James Davis the Director of the Pax8 Academy in Asia hosts Adam Ross from CloudOlive to discuss one of the major causes of revenue leakage that is eating into our bottom line. Adam talks us through the 2 major problems we have when it comes to managing SaaS and other recurring costs/revenue so that we can better identify the problem we have. He gives us insight into how we can solve these problems to gain trust with clients, increase our profitability and improve our cashflow
[00:00:00] Hello everyone, it's James Davis from the Pax8 Academy again and I've got Adam from
[00:00:24] Cloud Olive.
[00:00:25] How are you doing mate?
[00:00:26] Very good, James yourself?
[00:00:28] I'm doing well.
[00:00:29] We're in this wide world that you like had it.
[00:00:32] We've just moved a few hours north of Sydney, just out of Newcastle we are now.
[00:00:38] Yeah, moved here late last year.
[00:00:41] It's also a spot to be.
[00:00:42] It's beautiful.
[00:00:43] Loving it.
[00:00:44] Well, I'm excited to have you on because this is probably not a topic a whole lot
[00:00:49] of people discuss, but really I'll talk about how we prevent revenue leakage in
[00:00:57] our companies through the fact that we resell a whole bunch of SaaS subscriptions
[00:01:01] and even hardware and software, physical products.
[00:01:05] And I'm very curious from your perspective of how well are people doing generally
[00:01:11] when they come and engage you?
[00:01:14] How much sort of do you find that they're leaking revenue?
[00:01:19] As we engage with a new MSP, like we've got some like a general questionnaire
[00:01:24] that we go through and when that comes back, we've got a pretty good gauge of
[00:01:27] how well their PSA is going to be configured.
[00:01:30] Some of their more complex end client billing requirements like splittings
[00:01:34] or groupings or anything like that.
[00:01:36] Essentially just adding complexity to it.
[00:01:38] But what we like regardless of size of MSP, we would expect that for
[00:01:44] every $10,000 of revenue that you're putting through your business from a
[00:01:47] service perspective, there's somewhere between five to 7%.
[00:01:51] So $500 to $700 that is not getting recouped for any number of reasons.
[00:02:00] So if we level it out about 6%, right?
[00:02:02] And it truly scales.
[00:02:03] It's been incredible to watch this over the last four years now that
[00:02:06] we've been building FlatOly.
[00:02:08] This number has been fairly static.
[00:02:12] It's actually increased ever so slightly with NCE price changes and
[00:02:16] MSP is no longer recouping the margin that they once were even the
[00:02:20] month prior or the quarter prior.
[00:02:22] So just more and more complexity.
[00:02:27] As you break it down to that 6%, like a couple of percent will be
[00:02:31] the clients caught up, they've cancelled something, admin have gone through
[00:02:35] the process and cancelled it inside ConnectWise or AutoTask or PSA of
[00:02:39] choice, but it was never communicated and switched off at the vendor portal.
[00:02:43] Though that disconnect can take a really long time and that's just
[00:02:46] pure cost obviously, that's just going to hit cashflow more than anything.
[00:02:49] I mean, you can't recoup that in sort of back billing any of that.
[00:02:53] Margin is another one.
[00:02:55] And we also see if you've got a hundred line items coming from a
[00:02:57] supplier and you're doing things manually, meaning on a monthly
[00:03:01] basis or periodic basis, you go through and go, okay, that's got
[00:03:05] 10 units in there and it's got five or 10 in the PSA tick, happy days.
[00:03:10] Around five of those lines will not be getting billed out of the PSA
[00:03:14] at all, at all, at all.
[00:03:17] So they're just some of the things that we recognise if you buy from
[00:03:20] Cassell, we understand the reports and the invoice.
[00:03:25] So we just know what to look out for as well.
[00:03:27] So we can just shortcut a lot of the challenges all MSPs are facing
[00:03:32] with this very fragmented problem area.
[00:03:36] And I back up what you're saying.
[00:03:38] I'm typically saying that sort of five to 7% of revenue leakage
[00:03:42] from my anecdotal experience of doing this and some of those examples
[00:03:46] that you gave, 100%, that's what people are facing.
[00:03:51] Why is it the case though?
[00:03:54] Shouldn't this stuff just be easy?
[00:03:58] No, having now fully dug deeper into this problem than any person
[00:04:03] on the planet with my co-founder, it's a non-trivial problem,
[00:04:08] a lot more complex than we were actually initially when we set out to
[00:04:11] solve it. So why it exists is vendors and MSPs,
[00:04:17] there's massive disconnect in the way that MSPs buy and then sell.
[00:04:22] And even the timings that vendors build their MSP versus when the MSP
[00:04:28] builds the end client.
[00:04:29] So if you want to build a matrix of all these different items,
[00:04:32] nothing really overlaps that well.
[00:04:35] A lot of MSPs try to build very early in the month,
[00:04:37] but if an invoice lands on the sixth, like what are you doing
[00:04:41] that? It's a question that they have to ask across 10,
[00:04:45] 17 different vendors that they resell.
[00:04:50] So there's just very little consistency and no standardization.
[00:04:55] And my background was eight and a half years working at AutoTask.
[00:04:59] So I very much come from the PSA construct.
[00:05:03] If those things are set up well from a billing perspective,
[00:05:05] they're awesome. And that's universal across all
[00:05:08] software implementations really, but really around the PSAs,
[00:05:11] the Autotask, Connectwise, Halos, other.
[00:05:14] If the billing is set up well, they're a dream to work with.
[00:05:16] If they're not set up well, they're very big systems.
[00:05:19] And oftentimes people will not implement, have a bad experience
[00:05:22] and then leave and likely have a similar cycle in the next PSA.
[00:05:27] So I saw that for near on a decade.
[00:05:29] And the questions the MSPs were asking us
[00:05:34] when I was still at Autotask was like, well, how does everybody
[00:05:37] everybody else manage all the license fluctuations across all the suppliers,
[00:05:41] our distributors, our Microsoft, our this and that.
[00:05:43] And we never had an answer to that problem.
[00:05:47] So as we dove into a cocaine and I four plus years ago, it was like,
[00:05:52] oh, man, like our first client sent us 17 different vendor files
[00:05:57] and said, this is what the admin team worked through.
[00:06:00] Tried to do it on a monthly basis.
[00:06:02] And I was like, OK, this is with Biden off a fair bit here.
[00:06:05] But just incrementally bit by bit, we started seeing similar
[00:06:09] patterns, similar problems and just incrementally now can guide MSPs
[00:06:15] to say these are the pros and cons of what you're doing now.
[00:06:18] Here are the options here, the future pros and cons.
[00:06:21] Let's just pick one and keep moving.
[00:06:24] It's I see with that complexity,
[00:06:27] I've had to do it myself back in the day.
[00:06:29] I'm I'm glad I'm not having to do it these days.
[00:06:31] Like you said, the amount of solutions that we're reselling
[00:06:36] have exponentially grown here.
[00:06:38] Probably when I look back, when I was doing this kind of stuff,
[00:06:41] we might have done like six sort of products and solutions.
[00:06:43] And now the average is like 24.
[00:06:48] That's a lot of work.
[00:06:49] And probably what I'm seeing and be interested to get your perspective.
[00:06:53] I'm seeing more people give up on this challenge
[00:06:56] and just let it happen.
[00:06:57] And as a cost of business, but I don't think they can quite quantify it.
[00:07:00] Is that sort of what you're seeing or are you seeing people
[00:07:04] doing different methods to actually try and solve this problem?
[00:07:06] Everyone's got a solution to this problem.
[00:07:09] They have to write.
[00:07:10] And at some point, the customer will come back,
[00:07:12] their end client will come back from say, hey, why is this number like this?
[00:07:16] And it's like, oh, I've got 50 or 100 clients and one's picked up on it.
[00:07:20] They've like it's heard the trust aspect.
[00:07:22] And then they go, OK, let's try and fix this a little bit more.
[00:07:24] But everyone's got a solution.
[00:07:26] Everyone's got perhaps Excel,
[00:07:29] some from the workbook that they're using or some other process
[00:07:32] that works well or does not work well, but it's often very,
[00:07:35] very time consuming and human error prone.
[00:07:40] But there's a spectrum, there's a total spectrum into
[00:07:45] sort of how people are trying to solve this.
[00:07:48] There's no, as I said earlier, there's no standardization.
[00:07:51] There's no standardization from distributors, vendors,
[00:07:54] the way MSPs build their clients, the way the PSA has been configured.
[00:07:59] Zero standardization.
[00:08:01] And that's something that we've seen as a real opportunity
[00:08:03] and to come in and go,
[00:08:04] I sort of see every edge case or 99 percent of the edge case.
[00:08:09] I feel like we've seen them on multiple occasions now.
[00:08:13] And it's like there is a better way.
[00:08:15] And a lot of it starts with like the end customer.
[00:08:19] Like what do they expect to see on their invoice?
[00:08:21] Because that's what they're going to be happy to pay.
[00:08:24] And then beginning to work backwards right away to whichever vendors you go
[00:08:27] out and select to solve the problems that your clients have.
[00:08:32] It's a very interesting perspective of starting from the
[00:08:36] from what the customer is looking for and understanding.
[00:08:39] Because I think in general, a lot of us have made assumptions
[00:08:45] and we hear we hear,
[00:08:48] I guess, feedback, but we don't actually dig further into it.
[00:08:51] Like often I hear that the main thing I always hear is
[00:08:55] that the client doesn't want multiple invoices.
[00:08:57] But when I question the sort of MSP, the partner around that,
[00:09:02] they have no answer to why.
[00:09:05] And the obvious answer is, well, they don't want to do it
[00:09:09] because there's multiple things that they've got a manual input.
[00:09:12] Well, if you help them get an automated system,
[00:09:14] well, the invoice will just go in and that's not the problem.
[00:09:18] So I think what you're saying is like actually understanding
[00:09:21] the client expectations.
[00:09:23] I think it's obvious, right?
[00:09:25] If you think about it, it's obvious.
[00:09:27] I use Vodafone and they email me two weeks out going,
[00:09:31] hey, this is going to come out on the 8th.
[00:09:33] Cool.
[00:09:34] It's very simple and basic.
[00:09:37] Sure, that doesn't change.
[00:09:38] And sure, I get that it's a fairly sort of steady state
[00:09:42] bill that comes across.
[00:09:43] But it works for me.
[00:09:45] It works.
[00:09:46] And just thinking like the client at the end of the day
[00:09:48] needs to pay the bill, ideally quickly.
[00:09:50] Ideally, they don't have many questions that come back
[00:09:52] because that's just easy to answer.
[00:09:54] Because that just eats into the margin and time.
[00:09:57] And it's energy sapping.
[00:09:59] It sucks for everyone and diminishes significant trust,
[00:10:04] especially if it happens a couple of times.
[00:10:06] So I was like, OK, cool.
[00:10:07] Well, let's just think of it another way rather than go,
[00:10:09] what tools have we got?
[00:10:11] How are we going to package it into some single line
[00:10:13] and it's going to be all encompassing?
[00:10:14] We're going to charge 500 bucks a month.
[00:10:16] That's a big bump.
[00:10:17] Maybe a little high, but really high fee
[00:10:19] to a security bundle or something.
[00:10:21] So I was like, OK, well, let's just work with the client
[00:10:23] and see what they need.
[00:10:25] And I would imagine that conversation
[00:10:29] that you just had in terms of we don't want them split out
[00:10:32] or I would imagine under the hood of that is,
[00:10:35] it's complex for the end client to then go and manage it.
[00:10:39] And there may be other people up the chain
[00:10:41] that are questioning and they don't have the answer to it.
[00:10:43] I would imagine that there's some other friction
[00:10:45] that's occurring, which again, just sitting down
[00:10:47] and understanding what is it that they need
[00:10:49] in order to be successful in their job.
[00:10:52] Part of it, a really important messaging
[00:10:54] is how the invoice is then portrayed through the PSAs
[00:10:57] and accounting packages.
[00:10:59] I think that's a, I don't want to labor on it too much,
[00:11:02] but I think that oversimplification isn't helping us.
[00:11:05] Your example of like Vodafone is a good example.
[00:11:08] Maybe you've got a fixed price thing
[00:11:09] and it shows you usage and stuff, great.
[00:11:12] Electricity, water,
[00:11:15] like a lot of this is a well-trodden path
[00:11:18] and we've been, I guess in our industry,
[00:11:22] is a lot of smoke and mirrors
[00:11:23] that we haven't been able to convey our value
[00:11:28] that we've defaulted this sort of one line bundle
[00:11:31] that is difficult to manage.
[00:11:34] There's a lot of complexities in that
[00:11:36] and you've already highlighted the vendor perspective.
[00:11:39] They're billing us differently to how we're billing it
[00:11:42] and how it's different to the way
[00:11:45] that clients are interpreted.
[00:11:46] So that bundle or split out thing,
[00:11:48] every MSP has two decisions to make at the PSA level
[00:11:52] and then at their client invoicing level.
[00:11:53] Okay, do we split them or do we bundle them together?
[00:11:56] It's a decision point that needs to be made.
[00:12:00] So let's say that they then choose to split that out.
[00:12:05] It's like, okay, cool.
[00:12:06] If you're going to do that,
[00:12:07] then you can track costs and profitability
[00:12:08] and everything rather than bundling it all together.
[00:12:10] Cool, you got that path.
[00:12:12] Then the next question is at the client level.
[00:12:14] Do you split that out for the client
[00:12:17] or do you group it into one line for the client?
[00:12:18] And all the PSAs have the capability to do one
[00:12:20] or the other of either or both.
[00:12:23] And I think that certainly from our experience
[00:12:26] that there was a real big push from 2017 on,
[00:12:31] maybe through three or four years
[00:12:32] where it's like everything has to go into one line.
[00:12:35] And then what the knock-on effect to that was,
[00:12:38] cool we sold some more stuff
[00:12:39] but then admin team brain started to explode
[00:12:43] when nothing now matched the unit counts
[00:12:45] that the client was willing to pay.
[00:12:47] And gradually, gradually,
[00:12:49] and there's gained some huge momentum
[00:12:51] over the last 24 months.
[00:12:52] Certainly from our vantage point is
[00:12:55] people are just decoupling everything
[00:12:56] and either showing it or not.
[00:12:58] It's the only way,
[00:13:00] and I'm always happy to learn other avenues
[00:13:02] and sort of be say,
[00:13:03] hey, I don't know if you thought about this
[00:13:05] as a better way to think about it.
[00:13:06] But from what we've seen is like,
[00:13:08] that's the only way if you break them apart
[00:13:10] to track cost per client.
[00:13:13] The only way.
[00:13:15] It's impossible otherwise.
[00:13:17] I'll be interested to see your thoughts on that as well.
[00:13:20] I'm very anti-bundling.
[00:13:22] I'll just say it now for everyone,
[00:13:25] for multiple reasons.
[00:13:26] First what you said like the actual visibility
[00:13:29] of profitability internally is a huge issue.
[00:13:31] Every nearly every partner that I walk into
[00:13:34] does not have visibility and profitability
[00:13:36] of what they're doing.
[00:13:37] And it's because of stuff like this.
[00:13:39] But also I don't have my experience
[00:13:44] working through a lot of partners,
[00:13:45] even like selling things myself to clients.
[00:13:49] They don't actually like the lack of transparency.
[00:13:55] And the prime example I can always tell you is
[00:13:58] anytime a new manager comes into your client
[00:14:02] and they're questioning your bill,
[00:14:04] well that's why,
[00:14:05] because they don't have visibility.
[00:14:06] If it's actually laid out,
[00:14:08] they wouldn't even ask you the question.
[00:14:10] And so for me,
[00:14:11] especially as we're evolving into
[00:14:14] that sort of technology solutions partner,
[00:14:16] our pillars of values and what we deliver
[00:14:19] are getting broader and broader.
[00:14:21] But this whole truck it all into one nebulous bundle
[00:14:26] of everything.
[00:14:27] Just doesn't, it just doesn't make sense.
[00:14:31] It makes sense when you've got like
[00:14:33] you only deliver one thing,
[00:14:34] you're treating it as like commodity offering.
[00:14:36] Like, you know, pick Vodafone's a really good example
[00:14:40] of how that works.
[00:14:42] But as soon as you add complexity,
[00:14:44] it makes no sense to anyone
[00:14:46] in that approach from my opinion.
[00:14:52] I'm curious, we've been talking a little,
[00:14:53] you've been mentioning the PSAs a bit
[00:14:56] in terms of their setup.
[00:14:58] How, in your opinion and what you get to see
[00:15:01] in your visibility,
[00:15:03] how well have people generally got their PSAs set up?
[00:15:10] Do you, prior to kicking off cloud olive,
[00:15:12] the PSAs in general are not that well configured?
[00:15:16] And we know it because we did tons of analysis
[00:15:19] at AutoTask in terms of where churn came from.
[00:15:23] And if they implement one module,
[00:15:26] there are churn risk.
[00:15:27] And that's generally what happens.
[00:15:28] They normally implement the service desk.
[00:15:30] And part of that is because when someone Googles
[00:15:34] MSP ticketing system,
[00:15:36] it goes to AutoTask, goes to Connectwise,
[00:15:37] and then naturally the rep does their job effectively
[00:15:41] and it expands the entire picture and scope of,
[00:15:43] hey, have you thought about the whole life cycle?
[00:15:45] Not just this ticketing system.
[00:15:47] They go, oh, that's amazing.
[00:15:48] And they come aboard.
[00:15:49] But then they're busy, right?
[00:15:50] And they just implement the service desk
[00:15:51] and then they don't really implement the contracts.
[00:15:53] They're managing out of zero or other.
[00:15:55] And it just falls apart in time.
[00:15:58] So I saw that for years and years and years and years.
[00:16:01] It was a very tough problem to wrap consultancy,
[00:16:05] even at the size of AutoTask
[00:16:06] when we, at the time it was like,
[00:16:08] it was a hard problem to solve on scale
[00:16:10] and did loads of different consultant engagements
[00:16:12] and trainings and boot camps and everything
[00:16:15] to try and solve that specific problem.
[00:16:17] But looking at it now,
[00:16:20] we're very focused on the recurring billing items.
[00:16:23] Agreements in AutoTask, contracts in,
[00:16:27] sorry, agreements in Connectwise
[00:16:28] and contracts in AutoTask.
[00:16:30] That's what we have spent a long time identifying.
[00:16:34] Couple of things,
[00:16:35] naming conventions really matter.
[00:16:37] Like in general, right?
[00:16:39] People connect up their system into Cloud Olive
[00:16:41] and we've got a free module
[00:16:43] which just gives a list of all of your services
[00:16:45] or additions that you're reselling.
[00:16:47] And then you've got Excel-like filters
[00:16:49] and get margin calculation stuff on the top.
[00:16:51] Like it's just a cool view
[00:16:52] that's not available in any of those systems.
[00:16:54] So point one, when they sync that
[00:16:56] and we just jump in and have a look,
[00:16:58] the naming conventions,
[00:17:00] we've got a real like 80% confidence
[00:17:02] this is gonna be an easy implementation of Cloud Olive
[00:17:04] or there's gonna be a hard implementation of Cloud Olive.
[00:17:06] It's gonna be easy in the sense of
[00:17:08] every unique vended service from the vendor side
[00:17:12] seems like there's some form of standardization
[00:17:14] and construct in terms of the convention
[00:17:16] that's being given as a name.
[00:17:17] And we go, okay, cool.
[00:17:18] This is gonna line up pretty easily.
[00:17:20] CSP, NCE, BCDR,
[00:17:22] that I like it's like, cool.
[00:17:24] That's gonna be cool.
[00:17:25] That's gonna be easy.
[00:17:26] And then on the flip side,
[00:17:28] we've got a client in the UK,
[00:17:31] really large, right?
[00:17:32] They've come together in lots of different companies
[00:17:34] sort of been acquired into an umbrella company.
[00:17:36] But they had web route,
[00:17:40] just as an example,
[00:17:41] I'm not picking on web route,
[00:17:42] but they had web route that was getting bought
[00:17:44] from multiples of their MSPs that got acquired
[00:17:47] inside their PISA,
[00:17:48] they've got 11 different web route SKUs, 11.
[00:17:52] Okay.
[00:17:53] And that's not uncommon here.
[00:17:54] General thought is in the analysis we do
[00:17:57] with every new partner upfront,
[00:17:59] try to consolidate responsibly.
[00:18:02] Fewer is sort of more,
[00:18:04] there's more value in having greater control around it.
[00:18:07] And naming conventions, getting them right
[00:18:10] means you never have to re-engineer,
[00:18:12] hey, I wanna decommission these six different
[00:18:14] web route portals.
[00:18:16] It's like, okay, cool.
[00:18:16] Well, we can very easily slice and dice them
[00:18:18] and bring them across.
[00:18:20] Without it, it's just a fragmented,
[00:18:22] tricky manual process.
[00:18:25] It's really interesting.
[00:18:26] And that probably sits with the way
[00:18:29] that most partners have all these sort of legacy brackets
[00:18:33] in terms of their clients
[00:18:36] and they haven't updated their agreements,
[00:18:38] haven't put proper contracts in place.
[00:18:40] They've got them on different pricing schema,
[00:18:42] all of this kind of stuff.
[00:18:43] And your point around having that fragmentation
[00:18:47] makes it very difficult from an admin perspective,
[00:18:49] but it also makes it super difficult
[00:18:52] to look at profitability.
[00:18:56] What you just said there around like consolidating,
[00:18:59] using web route as an example,
[00:19:01] if you're selling one web route product,
[00:19:04] use that as the standard.
[00:19:06] If you're selling it at a different price
[00:19:08] for different people,
[00:19:09] change the price for the individuals
[00:19:10] so that you can see the different margins.
[00:19:12] Like it makes it so much easier then
[00:19:15] to manage this sort of leakage.
[00:19:18] What I'm picking up from you so far is
[00:19:21] the leakage is difficult and complex for people
[00:19:24] because it's typically not just one solve all answer here.
[00:19:29] It's multiple things that add up.
[00:19:32] So I'm very curious at what else do you see
[00:19:36] through this process and all these different things
[00:19:38] of like, what are different examples
[00:19:40] of things that are causing this leakage?
[00:19:45] The further you sell to your clients
[00:19:48] than the way that you buy from vendors,
[00:19:50] complexity creeps in.
[00:19:52] So if you've got 10 there and you got 10 here
[00:19:56] and you invoice that after you get invoiced,
[00:19:58] it's like very easy.
[00:19:59] It's not the reality though.
[00:20:01] So the second you start breaking apart
[00:20:03] and going to different ways
[00:20:09] of those two components not lining up,
[00:20:11] it just gets incrementally harder.
[00:20:13] And then if you start bundling 10 units
[00:20:17] into something that's gonna get sold for eight units
[00:20:19] because that's the way that it's been invoiced
[00:20:23] or the way that it's been sold,
[00:20:24] it's like, okay, more complexity that comes into it.
[00:20:28] I think rather almost in labor on why the problems there,
[00:20:30] I think that what MSPs should be thinking about
[00:20:35] is how do we buy from our vendors?
[00:20:38] Meaning is product A or service A,
[00:20:42] is that a per user license type?
[00:20:45] Is that a per site?
[00:20:47] Is that a device?
[00:20:48] Is that a server?
[00:20:49] Or is this something that's towards a lighter user?
[00:20:54] And then looking at if you've got 100 unique services
[00:20:57] in your PSA or 100 unique services from your vendor,
[00:21:01] it's like bucket them into very specific areas
[00:21:06] that you're buying in that frequency.
[00:21:10] And the power and control that this ends up given
[00:21:13] is at the end of the day,
[00:21:15] if you've got 100 unique services
[00:21:17] and 500 lines in total that need to be
[00:21:20] or should be checked on a monthly basis,
[00:21:22] it's like, I really wanna check all 500.
[00:21:25] A lot of them don't change every month.
[00:21:27] So it's like, okay, well, if there's 500 to do,
[00:21:30] you sort of do away.
[00:21:31] We don't have to check these 100 every month,
[00:21:34] but these 100 driven by user,
[00:21:36] I mean, we have to keep on top of that
[00:21:37] and decide, okay, try and pick a driver
[00:21:42] or a primary sort of driver of that user world.
[00:21:46] You might have five or six different vendors
[00:21:49] that you're buying from completely different countries.
[00:21:53] They invoice you at different times,
[00:21:54] but it's like, okay, let's just structure them
[00:21:56] into a user-based sort of puzzle
[00:22:00] and just sort of bucket that there.
[00:22:01] Which ones would be driven by device?
[00:22:03] Now, every MSP, not every,
[00:22:06] but 90 plus percent of MSPs will go,
[00:22:08] well, whatever their Microsoft count is
[00:22:10] for these types of SKUs indicate there's a human,
[00:22:14] there's a mailbox premium, the e-licenses, et cetera.
[00:22:17] And maybe Business Basic is a lighter user
[00:22:21] and maybe they've got some other, but they know this.
[00:22:22] Like they fundamentally have all figured this out
[00:22:25] for themselves.
[00:22:26] Like there's nothing new in that.
[00:22:28] It's like, okay, cool.
[00:22:29] Take that logic and then go,
[00:22:31] all right, what other services
[00:22:33] should be tied to the user count?
[00:22:36] Now keep in mind,
[00:22:37] you might have 20 users of Business Premium.
[00:22:39] We'll keep it really sort of straightforward,
[00:22:41] but inside of Datto SaaS Protection
[00:22:44] or other that maybe should be tied to that user,
[00:22:47] they bill you high point in the month, Datto this is.
[00:22:50] They bill you on the sixth of the month
[00:22:51] and they run their reports on the fifth.
[00:22:53] It's like, okay, what does it work?
[00:22:55] Come back to what the customer is expecting.
[00:22:57] They know they've got 20 staff.
[00:22:58] They know that Joe Blogs left on the 19th of last month.
[00:23:01] So they're happy with like one license creep,
[00:23:03] either way, they're happy with that.
[00:23:05] But if all of a sudden you've got 20 here
[00:23:08] and 22 data when you sell that,
[00:23:12] that's where the questions begin to come up.
[00:23:15] Very logical, very logical.
[00:23:16] And this is where there's a,
[00:23:18] what we've in the last four months,
[00:23:20] we started to understand that
[00:23:22] the vendors and distributors
[00:23:26] haven't taken that into consideration
[00:23:29] in terms of what the end client
[00:23:30] is expecting to pay on the bill.
[00:23:33] And the MSP is left in middle.
[00:23:34] So integrations are amazing.
[00:23:36] Don't get me wrong.
[00:23:36] Integration are awesome,
[00:23:38] but those integrations are typically being built
[00:23:40] to solve the problem for the vendors.
[00:23:43] Yes to bring it into the PSA,
[00:23:45] but the final five yards,
[00:23:47] which is where like innovation is coming
[00:23:50] or innovation is now like being focused on by some,
[00:23:54] like by us and many others in this space.
[00:23:56] It's like that final five yards now
[00:23:58] is what needs to be solved.
[00:24:00] And that's what we're helping with.
[00:24:04] It's very fascinating.
[00:24:07] That perspective of lining up
[00:24:09] those sort of like-minded billing methodology.
[00:24:13] I think so many people have just heard,
[00:24:16] well, you need to build per user
[00:24:18] or you need to build per device.
[00:24:20] But as soon as you start scratching the surface,
[00:24:22] that stuff falls apart very quickly.
[00:24:24] And it makes sense to align that
[00:24:27] with your billing methodology.
[00:24:29] And like you just said there
[00:24:30] is like try and group these together
[00:24:34] in terms of not creeping too far away
[00:24:36] from how the vendors are actually.
[00:24:38] Our stats suggest that if you're for every three vendors
[00:24:43] that you're buying from,
[00:24:45] you only need to reconcile one,
[00:24:47] providing that's your source of truth.
[00:24:48] And that's the one you trust
[00:24:49] and you have diligent process around on-boarding,
[00:24:51] off-boarding of users generally
[00:24:53] or device on-boarding, off-boarding.
[00:24:56] Once you have that number,
[00:24:57] you can invoice your customers.
[00:24:59] Like you don't necessarily need to
[00:25:01] and reconcile every vendor from everything.
[00:25:03] We strongly recommend doing that
[00:25:05] casually through the month
[00:25:06] once money's already hit your bank.
[00:25:08] Okay, you've invoiced out early
[00:25:10] and then casually through the month,
[00:25:11] absolutely bring it through
[00:25:12] and do a true up either manually or through Cloud Olive
[00:25:16] because it's a quality control exercise.
[00:25:18] It's gonna shine a light
[00:25:20] on other potential process gaps.
[00:25:23] Technicians not switching things off
[00:25:25] or leaving other things on.
[00:25:26] Like they should be,
[00:25:28] there's definitely a margin for error in this
[00:25:31] of, but you need to understand what that margin is.
[00:25:34] And if anything creeps outside of it,
[00:25:36] it should be the MSP's responsibility.
[00:25:39] It's eventually the MSP's responsibility,
[00:25:41] but currently too many partners that we see,
[00:25:43] too many MSPs,
[00:25:45] they put the onus on the end client
[00:25:46] and sort of just blindly hope
[00:25:48] that they don't dig in and ask questions.
[00:25:50] And like I was forwarded an email
[00:25:52] just yesterday actually from a client of ours,
[00:25:55] four emails long,
[00:25:57] just digging into every single skew,
[00:26:00] every lever or joiner in that end client.
[00:26:03] There's 15 staff at this end company.
[00:26:05] So now this MSP has to,
[00:26:07] they've been requested to send a summary report
[00:26:11] every single month across all of these services,
[00:26:15] including who's come and who's gone.
[00:26:17] Like that is an immense amount of work that all they,
[00:26:21] and then the MSPs just come back to us and said,
[00:26:23] hey, can we lock RMM to threat locker
[00:26:26] and these other license counts so this doesn't happen.
[00:26:28] But I wanna understand if they're wildly different
[00:26:31] because that's a problem.
[00:26:32] And that's precisely,
[00:26:33] like I forwarded it around to the team
[00:26:34] and I was like,
[00:26:35] this is precisely the problem that everybody is facing
[00:26:38] and this is precisely the problem
[00:26:41] that Cloud Olive is looking to solve, precisely.
[00:26:46] What we've been talking about a lot so far
[00:26:48] is that sort of making sure the license counts match
[00:26:53] and all the difficulty around that.
[00:26:56] But I'm curious what you see in terms of just MSPs
[00:27:01] and partners just under,
[00:27:03] just not billing for things in general.
[00:27:05] Like just not,
[00:27:06] just thing a new services not getting billed,
[00:27:09] new whatever and just completely undercharging
[00:27:14] and not getting that revenue.
[00:27:17] Yeah, again, if it's a manual process,
[00:27:18] five lines out of 100 might be getting billed out.
[00:27:21] The quantity or revenue impact of that,
[00:27:24] like 5% of lines,
[00:27:26] like it can certainly vary.
[00:27:27] But if your end clients are growing,
[00:27:30] there's a good chance you're leaving money on the table.
[00:27:33] A very, very confident sort of rule of thumb
[00:27:36] that we expect when we see new partners coming on.
[00:27:40] And at least periodically,
[00:27:43] periodically needs to have a true up
[00:27:45] across every single vendor
[00:27:46] because even vendors, they make mistakes, right?
[00:27:49] They double bill.
[00:27:52] They under bill rarely,
[00:27:53] but they may double bill and or like you cancel something
[00:27:57] off and it doesn't get caught.
[00:27:59] Like there's other areas that need to have,
[00:28:02] need to be lined up on a periodic basis
[00:28:04] just to make sure that the MSP isn't sitting there
[00:28:07] on a Sunday night,
[00:28:08] like, oh no, I can't sleep
[00:28:10] because they know that something like one skew
[00:28:13] for one client in one vendor is like,
[00:28:15] oh, I need to look into that tomorrow.
[00:28:17] So yeah, there's just a better way to think about this
[00:28:22] very holistically and a recommended starting point
[00:28:26] is actually bucketing services you're buying
[00:28:29] into these groups and trying to be like,
[00:28:32] put them somewhere.
[00:28:33] They all should go somewhere.
[00:28:35] And then per group, pick the primary,
[00:28:38] pick the driver that you expect to be the,
[00:28:43] the count that others should be then blended off of.
[00:28:47] And it's totally cool.
[00:28:48] You can have one line on like a phone line at a client
[00:28:51] or handset, right?
[00:28:52] That in of itself is gonna be its own source
[00:28:54] of truth count.
[00:28:55] It has to be, right?
[00:28:56] Cause that's, but everything else
[00:28:58] or probably 70, 80% of services can be bucketed
[00:29:01] into these lines.
[00:29:02] And when you start thinking like that,
[00:29:04] it's easier to communicate to the sales team,
[00:29:06] hey, this is how we do things.
[00:29:07] It's easier to communicate to the client,
[00:29:09] hey, this is how we sell these things.
[00:29:11] And then the admin management team in between
[00:29:13] just having an easier time,
[00:29:16] like managing the admin of it,
[00:29:17] reconciling the provisioning side of it.
[00:29:22] And likewise management then have far better data
[00:29:25] in terms of what their clients are actually costing them
[00:29:29] on a monthly basis.
[00:29:31] And that visibility again,
[00:29:35] that if I go back to the bundling conversation
[00:29:38] we had before, if we don't have clarity on that,
[00:29:42] we can't even see a lot of this stuff
[00:29:45] in our chart of accounts where,
[00:29:47] maybe we don't have our PSA set up.
[00:29:49] We should be able to see it from our chart of accounts
[00:29:51] to go, well, why is our cost so much more
[00:29:55] than what our revenue is when it's blended?
[00:29:58] It's very hard to see what the issues are.
[00:30:00] The problem with relying on your accounting package
[00:30:01] for that is you've got like,
[00:30:04] you may be able to see, hey,
[00:30:05] our cost for vendor X is 1000
[00:30:07] and we make 1500 happy days,
[00:30:10] but there's very hard then to see the break.
[00:30:12] And you might be under billing someone by 500
[00:30:14] and over billing by 500.
[00:30:15] And that's what majority are doing today
[00:30:18] and they've been okay with that.
[00:30:20] But as I said, like there's a lot of investment
[00:30:21] and focus going into,
[00:30:24] like think about 20, 15 years ago
[00:30:26] was all the RMM automation and stuff
[00:30:27] and PSA has gone crazy, like super mature markets.
[00:30:31] There's just a ton of investment
[00:30:32] and innovation now going into the admin teams
[00:30:35] and also into sales teams as well in the MSP industry
[00:30:39] but I think that that's where massive gains
[00:30:42] can be had very, very quickly.
[00:30:44] And we're just at the spear tip
[00:30:45] of this very specific problem that every MSP has.
[00:30:50] Do we under bill across the services we resell?
[00:30:52] Do we have our PSA set up right?
[00:30:56] Are our customers asking too many queries on our bills?
[00:30:59] Like that problem area is something that
[00:31:03] like we've spent four plus years now
[00:31:05] delving into insanely deep
[00:31:07] and have built just phenomenal technology around it
[00:31:11] and we'll continue to do so.
[00:31:14] It's interesting as we've explored this
[00:31:17] just to think about the amount of interactions
[00:31:20] that could possibly go right or wrong
[00:31:23] for this billing.
[00:31:24] Like I just used the provisioning thing as an example.
[00:31:28] It's that new user,
[00:31:30] that delete removal of the user and the license.
[00:31:36] You mentioned technology.
[00:31:38] This is where things like Roost and that
[00:31:40] starting to automate those processes.
[00:31:42] So we're a lot less reliant on manual labor
[00:31:45] to remember these things and do this.
[00:31:48] And that's just like one of those small examples
[00:31:50] of what you were talking about throughout this session.
[00:31:53] Just there's more processes
[00:31:56] and whether we can utilize technology
[00:31:57] or it has to be manual, it doesn't matter
[00:31:59] but there needs to be a structuring consistency.
[00:32:02] There's also fragmentation where opportunity exists.
[00:32:05] And this to me is still the single most fragmented process
[00:32:10] that MSPs have to face.
[00:32:11] And a lot of other things have been solved
[00:32:13] and it's awesome and they're doing well with it.
[00:32:16] Now the time is coming to admin and sales teams as well
[00:32:20] where they're just gonna get a real boost.
[00:32:24] We've been mainly focusing on the admin side
[00:32:27] with this obviously,
[00:32:28] because this is often seen as that admin function.
[00:32:32] How do you see how sales fits into this piece
[00:32:35] to get it right?
[00:32:37] Yeah, like sales won not all but majority, we all won actually.
[00:32:41] All sales won low hanging fruit, quick wins.
[00:32:45] They won happy customers that will keep up selling
[00:32:47] and buying and they trust everyone, et cetera, et cetera.
[00:32:49] So starting with the, I guess the rep itself,
[00:32:54] if we can give visibility of major swings
[00:32:58] or patterns that are going,
[00:33:00] this client has continually dropped XYZ license type,
[00:33:03] maybe a risk, maybe not,
[00:33:04] but it's a conversation point
[00:33:06] that should be sort of adhered to very quickly.
[00:33:11] A key simple topic, actually it's very difficult
[00:33:14] to solve this as an MSP,
[00:33:17] but like many would class it as a white space.
[00:33:20] So if they have this, they should have this.
[00:33:23] If they have this,
[00:33:24] they should have the same number of this.
[00:33:25] And any delta between the two is an opportunity
[00:33:28] that a rep can go and can upsell.
[00:33:30] Like super easy visibility and data,
[00:33:36] but very hard to actually unearth that.
[00:33:39] So like one of the,
[00:33:43] I'd say that we've seen fewer reps use Cloud Olive yet,
[00:33:48] but we do have a number of partners
[00:33:50] that have seen the opportunity in Go
[00:33:51] and the way that they're leveraging.
[00:33:52] And I see this being something
[00:33:54] that definitely take on in time
[00:33:56] when we focus more and more on it is,
[00:33:59] just being able to filter on eight different services,
[00:34:00] pick your clients that you work with in one screen,
[00:34:04] seeing where the counts no longer match.
[00:34:06] All right, let's go and explore that.
[00:34:07] Let's go and figure that out.
[00:34:09] Really simple, right?
[00:34:10] There's no rocket science in that,
[00:34:12] but it's hard to find information.
[00:34:14] And we've got some clients
[00:34:14] who are leveraging that,
[00:34:16] been leveraging for years actually.
[00:34:17] It's just not something that we've heavily pushed
[00:34:19] or would be awesome though is just be able to go,
[00:34:21] this belongs with this or this.
[00:34:24] Give me that data.
[00:34:25] Tell me what it is, create an opportunity, done.
[00:34:28] I like the view of presenting more data
[00:34:32] so that our sales team, whether they're reps
[00:34:35] or account managers can either go cross-sell upsell
[00:34:39] or even get proactively go have conversations
[00:34:41] of we're seeing this drop
[00:34:43] or we're seeing you grow fast.
[00:34:45] Do we need to change how we're doing things?
[00:34:46] Correct, yeah.
[00:34:47] It's so empowering.
[00:34:49] Even in vendor land when I was at Auditask
[00:34:51] and then data,
[00:34:52] like this is a problem we all had multi-arm product vendors
[00:34:57] and each client can use everything.
[00:34:59] That was a very difficult problem
[00:35:01] that was never perfectly solved.
[00:35:04] So again, MSPs have even more products
[00:35:06] and technology that they can go in and resell,
[00:35:08] but they wanna,
[00:35:11] like coming back to this user grouping
[00:35:13] or full user light user device, et cetera.
[00:35:16] What we've seen and I'm,
[00:35:18] we've seen it enough now that sort of happy to discuss
[00:35:20] that around 70% of the revenue
[00:35:22] will live in a user-based focus.
[00:35:24] Okay, so the user-based cost of business premiums
[00:35:27] that's where a lot of the bulk and cost is
[00:35:29] and then device stuff a dollar or two,
[00:35:31] maybe five bucks in certain occasion.
[00:35:33] So now we go,
[00:35:34] okay, well let's make this piece of a bulletproof
[00:35:37] and let's work out where there are actual gaps
[00:35:39] because that whole 80, 20 row,
[00:35:41] where do you wanna spend your time
[00:35:42] in order to make the biggest impact for your business?
[00:35:44] And that's a really smart place to bite off first
[00:35:48] and get that under control
[00:35:50] because also when you travels through end users
[00:35:52] have much more like understanding and visibility
[00:35:55] of who's come and gone in their team.
[00:35:57] How many people do we have now?
[00:36:00] Like that's what they expect to see
[00:36:02] across the entire user-based stack period.
[00:36:08] And when you start,
[00:36:09] if we circle back and we start wrapping up today,
[00:36:13] every $10,000 there's likely $600 you're missing out on.
[00:36:17] That adds up pretty quick.
[00:36:21] Yeah, it just impacts cashflow.
[00:36:25] And what's wild again is only 14% of line items
[00:36:29] change on a monthly basis.
[00:36:31] This whole problem exists trying to find the 14%
[00:36:35] and sort of dismissing the 86%
[00:36:37] that's actually okay and not moved.
[00:36:39] This whole problem has teams of people in cases
[00:36:42] or the CEO or founder, MD sort of working through it
[00:36:46] or ops manager or whatever.
[00:36:48] There's a lot of people involved
[00:36:49] in sort of finding these little nuances
[00:36:52] that have moved that can again
[00:36:54] just impact the way the client perceives the MSP
[00:36:57] if something's one unit off.
[00:37:01] And like we've discussed, it's a complex topic
[00:37:05] and it's very fragmented and there's a lot to look at.
[00:37:08] So I'm very keen as to get your,
[00:37:12] as we wrap up is like,
[00:37:13] what do you really want people
[00:37:14] to take away from this session?
[00:37:16] And what should people go and do next to action
[00:37:19] if they haven't been working on this,
[00:37:21] they haven't been focusing on it enough
[00:37:24] and we've highlighted there's money to be made
[00:37:26] in doing this.
[00:37:27] Depending on the problem that they've got,
[00:37:28] like invoicing in general,
[00:37:30] that's what a lot of people bucket
[00:37:32] every problem they have.
[00:37:34] In reality is gonna be one of two problems.
[00:37:36] One will be, I really worry
[00:37:38] that what we're buying from our vendors
[00:37:40] is not getting sold to our customers.
[00:37:42] Revenue leakage, that's one problem.
[00:37:44] Okay?
[00:37:45] The other problem is our customers
[00:37:47] ask too many questions back
[00:37:49] and it's not a simple relationship there
[00:37:52] when it comes to billing.
[00:37:53] Completely disparate, standalone problem,
[00:37:56] both need to be solved.
[00:37:59] You wanna try and work out which one,
[00:38:00] what's the problem you're actually faced with?
[00:38:02] And let's say you've got both, right?
[00:38:05] The easiest one to fix up initially is revenue leakage.
[00:38:08] Like that directly hits your bottom line
[00:38:11] and cashflow now and likely has been for some time.
[00:38:14] So either manually or like this is specifically
[00:38:18] what Cloud OnLive has built for four years now
[00:38:20] is take any vendor invoice,
[00:38:22] any report from any supplier
[00:38:24] and make sure that that is matched line by line
[00:38:26] back to your PSA either audit task or connect wise.
[00:38:29] Get that trued up, clean up any backend
[00:38:32] that hasn't been switched off in the vendor portal
[00:38:34] like that 5% of lines that won't be getting on build,
[00:38:36] deal with them, work through the margins.
[00:38:39] Then you go, okay, like this side of it's bulletproof,
[00:38:41] we're happy with this.
[00:38:43] Now it's trying to understand
[00:38:45] what does our customer expect to see?
[00:38:47] Like come back to the decision point
[00:38:49] of do we split out at the PSA
[00:38:51] or do we bundle them all into one line?
[00:38:54] Okay, and then if we split them out in the PSA,
[00:38:56] do we show that to the customer
[00:38:58] or do we not show that to the customer?
[00:39:00] Okay, and the answer will live in one of them.
[00:39:03] But if you're really struggling
[00:39:04] with customers asking questions,
[00:39:06] I would strongly urge break it apart,
[00:39:08] give the visibility,
[00:39:09] line up anything that's user-based
[00:39:12] to whatever their business premium is
[00:39:13] or whatever they expect to see as a user-based count
[00:39:16] and just do that for a few months.
[00:39:18] Just run that process for a couple of months
[00:39:21] and just watch how easy this process becomes.
[00:39:23] And then from that point, begin to finesse it,
[00:39:26] begin to optimize margin.
[00:39:27] But it's really important to stop the leakage
[00:39:30] and then work on that side
[00:39:33] if both problems are sort of happening at the same time.
[00:39:38] That's some great wisdom.
[00:39:40] And I think I'd leave,
[00:39:41] like what I've sort of taken out of this episode today
[00:39:45] is that obviously it's revenue leakage.
[00:39:49] And I hear a lot of partners always go,
[00:39:52] oh, we're not making that much margin on it.
[00:39:54] It doesn't affect us that much.
[00:39:55] It's not really hitting our bottom line.
[00:39:58] But when I talk to partners and go,
[00:40:00] how stressed are you by your million dollar company
[00:40:03] and your bank account is $60,000 less
[00:40:07] because of this 6% revenue leakage?
[00:40:10] And I know, owners stress
[00:40:12] over just the bank account number.
[00:40:15] And often it's because of these sort of things.
[00:40:17] So to me, it's a big enough problem,
[00:40:19] even if it's not necessarily going straight
[00:40:21] to your actual profitability,
[00:40:24] it's actually to take that mental stress off you
[00:40:27] and give you some breathing room
[00:40:29] to actually make decisions in your business.
[00:40:31] Hey, because a steady state line of no complexity
[00:40:48] and then add their specific use cases on top.
[00:40:51] Like things that will never go away,
[00:40:54] client demands of, hey, we've only got one tenant
[00:40:57] but it needs to be broken apart
[00:40:58] into our five or six subsidiaries.
[00:40:59] Like that sort of edge case
[00:41:02] that often happens with a couple of clients each.
[00:41:05] Like they're the edge cases
[00:41:06] that are more than happy to be branched out
[00:41:07] through Cloud Olive and sold.
[00:41:09] Like we've seen them enough now,
[00:41:11] we've built tech around it.
[00:41:13] But from a foundational perspective,
[00:41:16] just making it very simple for sales, admin,
[00:41:19] customers and everyone in between.
[00:41:22] There's just a formula that not many MSPs
[00:41:24] are sort of adopting at this moment in time.
[00:41:28] I understand why, like we spent four years
[00:41:31] and have 10 years of selling audit tasks
[00:41:32] and worked in an MSP prior to it.
[00:41:34] So there's a lot of time that's gone into
[00:41:37] only now in the last 12 months
[00:41:39] sort of seeing the light
[00:41:40] and then can go and just educate people
[00:41:43] in how you may want to consider this
[00:41:45] it will likely help in a big way.
[00:41:48] And just off the back of that
[00:41:50] before I really wrap this up,
[00:41:52] like you've been mentioned MSPs a lot.
[00:41:54] I come across a lot of VARs and SIs
[00:41:57] that have probably a lot more problems
[00:42:00] than a traditional MSP
[00:42:02] because MSPs are used to recurring billing
[00:42:04] and all of this sort of stuff.
[00:42:06] VARs are used to shifting product
[00:42:08] and now all of a sudden it's Cloud-based things
[00:42:11] that shift across and I see a lot of them
[00:42:14] struggling with that.
[00:42:15] And SIs have traditionally been perpetual licenses,
[00:42:17] bang, here's a professional services.
[00:42:20] But they're selling more and more smaller
[00:42:23] commodity type by SaaS solutions.
[00:42:27] But neither of them really have
[00:42:29] those sort of billing engines
[00:42:31] and even maturity of like what we're talking about
[00:42:34] in the MSP space.
[00:42:35] So as technology companies
[00:42:37] and technology partners around there,
[00:42:40] this is a bigger issue than even just like the SMEs
[00:42:44] the MSP space.
[00:42:46] Yeah, for sure.
[00:42:47] Do you know funny enough my brother-in-law is a baker
[00:42:49] runs a like 95 man incredible artisan bakery
[00:42:53] out in Sydney.
[00:42:55] He rang me going,
[00:42:56] hey we've had this problem with
[00:42:57] their equivalent of auditors.
[00:42:59] Same thing customer queries coming back
[00:43:01] because the billing was off
[00:43:02] because it wasn't reconciled properly.
[00:43:04] And I was like,
[00:43:05] like we're very focused on MSPs.
[00:43:07] We're not gonna go into
[00:43:08] automatic is their tool of choice.
[00:43:10] But it's like,
[00:43:11] it's incredible.
[00:43:13] Yeah, I think anyone who's buying
[00:43:15] and selling something runs this potential risk.
[00:43:17] MSPs just have sort of been a fairly acute way
[00:43:20] because there's every month
[00:43:22] across so many disparate vendors
[00:43:24] and data sets and billing profiles,
[00:43:26] et cetera, et cetera, et cetera.
[00:43:29] Hopefully the listeners and watchers
[00:43:32] have gotten something out of this
[00:43:34] and the stats you've provided
[00:43:36] hopefully sparks some people to go
[00:43:38] dedicate some time to it.
[00:43:39] So really appreciate having you on today, Adam
[00:43:42] and no doubt we'll have you back on in the future.
[00:43:44] I look forward to it.
[00:43:45] Thanks so much for your time
[00:43:45] and all that you do, James.
[00:43:46] All the best.
[00:43:47] Thank you.
[00:43:48] See you mate.