Specialize, Scale, Succeed: The Future of MSP Growth with MJ Patton

[00:00:06] Welcome to MSP 1337. I'm your host, Chris Johnson, a show dedicated to cybersecurity challenges solutions, a journey together, not alone. We are approaching actually when this goes live, it will be right after ChannelCon has happened. And unfortunately, if you weren't at ChannelCon, you'll have missed out. So just getting that out there.

[00:00:35] I have MJ Patton with Logic Ally on today. MJ, welcome to the show. MJ Patton Thank you for having me, Chris. So I had reached out to you and said, I want to capture an episode tied to what you had been talking about with ChannelPro Magazine back in Q1 of this year.

[00:00:58] MJ Patton And you talked about the fundamentals and growing an MSP. And as we all know today that a lot of IT service providers are facing a growth and scale challenge as a result of the threat landscape and cybersecurity services and all these things that maybe are foreign. MJ Patton But at the end of the day, I believe that MSPs are going to continue to be MSPs.

[00:01:28] MJ Patton What kind of MSP they're going to be or what label they use to describe themselves doesn't matter. MJ Patton I don't think clients are like, hmm, I should Google MIA today and see what MSP results I get or ITSP. MJ Patton I think those are, you know, industry buzzwords that we're using. MJ Patton Nothing's really changed in 20 years as far as the services that get packaged. MJ Patton Maybe we change the language a little bit.

[00:01:53] MJ Patton But I think the piece that I really saw that was valuable to me when I read through the article was, are you as an MSP doing the fundamentals, which comes back to a maturity challenge more than anything. MJ Patton And we see organizations doing a great job in some cases of maturing in one domain within their organization, but then failing to address any other domain.

[00:02:20] MJ Patton And because they don't address all of them, they find themselves in the same repeated boat over and over again thinking that they're maturing because one pillar is happening. MJ Patton And maybe the example of that is the three legged stool. MJ Patton If you don't support all three legs, eventually the chair falls over, right?

[00:02:43] MJ Patton And I think that's happening in our industry right now fast at a faster pace than ever before because we have the technology, we have the tools. MJ Patton But the human element obviously is is still a big that hasn't changed. MJ Patton So tell us a little bit about the fundamentals and then we can kind of unpack some of the pieces that I think are just well fun to talk about and maybe our audience needs to hear.

[00:03:08] MJ Patton Yeah, so what what I have seen over over the years and you know, I've been in different types of service providers. MJ Patton Everything from like small, like 10 $20 million service provider all the way to, you know, hundreds of millions of dollars in services. MJ Patton Yeah.

[00:03:31] MJ Patton And something consistent that I have seen is we we tend to just do a lot of services without understanding the true value that we have for our customers. MJ Patton Sure. MJ Patton And then have a very intentional way of adding on new services. MJ Patton And all of that comes down to that, like the fundamentals of go to market. MJ Patton It's understanding who are your customers?

[00:03:59] MJ Patton What are you actually providing and in our industry it's extremely fragmented. MJ Patton Yes. MJ Patton Like the amount of services you can have across multiple disciplines across multiple technologies. MJ Patton And then you know, think about cybersecurity as well right. MJ Patton One way I describe cybersecurity versus another organization describing cybersecurity solutions it's it's all over the place.

[00:04:24] MJ Patton And if you think from a customer standpoint, it's very difficult to understand well are these services for me. MJ Patton Right. MJ Patton And I think it it puts pressure on an ITSP to understand okay, these are the services we provide. MJ Patton And here is the value we create for a customer in like in that competency. MJ Patton And from there understanding where do you have shortfalls right from a customer and what they need.

[00:04:53] MJ Patton If I know my shortfalls, then I know like okay I can either build out that competency internally right and I can invest in people that can like service that or know that technology. MJ Patton Right. MJ Patton So let's take cybersecurity. MJ Patton Right. MJ Patton A lot of ITSPs are going into cybersecurity services.

[00:05:11] MJ Patton So they can either start hiring cybersecurity experts and build their own SOC, or they could use technology providers to provide those services or they could partner with other ITSPs that have that specialty. MJ Patton Right. MJ Patton Right.

[00:05:26] MJ Patton And I think what we end up doing is like we're so focused on well how do I drive revenue, how do I not like miss out on this trend that is happening that we try to take on all of it ourselves, which ends up diluting like your specialty and what makes you special and unique as an organization.

[00:05:47] MJ Patton And so when you focus in on the fundamentals of like who do you actually serve, where do you win, what value do you create, you can really have a lot of focus. MJ Patton And from there then intentionally pick and choose what additional value adds are you creating for the customer with having the customer being the center, not like the company being the center.

[00:06:11] MJ Patton You know, I was actually having this conversation today because at one of the sessions at ChannelCon we're talking about some of these components, you know, the what keeps you up at night. MJ Patton Over the years we've seen lots of this where they offer VCIO, VCTO type services and for whatever reason we decided to categorize them and with those titles.

[00:06:34] MJ Patton Over the years we've seen a lot of those titles, but in a lot of cases it's like the account manager or the, you know, service delivery role where they meet with the client, they talk about the needs changes moves, etc. MJ Patton And how that future and future state is going to look as and it largely was driven by technology, you know, the products and services. MJ Patton What's interesting today is, you know, you brought up cybersecurity is that we're seeing more and more of like real VCIO, VC so services now finally coming into play.

[00:07:06] MJ Patton Over the years we're seeing more of a tech. MJ Patton Over the years we've seen a lot of tech companies, but it's a lot of tech companies that are really good at rolling out managed services where like the monthly cost to client wasn't tied to how many hours are being logged by a tech. You might track that. I mean, it's metrics that are valuable because, you know, a tech working 45, 50 hours a week is probably at 80 to 100% of capacity.

[00:07:32] So you may need to adjust some of those things, but they're probably not working only with one client, right? The thing that's interesting to me now, especially with the threat landscape and the way insurance is being provisioned and the roles that we play is suddenly you're seeing these new services emerge, but they're coming out in ways that are like defined by block time.

[00:07:51] MJ Patton Over the years we're seeing more of a tech companies, but they're coming out in ways that are going to be able to do that. MJ Patton Over the years we've seen a lot of tech companies, but they're coming out in ways that are going to be able to do that. So you're going to get a fractional C.

[00:08:14] So you're going to get and what I've seen from a maturity standpoint is that in most cases they're selling something that can't last, right? Because there's only one of them. I called it the multi if you've ever seen the Michael Keaton movie multiplicity, which comes was from the 80s. You know, he's got too much going on at work. He's not spending enough time at home. So he talks to this doctor and starts with cloning himself the first time.

[00:08:41] And the like the plot of the story basically is that it comes down to they start creating clones of clones, which they've decided in this fantasy world. Clones of clones can't be as intelligent as the original. So, of course, that starts to play out and causing problems.

[00:08:57] And I think that's like an oversimplification of it, but the reality is MSPs are good at selling services that are not defined by my time that are now expanding into services that for whatever reason they've decided to go and offer based on time. Which if I recall back in the day, that's what we did when we had break fix. We're going into a vicious cycle that we know going back to that world prevents the ability to actually scale, even though you might be growing your business.

[00:09:28] Yeah, I am seeing more of that. And I think it is because buyers' expectations are changing. Think about the overall landscape that's happening in the IT and cybersecurity industry. Everything is significantly more complex. Back in the day, you had a few solutions they couldn't like think of. And it's like, OK, you go with these. They're known like and they're they're essentially table stakes.

[00:09:57] Now you have all of these new solutions. They're constantly evolving. Then you add on all of these AI solutions on top of it. Right. And then you have to think about it. Well, which solution is the right right solution for the specific organization by vertical, by size, by maturity level? And it is difficult to keep up.

[00:10:18] So unless you are in it every single day as like from a from a, you know, from an IT leader standpoint, I don't know how you would know all of these solutions and all of the right right things to solve for problems in your business. So what they're doing is they're leaning on their service providers to be that strategic arm. Right. They want to like they expect the MSP to stay on top of the industry.

[00:10:46] They expect them to be looking at other solutions and bring up like something that is innovative to the organization because they just don't have the skill. And essentially an MSP we've always said is like, hey, we extend your team so that you can focus on the things that matter most to your business. Right. Right. And I think that that theme has always been present.

[00:11:09] But going to your point about the complexities, one of the pieces that I think is missing is that we're still trying to be in a lot of cases the jack of all trades. And in some respects, I could say that, you know, using tools like Claude or other, you know, large language models to help is definitely in a lot of cases better than the let me Google search to solve your problem. I'll follow the instructions and get stuck halfway through.

[00:11:37] But at least it's, you know, maybe better than it was before. You know, we're also we're also constrained with we really haven't added to the workforce like people thought would happen from a IT services standpoint. In fact, I was optimistic when we started seeing the mid-market and enterprise organizations laying off staff because they were going to rely on AI now. So there's all this surplus of workforce and they're not becoming available to be hired.

[00:12:05] They're either doing their own thing. In many cases, they've started to launch, which is cool in some respects. We now have more SMBs to support than we ever did before. Just because they could build an app using Claude doesn't mean they don't need IT services to continue to maintain the app that they just built. So I guess that's one of the areas that I see a big challenge that we're all going to have going forward is you can master the fundamentals all day long.

[00:12:30] But how do you account for the fact that the staffing resources aren't there either? Yeah, I recently was on a session where Gartner was talking about like in the mid-market space, IT leaders, even with the implementation of AI, they're still planning on maintaining their headcount or increasing their headcount. Because we're still at a deficit for skill talent, right?

[00:12:58] And so growing it from that standpoint is very difficult. But I think this is where there's the opportunity to really just specialize in what you're good at. Not like go away from the thing of like, hey, I need to have all of the business everywhere. And I think this is where a lot of MSPs end up getting in trouble. They're like, well, I just need business from anywhere I can get it to I need the right type of business for my business.

[00:13:28] Right. And for that for that to happen, it's like just look in your neighborhood. Let's say you're one of these small MSPs. Instead of looking at the entire U.S. global industry and all of the market that is out there, because there's plenty of like market, right? Yep. If you look at just your town and you know that, hey, I would do really well with these type of organizations that are challenged with this type of pain point. I'm very good at solving this type of pain point.

[00:13:57] Like I can do it in my sleep. No issue. I'm sure you could find a significant amount of businesses just in your neighborhood that need that problem solved. Right. That you can quickly win and quickly like embed yourself and still provide incredible customer service to. Right. Sure. And then if you just think about them and then start thinking like, OK, now I have this great group of customers. They love me.

[00:14:27] I'm providing all of this great value for them. But I know their challenge is now with AI. I know now their challenge is with cyber. Now you can start thinking about like, OK, so how do I now start creating this value to them? And you have to make that decision. Do you build it or do you partner? But I think we're going to start to see more partner networks because you do have a lot of these small service providers.

[00:14:56] But it's a great opportunity for you to find another like minded service provider that offers something this like specific around their solution that would create value. And then you partner up and then you create that value. See if there is a need for it. That's going to increase your revenue without you taking on that headcount. And then you can like maybe that's a future merger scenario. Sure. Right.

[00:15:21] That's actually how our MSP ended up getting acquired was tied to hands and feet operational efficiencies with clients in different parts of the country. That finally was like, wait, we're paying these guys way too much money. We should just acquire them. But what you're describing, it makes me think about pulling a, you know, taking a play out of the construction space. Right. You know, you usually don't have a contractor that's doing everything from framing to plumbing.

[00:15:48] Usually there's multiple trades involved because they have to have the licenses to go with it. And obviously we don't have that challenge in IT services. But I think you're onto something like the opportunity to reduce your overhead from a created standpoint and the invest in the infrastructure to go with it is, you know, take advantage of those that already have that established expertise and the trust. And, you know, the opportunity is there.

[00:16:15] You're not gambling on what should I budget for this project when you're asking somebody that's been doing that niche piece for you for the last 20 years. I think we're going to see something that I've been seeing from a research standpoint is in the telecom space is just one example. But I think we're going to see it really get exposed across all industries where the critical vulnerabilities are, where the gaps are actually happening.

[00:16:40] Because we now can scrape public data very quickly to identify what exposure is out there, both from an individual organization standpoint and from a industry standpoint. And we can attach financial risk to it because of what we know from actuary data and claims that have been, you know, paid out over the last, say, five years. We don't have to go back very far to see what's happening now. What do you think?

[00:17:05] How do you think the fundamentals piece plays into that when you think about if a bad thing happens, you know, an event occurs, the thing that's inevitable for some organizations. Do you think the fundamentals at the end of the day are the evidence that create the resilience around, you know, the insurance does pay out? The trust isn't lost because you're able to prove that you weren't just winging it. Exactly.

[00:17:33] Like when we were talking earlier, I actually jotted this down. I said trust with your customer because when you have this and you're very confident in the thing that you can provide and you, like I said, you make it about the customer. Right. And if you know, like you're doing the best for the customer and their environment, do you want to put them in a place of risk?

[00:17:57] Do you like and so when you're thinking about it that way, it's like, well, are you confident you can like and I know that like, you know, fake it till you make it kind of stuff like that, like goes out there. Right. Or if you're building out a new service, like there's proof of concept that has to happen. But overall, there is trust that you're building with the customer that like, hey, we know we do this really well. This is going to help you for X, Y, Z. We like we stand behind this.

[00:18:27] And when you are in these type of scenarios, you can remain confident that you are going to be like in a good position. So that way you're not put it on like any type of risk that that creates such a great relationship, like a like a customer is not going to leave you when they think that, hey, you're so well intentioned and you are thinking about them. They're they're going to be with you forever.

[00:18:55] Right. Right. And and I think the trust and risk go hand in hand. So obviously and you said this before and I really liked it. Our job, the the IT service providers job is to stay on top of what is happening in the industry to help their clients make decisions to either maintain the level of risk that they are willing to accept or reduce it, depending on, you know, from a from a bad standpoint. But also show them where they have the opportunity to.

[00:19:25] Yes, this is going to increase your risk. But look at the reward that comes with it. And sometimes we get caught up, particularly when we're providing additional layers of security or we're trying to provide the best in class. And the risk conversation, not the trust part so much is. But is my investment as your as a client is my investment in what you're offering to me? Does it outweigh the benefits that it's going to provide?

[00:19:53] Like, is the financial spend more than the benefit that I'm going to get out of this? Because we're having those conversations, then the risk part is going to help establish the trust part. And it doesn't have to be I'm blindly trusting you. You're able to financially prove the reduction in risk or the maintaining of that risk level without it being a financial burden.

[00:20:17] And I think that is one of the things I see over and over and over again is, yeah, they kick the can down the road to have the meeting with us because, you know, they always think that we're going to charge them more money. It's like, yes, because your pattern has been every time you talk to them, what new thing they need to buy because of the threat landscape change. That's not necessarily wrong, but the approach is wrong.

[00:20:37] The approach is I am making a financial decision on your behalf before I've actually had a conversation with you to allow you to accept the risk perspective of, yeah, I don't want to lose sleep at night. And you need to tell me how much is it going to cost me and does it make sense versus I'm just telling you how much it's going to cost you and crossing my fingers that you'll say yes to this new service offering.

[00:21:00] We're seeing a really big push towards having conversations about business outcomes versus just the activity that's being done. Right. At the end of the day today, like meeting your SLAs like that, that's table six. You know what? When people say like, oh, we provide great customer service. It shouldn't be like, well, our CSAT score is really high and we we meet our SLAs this at this percentage.

[00:21:27] Like, OK, that's what we're paying you for. But how do you translate the things that you're doing into actual business impact and then translate that to the customer of like this is the value we created within your organization? Right. This is what we enabled you to do. And even with prospects like you got to you got to realize a lot of these business owners, some of them may may know like, hey, like larger organizations are definitely more mature in this.

[00:21:55] And they'll have like I am trying to, you know, grow my business and I need to have a scalable solution from an IT perspective in order to support that growth. Smaller businesses and like, you know, business owners, they don't know that. So it's up to you to then educate them. Like and then this creates that value conversation during the sales process of, hey.

[00:22:18] Like, this is the solution, but here's what it turns into and here's how you calculate the overall value for your business long term. And if you can have that conversation, you're more likely going to get that business because then they trust you. They're like and then they can always come back to it like, hey, you said that we're going to see this type of value. Like, how are we seeing that within the metrics? How is that all marrying up? And then you can reiterate the impact that you're creating for that business over and over.

[00:22:47] Like I have had. Like it in my peer relationships that are, you know, at like end user clients, I've heard of companies being like, I don't I don't see the value of our IT team. Like they just give us licensing like how like how hurtful is that? And I felt bad for like all IT leaders like across the world.

[00:23:14] I was like, that is such a horrible thing to just say that that's the value that like an IT department has or like, you know, the extended MSP is they just give us licensing for stuff. Yeah.

[00:23:56] I was I was part of a consulting team for an MSSP and the client that they had was was looking for help and in locking down some services for about 15 to 20 employees. They wanted more control over like application installation and just kind of. Almost to the level of like, I want to know the keyboard strokes, right?

[00:24:17] They weren't doing it from a vindictive standpoint, but because of the type of business that they were in, a lot of that was to capture the billing side. Like they wanted like when hands around keyboards, for the most part, they were probably billing. And so one of the things that we got into was I helped them structure a solution that allowed for, you know, here's the stack of what is not allowed. Like we were more focused on what's not allowed.

[00:24:44] And then basically anything that was in the whitelisted database provided by the vendor, they want to install it. I don't care because we're going to see them install it. We track it. What are they using it for? But we've not put any like we aren't blocking them from doing things that are in theory beneficial. When I left to come to GTIA, they reached out to me and they said, hey, we've decided that we just want to take this over and not have the MSSP manage it anymore. And I was like, sure, no problem.

[00:25:13] I mean, I think they were spending like $25 a month for this service. It was very cheap. It was just we enabled them. We were managing it for them as part of a larger package. They decided to move away. What was really interesting is about three or four months after that change happened, I got a phone call. Hey, is there any way you can connect us back up either with the MSSP that we've left and like help sort of mend that relationship? Or do you have a recommendation for someone that maybe is more appropriately sized for us?

[00:25:42] Because this isn't something that we can manage. We thought we could, but we can't. And what was really funny about it at the end of the day. So that's one example. And then going to the one that you said about 365. When you think about setting up a 365 user, it is not a click and done. Like the first time I had to set up a group of users, I was like, why did I agree to doing this project? Like this is awful. And things wouldn't work. Permissions weren't applying.

[00:26:10] Like, I think that's one of the, you know, talking about licenses. If you turned on the services that a client requests in most cases for 365, after about 90 to 180 days, the questions that are going to start coming in from the client are, how come XYZ stopped working? How come this app that we really, really love isn't working anymore? It's like, well, going back to we just do licensing for you.

[00:26:34] You didn't tell us you needed any of those applications, which are built into the stack, but they're not free. They give you a trial for 180 days and they don't tell you that up front. So let's go back to licensing. Do you want us to manage that and the costs that go with it? Or do you want to manage that? Because from what I've seen across the industry, the sheer cost to manage licenses in our industry today, because nothing is, you know, one and done.

[00:27:03] It's not shrink-wrapped at Best Buy anymore. If you have canceled something, if the employee is gone, who is going in and tracking that you need to turn off, you know, $2,500 a year in annual licensing spend. It's bonkers. I used to see that all the time. Like, hey, so we're going to reduce the license count of Office or the license count of Windows or the license count to like, why?

[00:27:30] I'm like, well, you're spending $23,000 a year for $2,500 worth of usage. Oh. And then they don't want to give you the money back. They're not like, hey, so you saved us $20,000. We want to allocate half of that to enhance whatever else you might be able to do for us. No, no, no. They're like, oh, man, our budget, it's really tight. It wasn't 15 minutes ago. So, yeah.

[00:27:58] Yeah, it's, I mean, this is where the need to have like that strategic layer is so important. Because it's like, who's managing the overall budget and the overall roadmap for this organization? And then saying like, okay, we're going to do this. This is where we're going to have cost savings. This will then enable you to do X, Y, and Z, which is going to provide X amount of value to your organization and allow you to do this. And then like from there, we're going to move on to this thing.

[00:28:28] Like someone has to be thinking about it that way, right? And a lot of these small businesses, they don't have anyone to do that, right? It's one of the reasons like across any function area, if you are outsourcing the function, you have to have someone internal that can provide that strategic guideline. So that's an opportunity for MSPs to offer that type of guidance. Yeah.

[00:28:57] Or, you know, you have someone internal that can end up doing that. From a marketing standpoint, I think MSPs should follow the same Kool-Aid, you know? Yeah. You know, MSPs that are like, hey, we need to invest in marketing. Why do marketing agencies fail? Because they're an execution arm. And many like marketing, like they're technically MSPs if you think about it. Marketing agencies. Right?

[00:29:26] They're just a marketing MSP. So what do they need to provide? Like also strategic guidance. But most of them don't have that capability. They don't have fractional CMOs. Right. They can provide that like roadmap of here's what you need to do and here's the foundations you need to implement. And here's how we scale out your programs and drive revenue. Yeah. So even if they do, even if they do, this is the part that's crazy.

[00:29:55] If you're the fractional CMO for fill in the blank MSP, the things that that MSP still has to provide that CMO is where do we want to be in three years? How many clients do we want to grow per quarter? What are the type of clients that we want to go after? What is our value statement? What is our mission statement? And all those things have to get defined. And if they're not, and that MSP is engaging a marketing company, well, that agency can't solve all those problems for you.

[00:30:25] Exactly. They're meant to execute those things that you're not comfortable with. You know, your keyword optimization, you know, the lumpy mailers or the fill in the blank, all the things that you can do to get in front of an audience. It's not their job to define the audience. It's not their job to prepare the messaging for the audience. It's their job to ensure that the messaging gets to the right people. I think we skip that piece a lot. Yeah, we do.

[00:30:49] And I mean, having like having a fractional CMO and you don't have like, you know, the great thing about this, like, like surge in fractional leaders that we're seeing in the market across all different areas is that you don't really need them. Like, you don't have to hire that role. Like, that's not required.

[00:31:15] A CMO should be able to come in, essentially assess the information, question the team effectively where they can document all of this stuff, build out the strategy, make sure that you have the proper resources in place in order to hit the goals that you that you are trying to achieve. And explain to you, this is the amount of investment required for you to hit those goals. And if you don't have that level of investment, what do we have to do from a pricing standpoint? What do we have to do?

[00:31:44] Like, you know, what could we achieve with the existing budget that we have allocated? That's what a good CMO should be able to do and accomplish for you. But we don't think about hiring that. Instead, we're like, oh, we'll hire a marketing manager. Well, I'm sorry, marketing managers don't have that expertise. They haven't sat in those type of like business decisions. So they don't even know how to, they're still going to go to the CEO and ask, okay, so what should I do? And what's my budget?

[00:32:14] And I'm going to go spend my budget. Yes. And understanding that spending my budget may not have the ROI if I'm not patient enough to allow the budget over time to have an ROI. Like my ROI may not be defined by time. It may be defined by dollar spend. And if I spend the dollars before the ROI window has been established, I'm going to say all kinds of bad things about my marketing company because it's their fault, not mine. Exactly.

[00:32:46] Well, MJ, we are past and past out of time. I ask this for every episode. Is there a book that you're reading today, whether it is work-related or not, that you think our audience would enjoy or benefit from? Yeah. For me, one of my favorite books, and I'm actually rereading it, but it's called Brave Thinking by Mary Morrison. Have you heard of it? That sounds familiar.

[00:33:15] I'm not sure. Yeah. So it's really about your own personal growth and about trying to break down internal paradigms in order to spur this new version of yourself and to continue to grow and become the best version of you for society. Like, that's probably the best way I could describe it.

[00:33:42] But for anyone who's trying to stop running into the same type of challenges over and over and over again, this really helps try to unlock those internal things that may be holding you back from achieving your fullest potential. Fantastic book. Fantastic book. By Mary Morrissey? By Mary Morrissey? Yes. Got it.

[00:34:12] She's been around a long time, right? This is a book that's been... Yeah. This is... I was noticing the author, the hairstyle, speaking of what we were talking about before we started this episode and the theme for Channel Gone. She would definitely fit right in. Yeah. Yeah. But it's an excellent, excellent book. I've recommended it to several people. Actually, like my own executive coach, he's the one who shared it with me. And it's been a game changer in my life.

[00:34:42] So highly recommend. Awesome. Well, there you have it. For those of you listening, this has been an episode of MSP 1337. Thanks and have a great week. Thank you.