talked about what should the MSPs do, right? Here is the thing, that they may start the discovery process, they verify it through some partners and some analysts, vendor websites and things like that.

[00:36:03] But the MSPs, the existing partners, still carry 80% of the influence at the final decision. So, you have to be there, right? So, they may actually come back, we actually have drawn this whole slide, where they kind of come in and out. So, they may say, okay, they will go to an MSP and say, okay, tell us more than what we already know. That's the

[00:36:33] conversation. Or they will say, validate what we have already decided. So, that the MSP should be able to answer that, right? But then the question is, what should the MSP do? You know what? Partner hosted technical workshops influence 69% of these buyers. buyers. The buyer wants to sit with somebody who knows their business. Yes, you know that, I know that everybody knows that, right?

[00:37:03] But this is more important today because we're talking about workflow, we're talking about agentic workflow. Industry expertise is the top trust signal, that's the number you quoted, says 70%, right? Why it is like that? Because it's not about certifications anymore, right? So, so the risk is at the front end. If an MSP doesn't come up when the buyer asks an AI assistant who can help, you never get to

[00:37:33] the workshop. Right. And the partners who are invisible to those answer engines are the ones least able to buy their way back in, right? So if an AI somebody cannot quote you, the buyer never meets you. You cannot have a workshop. You've strung it all together and if it's not on your website, the machines can't find you. All right, last couple of questions here because I want to get a quick thought from this. That 35% ready to switch, I thought

[00:38:02] that was really interesting and I want to get your thought on this idea. Is that a churn risk for the incumbent or is it the biggest new logo pool that MSPs have seen before? Like how should you look at that? That's a great question. So let's start, it's a churn risk. Let's start with that, right? It's a huge churn risk. It is higher in APJC and EMEA than it is in North America

[00:38:32] for a variety of reasons. Right? But the point here is this, that yes, but the MSPs then say, you know what, can this become my new strategy to go after new logos? But hey, listen, if you're being cut out by one customer and there is a peer conversation happening among the customers, you're going to be cut out from the second or the third or the fourth customer as well. Because if you have not learned from being cut

[00:39:02] out or churned out from the first customer and not revamped your strategy, then you're not going to succeed. And if you may think that, hey, that's my new logo opportunity, it is not. And that's a big challenge. So what the MSPs are doing today is focusing more on saying, you know what, I have got this customer, I need to find a way to keep this customer because I

[00:39:31] don't want services leakage, which means I don't want any other partner to come in and my services revenue getting potentially, shared with another partner. And then that's when they start to go and start to look at this P2P relationship. I may not have the skill sets that the kind customer wants, but let me bring in somebody else. Okay. So let me, as we wrap it up, one last thing and you're going to kick off the

[00:40:02] 2027 owner planning because you're the first person I'm going to be asking this. As people are starting to think about their 2027 planning, what's the one piece of advice for an MSP thinking about next year? One piece. Let me try and give you three then. Okay. Don't hate me for it. There are quick ones. One, I talked about that very early on in this conversation.

[00:40:32] Put a production price on every AI pilot before it starts. If the customer cannot see what yes costs, you are running a free trial. Two, lead security with identity and recoverability and sell it as a managed service. Identity because agents are multiplying it. Recoverability because that's what the small customer buys first and managed

[00:41:01] because only 5% of the mid-market relationships are managed today. That's your annuity. Three, get quoted. Published content an AI assistant can find and repeat specific to the industries you serve and run at least one customer workshop a quarter. The AI answer gets you on the shortlist. The workshop gets you the deal.

[00:41:34] and if I had to put on a bumper sticker, what would I do? Price the pilot, own the identity, get quoted. There's your bumper sticker. See, you managed to get it in. It's not even that long. We can make a bumper sticker out of that one. I could do this all day. I want to be respectful both of your time and the listeners. I know we're going to have you back again rapidly but if people are interested in finding your work, continuing the conversation,

[00:42:04] what's the best way for them to reach out? They can reach me through LinkedIn. I think I'm pretty active on LinkedIn or they can send me an email directly at anurag at tagile.com and I do respond. He really does, everybody. He's always quick on the responses to me when any time I've got a question. Anurag, this is always great. I love having you on. When we finish up, we'll talk about the next time I'm having you on. Thanks again for joining me. Thank you for having

[00:42:34] me. What a pleasure. Before we go, the vendor supporters whose membership backs this show. First of Firetail, one platform to discover, assess, and protect all AI usage across an organization with a multi-tenant console for MSPs. They're available at firetail.ai. And Transit AI, the all-in-one workspace for network engineers combining SSH, serial, SFTP, and an API client in one app with an investigation-only AI that can change nothing without

[00:43:04] your click. Transitai.app. And ABC Solutions, a full-service accounting firm specializing exclusively in MSPs and IT firms. Check them out at abcsolutionsfl.com. And Rhythms, a network support partner for MSPs delivering carrier agnostic 5G, satellite, and SD-WAN connectivity. They're at rhythms.com. That's R-Y-T-H-M-Z. And this show, the questions, the discussion,

[00:43:34] the disagreement, the closest thing on the feed is the Small Biz Thoughts community every day. That's member meetings, seminars, real questions, real answers from operating businesses just like yours, plus the resource library and courses through IT service provider university, now all MCP enabled to fit right in your workflow. If this format is the episode you look forward to the most, the community is where it keeps going. Join us at smallbizthoughts.org.

[00:44:04] If you're interested in advertising, head over to mspradio.com slash engage. The business of tech is produced under ethics guidelines posted at businessof.tech. Thanks for listening. I'll see you next time.

[00:44:37] Produced by Picture This Video Part of the MSP Radio Network