Transcript
are changing for MSPs. There's a hesitation there seems to be in, you know, in some of the smaller service providers at sub 10 million to use white label or third party services. But when you start to see over the 10 million, they're actually doing a lot of white labeling and third party because they know that the expertise sit out there and it's kind of, you know, why build it if it's already there. So good morning, good afternoon, wherever you are in the world. Welcome to another edition of the Beyond the Horizon podcast. I'm Pete Roythorn. And today I'm joined by VP of partner experience, Mr. David Weeks. Hi, David. Good to see you. Good to see you as well, Pete. Great to chat again. We did this a week ago in Berlin, actually, a few times. We did. We did. And for those of you that haven't, weren't able to catch up with that, David and I sat down and did a couple of end of day wrap ups, which were always an entertaining way of kind of summarizing what was going on at Empower so that, you know, everybody gets to see what they're missing, basically. Absolutely. Absolutely. No, it's a lot of fun as always. So what I wanted to focus on today is really the concept of co-managed and co-partnering. So really the kind of focus on the different go-to-market models that MSPs have. Obviously as part of the MSP Horizons report, there were some interesting stats that came back there. Predominantly, I mean, there was 37% of those respondents came back and said they are mostly working in a co-managed way, which is 17 percentage points up on last year. And apparently just 4% said they're co-partnering, which is down 13 points. So before we kind of dig into that, I think it's really interesting to just kind of define what is the difference between co-partnering and co-managed? Because I think there's a little element of ambiguity and confusion around this sometimes. Yeah, absolutely. I mean, look, when you look at some of those differences, and Pete, I think you can probably define this a bit, co-managed tends to be, the way I would look at it is, you're working with typically internal IT teams, you're in, you're providing a few line items of service requirements to help support them. When I look at co-partnering, you're part of the strategy of the business, right? And it's a much deeper engagement. And even when we were in Berlin last week, we were talking to a couple of partners who are very big into co-partnering. And they actually have a seat at the table with board of directors, right? And they're part of that discussion. And they're actually part of the decision making, the cost and analysis, the budgeting and everything. So co-partnering is a much deeper engagement, co-managed is more kind of augmented services. And that's the way I see it, you know, and love to hear your take on it as well, too. No, no, no, that makes perfect sense. And in fact, I think, you know, we were just briefly touching on this before the call is there is, if you dig deeper into the stats from the MSP Horizons report, which we've been doing recently, there seems to be a kind of marked difference. Once you get over the sort of 10 million a year managed service revenue band, then I think it was something like 75% of those that responded said they were working predominantly co-partnering. That to me now starts to make sense because it's a much deeper engagement, a much deeper involvement and something that I suppose on the surface of it, you would see as being more something that the large MSPs would be doing. Yeah, absolutely. I mean, when you start to see that maturity of a service model within those service providers, I think the big difference is they start to bring in things like CIOs, VCs, those things along those lines where they're really augmenting a staff member within that organization. And so, you know, there's a deeper reliance by the end customer on them to help them in terms of some of that strategy and look at it. It's a great way for organizations, those end customers to look at it. Why go out and try and source your own CIO or CISO or whatever it might be, if you can bring them in through expertise, and they're really a part of your team anyways, then, you know, even if it's somewhat of an outsource model, I guess you could say it's still it's still a win in the end, right? Because, you know, they bring that specialty to the organization. And so I think that's why we see it, because those those service providers that are over 10 million have matured that model and they've hired those people into their business as well. Almost what we would say in a way, you know, in some cases, it's also what we call a SME, right? A subject matter expert who can come in and really look at the business in a different way and start and start to help them manage how technology drives their revenue streams versus, oh, I'm going to come in and I'm going to do your patch management and your MDR, you know, and those are it's different ways to look at it in the way that you're supporting your customer. Sure, which is good. But do you think, therefore, the it's sort of in a way the smaller MSPs are precluded from working in a sort of more co-partnered managers? Is it something that's out of their reach or can they get involved? No, they can get involved. Look, you don't you don't need to have that person on staff either. There's a there's a lot of services out there that you can white label to bring in as your VCIO, your VC. So things along those lines with your end customers and and eventually you'll evolve to probably bring that in-house. But in the meantime, if they're representing your business and they bring the expertise, it doesn't preclude you. I think a lot of the problem and, you know, we had this discussion and I've had a lot in the last few weeks. There's a hesitation there seems to be in, you know, in some of the smaller service providers that sub 10 million to use white label or third party services. But when you start to see over the 10 million, they're actually doing a lot of white labeling and third party because they know that the expertise sit out there and it's kind of, you know, why build it if it's already there? And, you know, eventually you might say, listen, I think we can start to run this as our own department because we built the revenue stream behind it. But I think that's the difference. When when you're a smaller organization, don't be scared to go find the expertise that you can augment in your business. But they're representing your organization anyways. So let's I mean, you talk about white labeling there. Just just to make this clear for people that might be listening to us that that don't understand that. What exactly do you mean by white labeling? Yeah, what I mean by that is is you go out and you find a vendor who provides a particular type of service. But what happens is it's represented underneath your banner, right? So, you know, whether or not you're actually providing the service, you know, we see it a lot, for instance, where, you know, people will say, oh, I do SOC as a service, right? Or I do SIM as a service. They're not actually providing the service, right? It's a third party who's doing it, but it's all branded underneath that service provider's name. But they don't have a team of analysts sitting there looking at telemetry all day, you know, and that and that's not the requirement, you know. And sometimes, you know, when we talk about third party, the difference is you may want to state who that third party vendor is because they lend credibility to it, you know, similar in the way that we provide, you know, an EDR to our customers. But it's powered by Sentinel One because it's an industry leader. It's not an enabled EDR that we built, right? We brought in the best of breed. And so I think that's part of the problem is you don't need to have that hesitation, right? The services are there and then you can decide if eventually you want to bring it in-house. But if it helps drive you a revenue stream, then happy days go for it. I mean, that's interesting because my immediate question is that is kind of why are MSPs certainly, well, I mean, I suppose maybe this is sort of directed more at smaller MSPs than larger MSPs, but why are they reticent to white label? Control. They feel that they're giving up control and that there's a potential that that service could come in and take their business from them. But the problem is, is that that third party or that white label is a very defined service, right? They're not going to come in and say, oh, we're also going to do the managed services. Oh, we're also going to do this. Like it's very tactical and why you bring them in. But a lot of times that's what I hear. It's the, well, what if they go after my customer or I feel I don't have control over? And if something goes wrong, especially if it's white labeled, well, then it looks like it's my fault. Well, it is because you brought a bad service, but that's OK. Right. And you take the response. I mean, if you were doing it yourself and you did it wrong, you're going to take the responsibility. If it's third party and they've made a mistake, then you can say, well, yes, there was an issue with the vendor, but we're working on it or we're going to find a new vendor or whatever it might be. I mean, look, problems happen all the time, but it's not about control to me. Right. It's about augmenting the services that your customers require so that you gain stickiness. And if you're not doing that, somebody is going to come in and that could be a more valuable service to your end customer than you think that in the return they say, well, maybe we need to go out and find some other providers to give us what it is that we need. Yeah. And so you mentioned that sort of, you know, obviously there is an element of risk involved in this, you know, but you partner with anyone there is, you know, yes, there is going to be a certain level of control that you don't have. So how do you or how would you suggest that MSPs go out and basically if they need that partner, how do they find them and then how do they vet them to make sure that they are getting a service that I suppose is compatible with their level of service? Yeah, absolutely. I mean, look at one is, you know, you've got to meet with multiple different people, right, different vendors out there or providers of that service that you require. One is I think you need to look for a culture fit, right? You've got to make sure that those cultures align between your organization, your standards and theirs. The second is go to your peers out in the industry. Look at I mean, we see it all the time, right? People are on Reddit, they're on LinkedIn, they're on Facebook groups, wherever it is that they might be, you know, Slack, et cetera. And they're saying, hey, we're looking for this type of service. Who are you using? Well, you'll get a litany of different vendors, right? But you'll also hear stay away from these, right? Or these ones. This is my experience. And so I think you have to look to your peers. And then I think you also need to go to some of your core existing vendors today, right? Like you come to somebody like us where we say, look, we see a lot of our partner base utilizing this type of person or this vendor or this organization and look into the ecosystem, right? I mean, we have a technology alliance program. We've done some of that vetting for you, right, because we do have that open eco versus that open ecosystem. So if we've done the due diligence and we've done a check, then, you know, we're doing our best not to bring a subpar service. We're trying to bring best of breed options. And look, a lot of these will never offer those services. And that's why we do that. So let's let me just let me just swing back to the kind of the stats on the co-managed and the sort of fact that's, you know, that's increasing, I think, you know, this is something that we have been talking about in the market as a vendor trying to educate our partners in the fact that this is this is an important revenue stream. I mean, is it are you seeing that, you know, maybe maybe that message is getting out there and people are seeing the benefit of doing this and why they need to be investing in this to drive their MSPs forward? I think the message is getting out there. And I think there's also a pull from the market. And I think both have happened. And I think over the last couple of years, what we've seen kind of post-COVID is, you know, a little bit of that macro and microeconomic factors created, you know, a reduction in internal staff, things along those lines. And that was the pull to bring the MSP and on some of that co-managed. Then what we saw was when you look at that co-partnering, a lot of businesses said, OK, we realized post-COVID we didn't make the investments in the technology side and in the services side that we should have to be protecting our revenue streams, right. And our people and our risk and so forth. So I think that there's the end customer is more educated. I think the market's saying we need your help. And I think service providers are more open to the opportunity and they're starting to see it. And so they're starting to go after it. It is a viable opportunity today and we hear it on a regular basis. And more and more markets are starting to adopt it. And do you see it continuing to be important? Yeah, revenue generator. I do. I don't think it's going to end. And the reason is, is IT is becoming a lot more complex, right? Risk is becoming a lot more complex and more prevalent. And as a result of that, I think everybody is saying, OK, how do we work as a team to do this better? And, you know, we heard it on panels last week, right, from MSSP saying, well, we partner with managed service providers because we're not a managed service provider, right? Or vice versa. And or, you know, we utilize these type of people within our business. It takes a group now to manage those areas. And I don't know if, you know, there's not many businesses out there unless you're starting to move into that more enterprise service provider level where you can have it all in-house on day one. And so, you know, it's OK to go out and find the community that works for you and build it out through the ecosystem. And then over time, you can evolve how that works within your organization. Yeah, I like that concept you were talking about, about, you know, to fulfill a company's IT requirements. It needs a team of people, which is why and that in a way that ties back to the message that I always like when you stand up and say that at the beginning of Empower. And I know that a lot of people that I've seen talking about Empower afterwards always say, yeah, he's absolutely right. And that is that, you know, there is no competition. It's sort of, you know, there's plenty of business to there's plenty of business for everybody. Yeah, absolutely. I mean, look, you bring in some other people and they have a specialty that they're providing you, right, or a group of specialties that they're providing you. That doesn't mean it doesn't get reciprocated right down in their customer base. And suddenly they need you to come in. So look at when we're cross pollinating business, that way we all win. And, you know, I mean, you know, you're a good point. You know, I was sitting there, Pete, when I say that, you know, I say it every year on stage, right? There's no competition in the room. I say it at every roadshow, right? I say it on all of these. I think I think when they die, when you die, somebody is going to put it on your headstone. Well, yeah, probably. And, you know, it's funny about it was when I was sitting there saying that on stage, I was looking out at a whole bunch of our partners, right. And some of our largest, they're sitting in groups together and they're discussing and they collaborate. Yet they're competitors. Right. And they're OK with that. And they share because I don't know how many times in the last year I've actually heard about two of our partners competing against each other. It's very rare. And so, you know, I think as you mature, you start to realize that if you work together, then everybody wins. And so I think just just kind of starting to wrap this up a little bit in terms of go to market models, certainly looking at co-partnering and co-managed, what can smaller MSPs learn from the larger MSPs? Understand where you fit, right? I think I think that's it's a key point that I would give a lot of times what I see when you look at some of the the smaller to midsize service providers who want to move into the co-managed and the co-partnering, what they're trying to do is go in and take this bigger piece of the pie. Right. And it's OK if you go in on, for instance, a co-managed model and all you're doing is patch management from day one. You're part of the team now. Right. And now that you're in there, you can start to drive new opportunity, new empirical evidence through your meetings, your reporting things along those lines. So it's those I think who try and jump in and say, well, we're going to do the majority of it. That's a very difficult move. You need to find out where you fit. And when we look at the co-partnering, that is more consultative. It's not about a technology or service sale. It's about, hey, where is your strategy in your business today? How do you plan on growing over the next 12, 24, 36 months? And how can I better support that scale and that growth for your business and mitigate that risk as you move forward? And I think those are kind of the two different ways that you have to think about it. And I think the market will continue to evolve where service providers have to be consultative. You need to be business consultants. When you walk on site and back into your opportunity versus trying to create an opportunity with a technology resale. And interestingly, so I mean, one of the things that I heard people talking about in power is that you can, you know, as a smaller MSP, you can find find a larger MSP and go and ask them and literally go and ask them, this is the problem that we've got. How you know, how are you managing this? How are you doing that? Because ultimately, everybody's sort of having the same problems just on a larger scale. But that the people shouldn't MSP shouldn't be afraid to go to certainly smaller ones shouldn't be afraid to go to bigger ones. And, you know, if you're in a peer group, if you're in an event and kind of quiz them, is it would you feeling that? Yeah, absolutely. Look, I mean, what I always say is, you know, don't make it a one way conversation. Right. When you learn, share also where areas maybe that you have found a lot of success as well, too, because even if you're, you know, if you're a two million MSP and you're talking to a 10 or 15 million, it doesn't mean that you don't have ideas that could help them as well, too. Maybe you've tried something new that's been successful and you can bring that up. I mean, look, one of the things I always say is if you're a million MSP in turnover and you talk to another million turnover, you probably have the same problems. Right. But when you talk to a 20 million and 20 million, they have the same problems. Right. Like that continues to evolve. And that's why as we get those working within peer groups or discussions at conferences, it is good to have those different levels of conversation. But yeah, go ask. I mean, look, they've made a success for a reason. And we've got a lot of partners now that their focus has almost shifted completely to co-managed or co-partnering. Right. And those are their models. And what's interesting, I know of a private equity firm, actually, I know of a few now that will actually pay a higher multiplier depending on the number of co-managed and co-partnered contracts that you have in place because they tend to be higher value. They tend to be stickier and you have more control in terms of the spend and the say and so forth. No, that's really interesting. I hadn't really thought about it as being so it's not only it's not only a revenue generator, it's also a value generator. Absolutely. Yeah, absolutely. And I think that's the way that you have to look at it. Because look, when you're selling to SMB, what we see a lot is budget pressure. Right. And oh, that seems expensive. When you get up into the co-managed and co-partnering, it's not yes, there's budget pressure. There always is. But it's more about, OK, we'll make the investment because we can see the outcome. Right. So it's more around that ROI, that productivity gain, that scale, that risk mitigation. Those are discussions that are very different than you should buy EDR because you need it. And another thing that kind of occurred to me as you were talking is that is this because essentially, you know, you're talking to partners globally, you know, I mean, we had what's it, 39 countries represented in power. But at the end, it was 51. So I somehow miscounted. I was the one who said 39. Well, there was there was a large number of countries there. And I mean, you know, which is amazing that, you know, you have this you're talking to a lot of people a lot, a lot of times across the globe. And the co-partner and co-managed thing is not just isolated to, say, North America or EMEA. It's very much a global phenomenon, isn't it? It is. And I think I think it's the level of maturity that it's at in the marketplace. So North America, yes, they kind of picked it up first. And I think that was where the first market pull came. And that was really kind of during COVID and a little bit before. And we knew a lot of people who were doing it before. Now we're starting to see mature across DOC, UKI and EMEA. And the Nordics are starting to pick it up. Interestingly, the Netherlands has always kind of been there. They just called it supplemental services. Right. But they always did a lot of co-managed and I think just smaller country, but more opportunity. We see the same in South Africa, larger organizations. Things change there where a lot of the global service providers left the market at times. And as a result of that, it opened opportunity for those service providers. So certain markets have matured faster than others. But yeah, I think globally now we're starting to see an uptick on it. And I think everybody's starting to see that that that pull from the market. But they're also starting to go create their own opportunity as well. It's interesting what you say about the Netherlands, because that kind of makes me think that potentially, you know, potentially this is something that people have been doing. But just like we're now trying to put a different name on it, is is there an element of marketing spin in there or is it, you know, is is yeah. What's your take on that? There is an element of marketing spin. I think the other side of it, though, is the the value that is seen when a service provider comes in versus what it was five or 10 years ago. Right. I think a lot of times before when a when a service provider went into a business, they were seen as a cost center and a cost that maybe you don't want to take on. I think today, post-COVID, businesses now see the value of a service provider because they realize what they went through to be able to move all of their employees remotely. And I think the other side of it as well is, you know, and it's something that, you know, we've said in the business for a while, and I've been doing this for 18 years, a long time ago when this all started and we were talking about managed services in the marketplace, those service providers were smaller shops. Today, they're mid enterprises. So look at yourself and the value that you bring and the size of organization that you are as you've grown. You're very comparable to a lot of those customers. Some may be bigger, but you're still a very mature organization. And so I think I think we have to take some stock in that and be able to build on that and capitalize on it to be able to say, you know what, we should be here and we have the ability to support you. Fascinating conversation as ever. I think I think we can close it there. Otherwise, as usual, we could go on all day. Absolutely. Good. But no, David, thank you again, as usual. Thank you very much for your time. And yeah, look forward to the next one. Same as well. Thanks, Pete, for the time. It was excellent.
