Episode 44: 100% of Your 50%
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Erick and Rich discuss why private equity firm Thoma Bravo says Manny Rivelo is the right choice to be ConnectWise’s new CEO and three tips for improving customer retention. Then they’re joined by Sunny Kaila, CEO of IT By Design, to discuss his new book on how overseas technical workers can help MSPs grow faster, increase profits, and raise their valuation. And finally, one last thing: a new AI tool that threatens to put Erick and Rich out of their podcast-hosting job.
Discussed in this episode:
Thoma Bravo Exec on New ConnectWise CEO: “He’s an Innovator”
Transcript:
Rich: [00:00:00] And three, two, one, blast off, ladies and gentlemen. Welcome to another episode of the MSB Chat Podcast, your weekly visit with two talking heads talking with you about the services, strategies, and success tips you need. To make it big and manage services. My name is Rich Freeman. I’m a co host of this program.
I’m also the chief content officer and channel analyst at Channel Mastered, the organization responsible for this show. I am joined as I am happily every week by your other co host, our chief strategist at Channel Mastered, Erick Simpson,
Erick: how you doing? Doing good, Rich. How you doing? Just coming off of a busy travel week.
You recovered, you ready to rock? I am recovered and ready to rock. Yes. Earlier this week the first three days of this week, I was in Palo Alto. At an HP event learning a lot about AI PCs and just AI everything actually, cause the HP is building AI into anything you can name, including printers, which we don’t have time to get into here, but very good event and got home late yesterday afternoon.
Rich: I’m raring to go, sir.
Erick: All right. Let’s not keep our listeners waiting. Rich, what’s our top story this week? It is quite
Rich: a tough story. Actually, by the time people are listening to or watching this show, this news will probably be on the order of ten days old. But during the week in which we’re recording this was huge news, and that is that they have a new CEO at ConnectWise.
After five years in that position at ConnectWise, Jason McGee has stepped down. He will be replaced by someone named Manny Ravello, most recently CEO of Forcepoint. Cybersecurity vendor. He has prior positions at F5 at Vaultix, which is a security vendor that was eventually acquired by Cisco.
Now you may have read Channel EDE had a Q and A with Manny Revell, the new guy, Jason McGee, who has stepped out, talking about the change of position and so on. It was very good. Congratulations to them for that. But I reached out to a contact I have earlier this year. I had a chance to interview Mike Hoffman.
Mike Hoffman is a partner at Toma Bravo. Toma Bravo is the private equity firm that owns ConnectWise. Mike also sits on the board at ConnectWise. And I wanted to get both a Toma Bravo point of view and a board of directors point of view on the leadership change there. And again, by the time folks are enjoying this podcast, you will be able to get my complete write up on this on my blog, Channelholic.
Which is www. channelholic. news. Here’s a quick rundown of what I learned. And I asked Mike from a Toma Bravo point of view, why Manny Ravello? And he basically said, they were looking for three things. And no particular order here, but there were three things that they were looking for.
They wanted somebody with deep knowledge. Cyber security experience. They wanted someone who is a technologist. Someone who’s passionate about technology, eating products and somebody who can really sink their teeth into the product side of the business. And then also somebody with demonstrated success running large vendors at scale.
And they said Manny Ravello checks off all those boxes. He’s somebody who Mike Hoffman is confident the Connectwise partners will like just on a personal level. And so he was a good fit there. And I asked, of course Absolutely. Totally makes sense. Running successful businesses at scale.
Totally makes sense. Why the focus on security? And he basically said, look, it’s not the only thing that connect wise does by any means, but it’s a very important. Piece of the story there. It is a dynamic, fast changing and fast growing market. And it’s apparently the fastest growing revenue segment at ConnectWise.
So they wanted somebody who was going to be strong there. Now I I asked him, is it a coincidence? That back in May ConnectWise named a new CFO as well. Those are two pretty significant positions changing hands within six months of one another. And he said, yeah, it’s coincidental timing.
I talked with him, this was the first chance I’d had to speak with him at all about the new CFO. And he said that, they liked this guy and his experience. And in particular, they liked the fact that he’s been involved in half a dozen exits. For privately held companies before which of course inspired the inevitable follow up question for me Is there an exit on the horizon?
For ConnectWise, you’ve recently hired A CFO with experience in that area. You’ve recently hired now A CEO, by the way, with experience in that area. ’cause Forcepoint sold off a big hunk of its business about six, eight months ago. And the answer was basically there is no plan for an exit at this time.
There’s [00:05:00] no timeline on that. Eventually, of course, there will be an exit. And they want to be in a position to, to do that as effectively as they can for their investors. At Toma Bravo, but that is not something that they are actively planning for right now. And that is not why these positions change hands or why they put these two particular executives into those positions.
So that is the official word from Toma Bravo. Erick, I’ll just toss in a few kind of final thoughts of my own here. And first of all, I wouldn’t say I know Mike this is really only the second time we’ve spoken. But he’s always been, forthright, a straight shooter with me. I take him at his word when he says this is not in preparation for an exit that we’re contemplating at some point in the near term, keep in mind CRN had some excellent reporting a year or so ago, if I remember might be getting the timing wrong, that they were in, in conversations with Other private equity firms about potentially buying connect wise and those deals none of those deals worked out So I take my kids word when he says that this is not You know in anticipation or in preparation for another attempt to sell the company I don’t think it’s just One kind of, important thing from a Tomo Bravo standpoint that they brought in somebody in as deep in security as Manny Ravello appears to be.
I will just say that, and I, my knowledge of this kind of thing is partial but my understanding basically is that if you are a company like Tomo Bravo trying to sell a company like ConnectWise you are going to get a significantly higher multiple, a much better price. On a company with cyber security or let’s just call it a cyber security vendor is going to sell for a much higher price than an I.
T. Management vendor. And so I do think that 1 of the things you’ll see going forward is a real focus on the security part of the business that connect wise to help boost. The valuation of the company even further. And this was the one thing from the conversation with Mike, I didn’t emphasize as I asked him what are your marching orders from Toma Bravo, from the board for Ravello as he comes in?
And he basically said, pick up where Jason McGee left off. Jason, grew revenue 300 percent in five years, grew profits or profitability 500 percent in five years, pick up where he left off. I would add that the one thing he will also probably be looking to do is really lean into the security part of the business so that whenever it is that a sale or an exit of some kind, which could be an IPO, whenever that comes the company sells for as much as it can.
Erick: Very interesting conversation, Rich. And I’ve got a couple of thoughts. First thought is, with this kind of dramatic change. From a leadership perspective, it’s, it’ll be interesting to see how ConnectWise, handles that messaging. And maybe any potential questions or concerns from their partners.
Number one, right? Because this is all different now, right? What, how do you promote that message? How do you deliver the new vision? And maintain the trust and confidence of his existing partners, as sometimes when change happens, people start. Wondering and waiting for communication.
So rapid, consistent communication, direct communication to the partners. Like they’re just going to see how that rolls out. And secondarily, my other thought is they may not be planning for anything. Now they’re putting pieces on board, right? They’re making these p they’re making moves on the chess board now for a longer game potentially.
So we know, like you just said, valuations are different or, security focused, security led organization. Valuations are different for SaaS organizations than other. Organizations. So again, I think what we’re seeing here is early positioning, early restructuring. to obviously meet the requirements that ConnectWise has to Toma Bravos and Toma Bravo has to their shareholders, right?
Rich: Yeah. And, it’s worth keeping in mind. I Toma Bravo bought ConnectWise in 2019. I remember being told by someone from Tooma Bravo, I met at IT Nation connect that year. That ConnectWise was actually the first acquisition out of a new fund that Toma had raised.
Five years, five to seven years is not an unusual timeline for a fund when limited partners come in, they put their money in there looking to get a return on that investment with a partner. Private equity company. There’s usually on a closed end fund, there’s usually a deadline for when you’re going to, you’re going to see a return and we’re heading into that window here.
[00:10:00] I think that, there, there are all sorts of reasons why that it doesn’t mean that they are definitely going to be selling soon, but I think you’re right. They’re positioning themselves for the time when the time comes and If we had to guess I think it’s not going to be another five years would be my guess.
I concur. All right. You were talking about communication as being a key to partner retention for ConnectWise in this case and retention as it happens is the subject of your tip of the week.
Erick: Absolutely. So let’s talk a little bit about The challenges that MSPs have in terms of clients, there’s several identifying the right ideal client, bringing them on board, making sure that we’re evaluating our clients on a regular basis, if not yearly.
Maybe more often when necessary to make sure that we are maintaining that championship team. I mentioned on one of our shows, the idea that, we do the ABC of clients on a regular basis because the team that got us, here today may not get us to where we want to go.
And I use the analogy of, let’s say you’re a sports franchise owner. So you’re going to make player trades to get to the championship in the new year. So there’s challenges of identifying the ideal clients to keep the ones that exit. But let’s focus on the ones that we want to keep and reducing client churn, increasing client retention.
So there’s three tips this week. The first one is of course you have to deliver exceptional customer service. When we talk to MSPs rich, we ask them what their unique value proposition, they always say excellent customer service. I technical skillset and things like that.
That’s not really a unique differentiator until you can demonstrate it and why do clients stay with you because you’re delivering that exceptional service? I’ve worked with MSPs rich where they are a boutique. MSP. So they take it a little bit differently than maybe some of the other MSPs out there that just serve multiple markets and multiple verticals.
But they are like very boutique, not from a vertical focus sometimes, but just from a delivery focus from that fanatical customer service approach. So it’s all about the customer experience. So exceptional customer experience, exceptional customer service, proactive communication, number two. We’ve got to have continual proactive communication, thereby increasing that, strengthening that relationship with our clients.
And that does mean having regular check in meetings with your clients. Again, you can only do this, Rachel, when you are very focused on, the A and B clients, if you’re dealing with a bunch of C, D and F customers, they’re going to rob you of your ability to deliver exceptional customer service to the clients you want to keep, maintain proactive communication.
Can you imagine Rich having to do QBRs with every single client? If you have a hundred clients, you just don’t have enough time in the calendar to do that. So this allows you to do that. I was on a consulting call with one of my current clients this morning talking about these opportunities, projects that they’re looking at that they should not be going after because number one it’s a landmine because the environment is just not fit for what they do.
It’s tough to quote and tough to meet the expectations of a client that you don’t have a relationship with. This is a project that comes in off the straight and you have no way to mitigate scope creep and scope seek because you haven’t had the time to properly engage with them as you would with an existing client who you’ve known for a long time and you’re delivering more services that way.
So the guidance here Rich is focus on your existing clients grow the ideal clients. That you want to work with and just go wider with them instead of trying to bring in things that don’t meet that ideal client profile. Third tip, Rich, deliver value added services, don’t deliver commodity services.
You’re going to cover kind of the basics of what an outsourced IT organization should cover, but what are you doing beyond that, beyond help desk and patching and updating, right? Are and some of the topics that we’ve talked about on the show recently, Rich? How are you helping them, identify AI opportunities and leverage AI for business outcomes, right?
For organizational outcomes, how are you helping [00:15:00] them mitigate their risks? Not only from a basic cybersecurity protection approach, but what are their compliance requirements? Are you delivering these value added services? That your clients may not even know they need a they should be addressing.
That’s your job. You are the, if you’re the outsourced IT organization, that means you’re also the outsourced CTO and, CISO in some cases. So you better understand your clients businesses to the degree that you can lead them in strategic conversations during your QBR meetings, right?
It’s not talked about this a lot too, Rich. It’s not having your report card reviewed by your parents, when you sit down this QBR is you have to be delivering strategic value, roadmapping, bringing, identifying risk, mitigating that risk, and then helping that client grow their organization so that they can’t see a future without your organization in it.
Rich: All three Recommendations that are rock solid, Erick. I want to underscore the proactive communication piece because as an MSP, you’re delivering proactive IT services. And that means that if you’re doing your job, if that technical skill that, like you said, everybody appreciates.
Thanks, Jim. says is one of their strengths. If you really got that technical skill and you’re doing proactive it things aren’t going wrong all that often at your end user accounts and so they’re not calling you and you’re not calling them and out of sight, out of mind. And yeah, you’ve absolutely got to be.
Making a point of communicating with your customers and just letting them know what you have been doing behind the scenes. How you’ve been adding value for them in ways that maybe aren’t entirely visible. And then that also gives you the opportunity to have conversations about those value added activities that you can do with and for them.
And I guess I’ll say it be their trusted advisor, be The strategic IT expert who comes in there and really helps them understand what they can do with technology that maybe they’re not doing now. That’s part of that communication process, but yeah you’ve got to make a point of being in regular contact with your customers.
Especially if you’ve been doing a great job for them. Yeah, Rich, pick up the phone, check in on them. Don’t think that, oh, we have regular communications, Rich. Because, every month our system sends an automated report to the client. That’s just noise, right? That’s just there’s, there’s value in the data, but the real value is in the analysis, as you well know, be in our channel analysts that now measure rich it’s in the end.
Erick: Now that’s the value and that’s the value that we like to bring to our clients. That’s the value that MSPs need to bring to their clients as well, demonstrating the justification for, or the need. And justification for additional budget, demonstrating the need to move into a strengthened cybersecurity posture because of the things that you can illustrate to them that are happening to organizations like their clients organizations, but it won’t be happening to them because guess what?
You’re our client, right? And that’s the unique differentiation that we bring. All right. We’ll keep that in
Rich: mind, folks. Erick, just a few episodes ago on the show, we you and I had a conversation about the pros and cons, the potential financial advantages of outsourcing some of your technical work overseas.
This was inspired by a conference held by I. T. by design that I attended recently and more particularly by a recently published book written by Sonny Kayla, the CEO of I. T. by design. I have invited him to join us on the show this week, talk about the book. Talk about going global. Give us a chance instead of just discussing the topic with each other, to discuss it with somebody who has essentially built a career around that.
And Erick, we’re going to take a quick break. When we come back, we will be joined by Sonny Kailas, CEO of IT by Design to talk about his new book. Stick around folks right back.
And welcome back part two of this episode of the MSP chat podcast, our spotlight interview segment, where we are very pleased to be joined by Sonny Kala, the CEO of it by design. He is also the author of a new book, the secret to building winning global teams, how to leverage offshore talent to exponentially increase profitability.
And valuation is available on Amazon and wherever finder books are sold. It is also the subject that we discussed on the podcast just a few episodes ago that this topic of going global and why MSPs who are not doing it. Really need to take a look at it. So Sonny thanks for joining us on the show.
Sunny: Thanks for having me, Rich and Erick truly appreciate you giving me the opportunity to come to your show.
Rich: We go back quite a ways, but for folks in the audience who are new to you, new to [00:20:00] IT by design tell them a little bit about yourself, please.
Sunny: Yeah. Typical MSP practice that I founded in New York city in 2003.
Then we started growing rich in New York city. Just like it was not called MSP back then in 2003, it was like, okay, what exchange migrations do we have to do with desktop support, all the breakbacks. And then got all the tools that were industry famous and got started going to conferences started learning that you can create that mr out of this And that’s the year 2007 a lot of 24 7 Service delivery requirement was needed for wall street customers.
We could not find any provider To deliver on 24 seven, we couldn’t find local talent where they were willing to work nighttime and weekends. And then I’m like, and this, how do we solve this problem? And that’s where we opened our own knock by taking trainers from here to the U S building would all knock to serve our New York city.
Clients as MSP in terms of 24 7 service help desk and knock. And overall, the world piece that we used to do in 2007, and my peers loved it so much that they, oh, your growth your ebitda at that time, EBITDA was not as MS as it is today, but it was, oh, you’re profitable, you’re growing. And how can I do this?
And as a go giver, I gave my India capability, which is 24 7 to a couple of my peers in my peer group. They have started loving it. And they’re sunny. They gave me some thinking and ideas that why are you just selling locally in this market? Why are you being boundary based entrepreneur? You have a capability.
Which is a global capability built to deliver to any time zone Why don’t you start serving other msp’s and that’s where the target market change target customer change from smb to msp And this is a 2015 or so So 2007 to 2015, we grew as MSP. Then we became a master Ms. P in 2015, and now we have 400 MSPs that are, that we have built teams for, or they’re using shared knock or shared help desk, or dedicated noc, dedicated help desk.
Then we built a talent operating system called TeamGPS. Then we built a community platform called Build It Live, which is our sixth this year. So that is a little bit of IT by design journey that we have traveled so far. And it’s really based on really being being a company which has boundary less vision and the capabilities are also boundary less and our reach is boundary less.
Rich: I was at the at the conference at Build It Live just a few weeks ago. Very much enjoyed it. And you spent most of your time on stage during general sessions talking about this issue, the subject matter of the book, the potentially dramatic IWDA implications of leveraging overseas labor.
I had conversations with MSPs at the show who were very interested in what you had to say. And you had some very concrete numbers to share. But a number of them had experiences, typically a long time ago working with overseas labor that did not come together very well for them. And so there’s a certain amount of, anxiety, skepticism out there.
What has changed for the person who had a bad experience? Let’s say 15 or 20 years ago, what has changed and Erick’s raising his hand when he was an MSP, he was one of those people what’s changed in the overseas labor market since then that should cause MSPs to give this option another look?
Sunny: Yeah, no, a hundred percent. And one is I think the, these markets that low cost talent markets have. Evolved. So if you, for example, if you look at India and I think the first probably it was used by fortune 5000 fortune 500 companies like Microsoft, Google Dell early 2000 but MSP channel experienced started experiencing when Zenith back then started coming to the channel One it was just purely offshore company.
They didn’t have too much of hybrid capabilities means that they didn’t have overall delivery capability here in the u. s and Any company where they don’t have u. s capability We didn’t understand what us service standards are those companies struggle. So that’s let me get so the point that i’m making is The market was not mature some companies that try doing it.
They did not know what the service standards are What are the disney standards when it comes to service? What is the expectation of the? US customer, business customer from MSPs, they try doing it, but they without, you can meet expectations that you don’t know or are not aware of. So they tried [00:25:00] doing it, but not successful.
Another piece English now in India is like number one. If you look at the overall probably billion plus population, if you look at how many English speaking people are in the world and what is the percentage of English speaking people in India. You will be surprised at the number and out of like about eight to nine hundred million people u.
s population is 340 million somewhere there that if you Like look at in that range, right? When you have a country with eight to nine hundred million people who are under 30 years old And they’re gen z’s type of thinking thinkers and they start their childhood with hollywood Not only the bollywood then the english is very natural for them So if you talk to anyone in our company, we used to spend Three to four months, which in the beginning, when I opened up India office in 2007, just to train people on language skills.
And there is another piece which is very prominent there is called accent neutralization, like voice and accent trainers. They used to spend weeks and weeks to work on the accent. And now people who are born in the, that are 30 under 30, they just, it’s very natural, like, when we now hire people out of colleges, universities, or one or two years of experience, young talent, they don’t require too much of language training, they are very fluent.
And then other fees same thing with the philippines market And other near shore markets like now we are looking at mexico, for example as a market like young people in mexico city The way they speak english like number of people that speak english. So overall I think in the world In these low cost talent markets, there are more people who have really amazing communication skills.
And they have a lot more culture understanding because now the way the world is interconnected from the social media and everything, people listen to TikTok, everything, every day they wake up, they really get that culture alignment naturally, just because of the society, the digital world that we live in.
So I think that’s what there’s I can talk on this topic for hours and hours But it’s really the language skills have improved the overall understanding of American mindset American culture people could just get naturally Connected there because they watch Hollywood movies. They consume content that is being created by content creators here So it’s like really not the old days when you had to turn on all your tv And even there you don’t have too much cable in india or philippines or other parts of the world,
Erick: I Appreciate the perspective that you shared sonny.
Yes, I was an early adopter You trying to outsource back office support, because as you mentioned, things have changed in the 20 years since, almost 20 years since I sold my MSP practice, we were, trying to figure this stuff out, there was not this cultural explosion or cultural accessibility.
Accessibility to us markets from Hollywood, from, social media did not exist. There was no tick doc, there was no YouTube. We had to really figure out how to integrate outsourced offshore talent to help our technical team. So things are much, much different now. So once we get past some of these kind of, maybe Objections, right?
Let’s say that in my mind, I’m an MSP and okay, I can appreciate the argument that you make. It makes perfect sense. Heck, as a consumer, I’m dealing with offshore support and I’ve no, I did, I know the dramatic difference that has happened over the years, right? I, and even with the platforms that we use in our business and SaaS, we’re opening tickets, we’re communicating with folks.
There is very little. Friction in that communication exchange now much different than 20 years ago. So once we get past some of those kind of, considerations for an MSP thinking about expanding and overcoming some of their challenges from a labor market perspective, how does the cost of overseas labor, what the MSP pays and the skill level of the talent that they are But they’re hiring compare to what’s available in the U.
S. versus kind of outsource relationship. Can you connect some dots for us?
Sunny: Yeah, no, 100%. And just add [00:30:00] one Peace to the previous thinking that we were sharing that Erick, you’re right, the overall still the fear uncertainty doubt is there and it’s normally the our life experience is what builds fear, uncertainty, doubt, if you have had experience with a bad provider.
In the service provider, you can still today, no matter like what I was saying earlier that there’s a huge pool of young English speaking talent in India, Philippines, Mexico, all over the world. But if you end up pondering up with the wrong person. Partner means the values are not aligned overall. They’re thinking what they’re doing the way they are, thinking about Hiding for example, you’re talking about people Even here in the us you have service providers where they don’t know what good looks like to hire right people And keep good people and keep them engaged and motivated and well aligned with the outcomes where happy employees make happy Customers is not their thinking Similarly in the offshore markets, there are so many of those companies where they’re trying to do it But they don’t know they don’t know how to hire train deploy Means positioning talent based on their strengths And so it’s really important to understand that market is important.
The location, yeah location is important, but also in that location, it could be India. It could be Philippines. It could be near shore, any market, Costa Rica, Mexico, or South Africa. Like these are the typical markets that MSPs are going to. It’s important to know the market, know the norms, local, and then end up choosing the right partner.
This is why in my book I talk about the check, there’s a checklist to do your wedding process for the service. Provider that you will be partnering up with that’s really critical But normally fear uncertainty doubt is the bias of our own personal bias or our thinking boundaries Is the quality of service is normally concerned that what’s going to be the service standards here the reliability the security the overall control You have internally on in house team, the control is a Oh, I’m going to lose control.
And entrepreneurs have control freak. I’m one, I can say that. And we don’t want to lose control. So this is where you were saying that it’s an integrated team. You’re not losing control. They’re part of your team. They’re extension. So that’s like also talking with solutions. Communication. We already talked about the culture.
The reputation, what my customers are going to say, if I know I have an offshore team. So those are normally the fears and uncertainties and doubt. The number one thing to really approach it with the proper strategy is you want to choose the right location. You want to choose the right partner.
And then you want to take this team as your own team, the way you will hire, train, onboard people. And engage them, recognize and reward them. If you have five people, 10 people sitting in another country, it’s no different than you, you are having a branch in another region here, the way you’re treating them, the way you are communicating with them, daily huddles to weeklies calls.
It’s like taking them as part of your team. You are one team. Those are the partners that are having so much success. And in terms of your cost question They are able to save about 30 to 70 percent because they know how to successfully leverage Offshore and nearshore talent to save 30 to 70 percent on your labor cost now if you stay with me for a second What is msp the biggest cost in the pnl?
So let’s say if there’s five million dollar top line revenue msp What is the biggest cost and you have done business, you know You have that. MSP is the, so normally if you took look at SLI service leadership or any other manual where they benchmark numbers, they coach you to keep your labor cost under 32%, 30, 30, around 32%.
And. Majority of the msps that I talked to you know what their cost is their labor cost They are close to 50 percent anywhere from 50 to 50 40 to 50 percent is their service labor cost if you can end up saving 30 to 70 percent That’s what our most successful partners are doing in that range.
You are saving a significant amount And then taking that into towards your bottom line So in this five million dollar top [00:35:00] line if you’re let’s say your labor cost 40 Let’s take the number on the lower side. Okay, so basically if you save even 10 That’s two hundred four hundred thousand dollars for a five million dollar revenue top line revenue msp If you just take 10 percent because you have the fear You know like a poor experience negative experience with the provider or market.
You don’t want to do it You know, or you’re scared about your customer talking about this or leaving customers leaving you because of this decision Take the backstage activities like monitoring, managing updates, any migrations, anything that needs to be done backstage, right? We all understand the front stage and the backstage in a theater setup.
So if you take your backstage activities and just try that, people can save more than 10, but let’s say 10%, 400, 000 Rich and Erick can be saved for their MSP. And you know what that will do to the bottom line. You will be able to save
your EBITDA with the 40 percent will be 750, 000 and if you say a 400 add that to 750 K you are at 1. 15 million dollars your EBITDA and you know What happens evaluation valuation is a multiple. Let’s say for this a 5 6 X multiple that 1. 15 times six axis 6. 9 million dollar valuation Just by saving 10 rather than 30 or 70, which is the potential now 3.
7 3. 75 million dollar valuation if you don’t use integrated off your team versus you use offshore integrated team your valuation will go from 3. 75 million when you don’t use it to 6. 9 million dollars Like if I will tell an MSP owner that you can put another 3 million just by taking backstage activities where you have no risk in terms of your reputation, you’re not losing the control because you’re just doing backstage activities.
You are taking baby steps or like small micro decisions to go towards bigger potential. That’s I shared this, I share this story all the time. I’m getting a call. That this yeah, shared it, I felt it as well. I was part of it. Peer group. And one of my peer group member who became my friend, he called me one day that I’ve been working really hard, putting my health at risk family.
And now I’ve been asking Lisa, my wife, that if you allow me to work extra hours, I’m going to be retiring in the next five years. I have to make this profitable so that we can sell and retire. And he’s calling me and saying, can you please talk to Lisa? I’ve been trying to get overall valuation and buyers are after me, but when they look at my numbers, no one wants to buy me because my EBITDA is not there.
It’s not even 5%. And for that entrepreneur, if that entrepreneur took a pause to see why I’m doing what I’m doing, what are the most important numbers for me as an entrepreneur that no one is going to get up and buy me? In the morning and think my valuation my service manager is not gonna think my revenue manager is not gonna think no one is gonna think Other than the owner who is all in with his cash and capabilities then Why are we not?
Taking that pause to think what is the most important number in the business is profit And the valuation is a by product And profit gives you the cash confidence That when you are a cash confident entrepreneur, that confidence energy goes to your team. They become more confident. You are more confident to expand your capability that expand your reach.
And the business grows, right? So just with this, backstage front stage thinking just anything which is customer facing Anything with interaction could be qbr could be any customer call. Don’t try it If you’re if you have the fear or you are uncertain You can make that uncertainty a certainty by just putting some backstage activities like patching Rebooting any projects that can be done backstage By these engineers that are 30 to 70 percent lower salaries, and they’re willing to work nighttime weekends when business is not running, then they can reboot servers.
They can bring mission critical stuff down and updated anything that needs to be done. [00:40:00] Firewalls, routers, switches, cloud, and you don’t have to have your team do that at nighttime and a weekend when they are spending time with their families. What happens? Your culture improves as well because now they can have dinner with the family.
They can have their free time as free time on weekends. They are more energized from their free time to work more on Mondays Monday to Friday. And they go to the client. They look healthy. They feel healthy customers love them because they’re front stage. They are your face They need to look healthy They need to, customers do business with companies where employees are happy.
Rich: So you earlier on, you made a an important point actually there were some panels during the conference where this came up a lot. I know Erick when he was an MSP believed this very strongly and said so on the podcast before you were talking about, you need to think of these people who are working for you overseas, not as just some.
Vendor or some resource, but as part of your team and integrate them into the culture and and your work flows accordingly. And that’s maybe just one example of what I’d like to hear some thoughts about for me. What are some best practices? What do you see in I T by design customers or partners in terms of how they utilize this resource successfully that other people should keep in mind if they experiment with this too?
Sunny: Yeah, that’s such a great question because when you have the right market, right partner and everything. Now, this is what needs to be true for any MSP to be successful leveraging this very unique solution. They need the way you delegate and elevate or delegate and double down on value creation. Same delegation skills that acquired means you cannot do drive by delegation to a option.
You cannot say, okay, it’s us here and the vendor resources are them. It’s not us versus them. It’s us. It’s oneness. It’s one team. And that’s like a mindset. So let me start with the mindset. Mindset has to be that this is my team. I’m just using someone as an employee of record, as a we work place which is secure, safe.
People come to the office in that offshore environment. country and they have the recruitment engine. They are the training engine. I’m not taking any legal risk local out of this in any other country where my company can be at risk. So you’re leveraging all those benefits as a business by having a provider.
Service point provider. And then now the mindset has to be, even though they have done everything, they built the office for me, if they make a SOC to compliant, they are they have the HR, they have the recruitment, they have the training, they’re bringing in people to me. All I have to do is now do my part.
Do 50, a hundred percent of my 50%. So it’s both it’s a partnership, which is 50, 50 ownership, call it cool, managed You as a msp have to do 100 of your 50 Then it’s successful and what that means is that you have to start with defining your success Why i’m doing this? This is what success measure is It could be in EBITDA, it could be in customer service, customer experience score or customer satisfaction score, your employee satisfaction score.
So you’ve got to have a clear three to five most important numbers defined in your why are you doing it? Are you doing it to cut costs? Are you doing it to expand your reach? Means your customers are in, Even though they’re headquartered in your city, but they have branch offices throughout the globe and you want to expand your delivery delivery hours, or are you doing it to make sure that your team don’t have to stay up at night to do all the patching, rebooting and everything else, or monitor mission critical stuff, or you’re not able to hire people at night?
What is your why of doing it? Once that is clear, then the what? I talked about this in the book in three section, the why, the what, and how the why is, what’s your why to do it? Is it profitability? Is there something else? Is it capability expansion? Is your reach expansion? Then the what, what needs to be measured to just to see.
When I can audit on a weekly monthly basis to see if I’m Being successful with my strategy and my why and then the how is basically what Erick mentioned earlier It’s all it’s just treating them as your own. It’s not Some other [00:45:00] human beings they are human beings. They’re people and if your team Has their mindset which will come from you having their mindset and then communicating that constantly we they are on our team.
They are not another team. There is one team. No blame game happens. No, like a victim. Mindset happens. It’s ownership mindset happen and okay, so that’s like a mindset. And then another piece from the process point of view rich is more of if you are having a standup meeting in the morning. Invite key people, depending on how big the team is.
Invite them, bring them into the meeting rhythm the way you will have it here. Use Teams and other tools like Zoom, whatever you are using for communication. Have that overall the process for same page every day, every week, every month, what’s working, what’s not working, constant understanding and helping them get unstuck if they are stuck somewhere, the way you will get your team locally get unstuck.
So that’s like a meeting rhythm part, like from the US point of view or scaling up or whatever you’re using. OKR, whatever you’re using. And then comes to the culture piece. The culture is not two cultures. What we do with our partners, we look at their core values. We print core values. We have the retractable banners.
If it’s a bigger team, you just brand them from color, according to color that the customer is using, the values that they are using. They need to be living your culture, breathing your culture as, because it’s one team. Values, mindsets, purpose. Is your company way of doing things so really making sure that the culture peace and then Appreciation recognition war right?
It’s not when something goes wrong It’s offshore team when something goes right is it’s my in house team. That’s like that mindset will never work It’s okay when something goes wrong This team has a learning opportunity to win. So you’re never losing You’re always winning as a team, but it’s not okay You It’s an onshore team is winning and offshore or offshore is winning and so that it’s just a culture.
It’s just a culture that you create. So once you focus on the mindset is the why, the what, and the how from the meeting rhythm and everything is in place, they have access to the network documentation, to everything that your in house team needs to have as onboarding of employees. They need the same they are not like, uh, like they don’t have any magic to understand all the configurations and everything like your own in house team will won’t have it.
So making sure that you’re setting things up for success in terms of having your playbook, your service playbook, which you use internally, taking time to onboard them correctly. Once they’re onboarded, everything is working, then taking time to celebrate their events, taking time to appreciate them, taking time to recognize them because they’re human beings.
They like appreciation. They like recognition, just like every other human being. So it’s that’s the culture part.
Erick: So those are really great insights. And I think the conversation that we keep referring to is a little bit of backstage conversation where I was sharing with you, how in my MSP practice, we tried to pioneer this was 20 years ago.
So this is how much things have changed in the last 20 years. And the challenges that we identified and some of the things that you’re sharing here, we also experienced. It’s Hey, it’s not our service desk, their services, it’s our service desk, having these. Huddles having the appreciation.
We would even send, gifts and things like that. And you have to take to kick, to create that, that cohesion, that team building spirit. So again, if this is you’re building another team, get them out there right down the hall, and have those communities. I agree with all of that. But during that, we also identified things that we were unprepared for, that kind of slowed our ability to integrate faster and build that relationship a lot faster.
Mind you, this was 20 years ago. So we had other challenges as well. So while you just talked about, the best practices to get the most out of the, this opportunity, I want to flip it now. Can you share some of the things that an MSP that’s considering doing this what kind of a maturity level they need to have, what their organization, what do they need from a blocking and tackling perspective in a readiness?
Perspective in order to the first step for success so that we don’t have friction and stop and starts and things like that. How should an MSP evaluate their readiness today? What or [00:50:00] give us like 5 things that they should have in place. To make this, to make this decision to move forward. What will disqualify somebody?
A hundred percent.
Sunny: No, that’s a great question, Erick. And it’s one way to this look at this, Erick, is that if you are that operational readiness that you have as a business to onboard in house team members, and you’re being successful and your numbers show it, that you are hiring people, hiring, right?
Because you have a hiring. And you have onboarding playbook and you have overall the culture playbook and you have the operational maturity in terms of processes are documented. Everyone knows what good looks like to do things, right? Then you are ready. So basically, one simple thing is that if you are not being successful with your talent strategies locally, You’re not going to be successful by integrating with offshore team.
So your process, you have your numbers very clear, like yours, the job descriptions, the scorecards, number one, you will know what role expectation and goal expectation you have from your team members. That’s like number one. Do you have a process to vet talent from culture? the mindset the culture the purpose alignment and Understand what their genius is their superpower their unique ability their passion And like they want to do what you require them to do in that role The role is clearly defined goal is really defined That’s like number one, like all the hiring practices that we use.
Number two is that when people are done, like a hiring is done right, onboarding is done right, then you’re setting them up for success. And the number one thing, especially for service delivery, is your delivery playbook. The training on are you using network glue? Or it glue or you’re using something else like you do you have a documentation system?
Yeah, all the processes are clear how you talk to customer. How do we do what we do? What are our service? Uniques that are there right and really being able to Have that process and the documentation or the playbook and systemize playbook The system has the overall compliance of the process Then it’s ready.
So operational maturity is a bigger word there are a lot of people that use because of the SLI model, but it really means that, okay, is your talent, hiring, training, and on boarding practices mature? And then I sit on a service desk, like a help desk or service desk or knock desk. Do I know what processes I need to follow?
Like what good looks like for me to be successful? What are the processes with company way of delivering service? I know it and I’m living it. And I have compliance means that someone is doing my QA, someone is doing my audit, and they’re giving me timely feedback if I’m not doing something right.
And another simple piece is that leadership. If you are MSME and you don’t have a successful leader who is able to hire, train, and develop and make people successful locally, then it’s a visual thinking that someone else is going to do it for you as a vendor. Leadership license. We all have license to drive.
Why not a license to lead? What is the criteria to be qualified for a license to lead, right? And if you have that thinking as a company, and your leader have not only the leadership license, but he don’t have too many points on that he’s canceled license. Then you are eligible to think offshore.
You’re eligible to bring another leader from offshore or team. And Yeah, so I don’t know if I answered your question But it’s really do you have a service coordinator or service manager or someone who know how to lead people? Because you are talking about adding people.
Erick: Yeah, appreciate that sonny And I think to me one of the things that i’ve seen over time are msbs that have that fear uncertainty and doubt and aren’t thinking ahead to help the offshore outsource team You Succeed, ahead of time before they’re ready to go.
But no, sorry. Can I have just
Sunny: one more, just one line culture book? People know, so you have the hiring manual, you have the hiring training, all the [00:55:00] manual and you have a successful leader who’s going to integrate this team. And then do you have a culture playbook? Because when people become part of you, do they know what good looks like to be a good citizen of that company?
Culture, culture playbook.
Rich: Really interesting stuff. I so appreciate the debt. You’ve been doing this for such a long time. So you’ve really got a depth of expertise in this area. We could talk with you about this for a lot longer, but we are out of time. The book for people who want to read it now, and I recommend it to them.
It’s called The Secret to Building Winning Global Teams. How to Leverage Offshore Talent to Exponentially Increase Profitability and Valuation. If you’re watching us on YouTube, you’re seeing the cover now. It is available on Amazon. Sunny, for folks who listen to this show, read that book, they want to get in touch with you, they want to learn more about IT by design, where should they go?
Sunny: They can go some very active on LinkedIn or it vd.net or sunny speaks.net. You just, if you can search Sunny kelan it by design, Google it GPT, it, you will see it. But one just last comment that Rich that I want to make is, this is in service to MSP community. I wrote it with 20 plus years of my lot of making mistakes.
I just don’t want others to make mistakes And this is not you know, you use anyone that you want if but know your why Then have your what very clearly defined and have the how which we just talked about But just this book is gonna help you prevent making those mistakes That I have made so you can learn from my very expensive mistakes that I have made You and rather than you making that mistake and learning from that mistake and then growing so this is really in service to others.
And so you can get it from Amazon. If you just go to Amazon and search Sunny Kaila, but the author or the title of the book is The Secret to Building Winning Global Teams you can get this book. And I went so fast, you know about serving the channel that if you just ping me on LinkedIn and just you know DM me, with the that I need a book copy.
I will send it to you. Free coffee.
Rich: That is awesome. That is a very generous offer. We will have Links to everything you were talking about there in the show note for this episode So check that out, folks. Sunny Kayla, once again, thank you so much for joining us on the show.
Excellent conversation. Folks, we are going to take a quick break right now. Erick and I will be back on the other side of it to share some final thoughts about this interview with Sunny. Have a little fun, wrap up the show, stick around. We’ll be right back. Are gonna be right back
All right, and welcome back to part three of this episode of the msp chat podcast once again, thanks very much to sunny kayla of it by design for joining us to talk about his new book lots to chew over there, for folks in our audience Erick I think the Thing that I most want to call out is just this idea that came up there that going global, utilizing overseas resources, it can save you money it can increase the valuation of your business.
It is not going to fix what’s wrong with your managed services practice with respect to people and people management. Basically. If you go into this with some issues in terms of how you manage people and how effectively you do that, you’re still going to have those problems. Once you’re working with some offshore help desk so basically this is only going to work for you as well as you can make it work by virtue of how well you manage technicians.
Erick: Yeah, you’re absolutely right, Rich. And boy, what a delightful conversation. We could, you could feel the passion that Sonny exudes around this topic and we could have continued all day, I gotta say. But I think that, a couple of other things that.
MSPs need to keep in mind in addition to, having that preparedness and being ready is, you’ve got to look at this as a collaborative effort, not only from a service delivery perspective, rich, but from a planning and preparation and relationship management perspective. I’m going to fly out about 50, 000 feet.
And just one thought that I know that I, or one experience that I had in trying to do this early on in my MSP practice when things were a lot tougher is just having much more strategic conversations around what it is that is required for success. So for instance, a couple of things rich include, having our processes documented, Sonny touched on that during our interview.
And I know he goes [01:00:00] into it in the book as well. But having your processes documented and not assuming or relying on a far fetched idea that they probably already have their processes documented. So we’re just going to allow them to leave. That is a mistake when we’re thinking about outsourcing individuals or teams or other companies that do this.
on a daily basis, like it by design is thinking that I don’t have time to figure all this stuff out. I suck at this stuff. Maybe by bringing in an organization that does this for other MSPs, I’ll just be able to hitch my cart up to that wagon and things will get better. That is not true at all.
You’ve got to own your processes and you need to lead, coach, And direct the external team, just as if you’re hiring them yourself directly and they’re like, like we talked about right down the hall in your building. So you’ve got to take command of that. And a lot of MSPs that, that I’ve talked to rates that have had a rocky road trying to outsource until they figured these things out.
Thank thanks to Sonny for writing the book that lays the roadmap for it. Have not had that type of. Perspective and in fact, I’ve talked to MSPs that. In a trial scenario with an outsourced organization, not it by design but just any others, any of the others that are out there, they have told me that it didn’t work out.
And when I asked why I says we gave them our worst customers and they just couldn’t save them out of a thing. And I’m like that is completely backwards. You know that. So anyway, there are some things that you have to evaluate as an MSP yourself before. Taking the leap here because you want this to succeed.
The outsourced organization wants success here and you want to grow as a very collaborative, strategic, very valuable component of your service delivery team moving forward.
Rich: Yeah, the vast majority just to focus in on I. T. By design, the vast majority of their clients are paying not just for the help desk technicians, but for local overseas management of those technicians and the sort of surrogate managers can’t do their job.
They can’t make sure that the service is being delivered in alignment with how you do business unless they understand how you do business and that has to be Documented it. You really have to have your ducks in a row at so that these folks who are helping you be more effective provide 24 7 3 65 service know how to do that.
Yeah this is something that can be really powerful for an MSP, but not every MSP is going to be prepared to to take advantage of that resource. Erick, that leaves us with time for just one last thing. Now, some folks in our audience might be familiar with, they may have come across in the media in recent days, a a service from Google called Notebook LM.
Which has actually been all over the headlines recently. I actually first heard about it weekend before last, Erick on a podcast I listened to and thought this sounds interesting as something that might be helpful for me in my work. And so I opened up an account, started playing around with it.
It has actually been really helpful for me. It’s like an automated research assistance that can in my case, go through all of my interview notes and so on and find stuff for me. The the reason Notebook LM has been all over the media though is this one particular feature that this this product comes with and the thinking behind this feature by the way, is very sensible, very logical.
I, I learn best by reading, but a lot of people these days prefer to listen, they prefer to watch, that’s how they consume and learn. And the thinking at Google was instead of limiting people to these text based answers to their questions, what if we could just provide them with some audio that provides an answer as well.
And rather than just have, some genErick AI expert teach you a lesson about whatever it is you’re interested in, they decided to to have the tool manufacture. A podcast episode about whatever it is that you’re researching. Two people, a man and a woman, having this sort of chatty, casual conversation about whatever it is that you’re studying in Notebook ALM.
And Erick, this it’s a very interesting feature. Like I said, it’s gotten a lot of attention. It’s actually, though, something we need to be concerned about because it’s AI. Can do podcasts as well as we can. Like what do people need us for anymore? This is a direct threat to our job as co hosts of this podcast right here, and so I decided to conduct an experiment.
I went into my notebook LM account and I fed it some information about Sonny Kala and his book, and I asked it to produce a [01:05:00] podcast segment about them. And about three to five minutes later. I got something back and I’ll just play a little bit of this for the audience right now and they can judge for themselves, who’s better us
Ai Speaker 2: or or Google ever feel like finding good people to hire is like almost impossible.
These days, it’s
Ai Speaker 1: tough out there. Yeah, it’s
Ai Speaker 2: tough. Especially for smaller businesses, everything costs more, competitions, like breathing down your neck. Makes you wish you could just clone your best employees. Okay, bad joke, but hey, there might be a smarter way to to tackle this whole talent thing.
Ai Speaker 1: Okay.
Ai Speaker 2: And that’s what we’re diving into today. The Secret to Building Winning Global Teams. Okay.
Ai Speaker 1: It’s
Ai Speaker 2: a book by Sunny Kayla and Shannon Waller. So what do you say, Erick
Rich: how did, how do they compare to us?
Erick: Rich, it’s scary. It’s scary. How natural and conversational and it’s very good.
For someone that is just scanning podcasts and things like that, I can see folks taking this and creating. Content and podcasts. And this is just like the first version of this. And I remember Rich, I picked up on it after you picked up on it. And I listened to, I read an article, I listened to a podcast online and I remember messaging you and you said, Oh yeah, I’ve been using it for this and that it’s going to be great to discuss how this is such a threat.
To us and the MSP chat podcast. And here we are talking about it. Can you imagine what happens as this kind of technology and this particular product evolves over the next 12, 18 months? When you can choose. The voices and you can choose, who the folks are and guided, it’s uncannily good in its first iteration.
So are our jobs threatened rich, or are we really at the mercy of AI and Skynet taking over our jobs? Our jobs. Yeah, I don’t
Rich: know. I don’t know. Again, I’ll let our audience decide, which version of the conversation about Sonny Cale do they prefer to listen to the the one that Google created or the one, the one thing that Google can’t do right now is actually interview.
Sunny Kayla as we did, but who knows how much longer remains the case. And then, yeah we’ll be interesting to see what that means for the the podcast industry, if you will. Oh,
Erick: boy, it’s a brave new world, isn’t it, Rich? It
Rich: certainly is. And folks that is all the time we’ve got for you this week on MSP chat.
We’re going to be back again. In another week’s time with another episode for you until then. I will just remind you this is both an audio and a video podcast Which means that if you are listening to the audio version of the show But you’d like to check us out on video go to youtube look up msp chat You’re gonna find us there if you are watching the youtube version, but you’re into audio podcasts Go to wherever it is.
You get your audio podcast look us up there, too You’re gonna find us either way. However, it is you get to us, please subscribe Great review. It helps other people find and enjoy the show. Just like you do. This show is produced by the great Russ Johns. It is edited by the equally great Riley Simpson.
They are part of the team with us here at Channel Mastered, which is responsible for this show. They would be happy to make a podcast for you too. No AI required. And what the podcast is just a tiny little fraction of what we do at Channel Mastered to learn more about that, go to www.channel master.com channel. Mastered has a sister company called MSP Master. That’s Erick working directly with MSPs to grow and optimize their business. You can learn more about that organization at www.mspmastered.com. So once again, we thank you for joining us. We’ll see you in a week. Until then, folks, please do remember you can’t spell channel.
Without MSP.