About the Episode :
Fred Voccola brings his expertise on MSPs, SaaS, and Cybersecurity to talk about the future of the MSP Space over the next decade. Learn how years of experience in the IT Channel gives Fred and Rick an interesting conversation.
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About Guest:
Fred Voccola is the CEO of Kaseya, a provider of IT Infrastructure management software for small and medium businesses around the world. As CEO, Mr. Voccola has led the transformation of Kaseya into the global leader in its sector with over 1300 employees worldwide, providing its industry leading solutions to over 25,000 organizations across the world.
Prior to that Kaseya, Mr. Voccola has led multiple software and internet technology companies, including serving as President of Yodle for Brand Networks, which was sold to Web.com (NASDQ: WEB), Nolio, Inc., a devops SaaS company, where he drove 100% year-over-year growth and successfully sold the business to CA Technologies. Mr. Voccola also co-founded and served as president and CEO of Trust Technology Corp., the pioneer in working capital compliance SaaS solutions. Trust was successfully sold to FGI Global in 2010.
Earlier in his career, Mr. Voccola co-founded and served as President of Identify Software, substantially growing the business during his five-year tenure, culminating in a sale to BMC Software. He then served as vice president of worldwide sales and services at BMC Software. In addition, Mr. Voccola has held various management and executive roles at Intira (acquired by Divine Systems) and Prism Solutions (acquired by Ardent Software/Informix/IBM). Mr. Voccola holds a Bachelor of Science in Finance from the Carroll School of Management at Boston College.
Welcome to a very special edition of “All In,” I’m your host Rick Jordan coming to you as always just with the fire and MSPs, especially listening today we’ve got entrepreneurs in our audience a lot of people but MSPs especially those in the cybersecurity and IT space, listen up because I’ve got a special guest today, the CEO of Cassia, we’re going to talk about so many things today, which is why you’re gonna want to share this out with as many people as you know within the MSP space within the tech space, because we’re gonna hit some amazing things with SAS and mergers and acquisitions today, and we don’t do promotions, we don’t take sponsors or anything.
The only way we help more people and impact more people is with your help so I’m asking for your help today to just share this out because this dude, I’m pumped, he’s gonna bring it today. Prior to Cassia he led multiple software and Internet technology companies including serving as President of Yodel, and Britt for Brand Networks, which was sold to Web.com and get this, the list goes on and on to develop the SAS company where he drove 100% year over year growth and successfully sold the business to CA Technologies, and also co-founded this, and served as president of CEO, and CEO oh my gosh man, Fred, this is incredible, welcome to the show.
Thanks Rick man you’re, you’re being too nice, I just, you know, I was born in a time where technology took off. I’ve been so lucky and blessed and, you know a lot of the things that you said I get some of the credit for him because maybe my title and stuff but the kind of really good markets that really good people and got very lucky. So, sometimes luck has been better than good, but I appreciate you looking forward to the conversation.
Same here, my man. Same here, If we could go on that tangent for a little bit because you’re talking about being in the right place at the right time, you know, from what I’m hearing, and I see a lot of that and a lot of if you call them successful people, right, and at the same time. Yeah, they’re in the right place at the right time, it’s almost like sales. I always see it too. It’s like sales that a lot with sales is frickin timing, you know, and, but you kind of have to make sure that you’re going to end up there to begin with. Right, so there’s probably things that you did prior to that right in order to even have the momentum building in your life, where did all this start for you?
I don’t want to get too touchy feely and personal but I’m super blessed I have. I was lucky enough to have the greatest parents and family ever. Or, I hate saying the greatest but there were no parents that were better than mine. It’s funny, I just did this because we have met the CEO and it was like a little, you know, little personal stuff about the CEO, so yeah, he’s like that, and I never really thought about it before but my dad is, I believe, the smartest person on earth. I’m so lucky enough that he’s here, after he did his tenure with the government and CIA and stuff he got into, into the technology space in the private sector, and growing up, I would say my dad got rich after I was old.
So, you know, it was very happy there that you still had to kind of earn things but he was, he had a company that invented EZ Pass the electronic totally electronic Oh nice, yeah. So, he then was a founding member of the company that did Navteq that did in vehicle navigation so I’m not here to talk about like my dad’s resume but the innovation. Oh, he’s always thinking, his whole career when he worked in government right, it was always about how to take technology and, you know, back when my father was young, computers were brand new, literally brand new, how do you use this new thing called computers information data and technology and change the world, and, you know, growing up in New Jersey, shout out to New Jersey said you don’t take ads while I’m shouting out to New Jersey.
We don’t take their money, we give shout outs all the time, brother. Good people good places good things yeah go for it,
Growing up from New Jersey, the Garden State Parkway is the one of the major freeways there and driving down to the shore in the summer, there was just, miles of backups at these stupid things called tolls, because you had to stop your car and throw your quarter in and drive off. So I remember my old man said, “This is stupid. Why don’t we put a little tag on a car window, and make it so you can just drive through and they’ll debit an account?” Now that we all live with that every day. I remember him thinking that up at the dinner table and talking about it, I’m like, yeah, why don’t we do that. Yeah, I was 10.
That tech was like cutting edge back then, this is we’re talking late 80s, early 90s So, very fortunate that I had a father who was into making the world better, by solving big problems with tech and just, there was never you can’t do it, It was let’s try to figure out how to do it. Then of course, my mom is one of the greatest human beings you’ll ever meet. I can if I got a zero test she would find the positive in it, and try to make a way of making it better and you know when you’re in technology you’re an entrepreneur, you fail, and when you have a support system that picks you back up when you fail, I’m so blessed. So, yeah, being in the right place at the right time totally helps having, you know, the parents and the family that had grown up as is just super blessed for it and super lucky.
That’s huge man, I love how you say “having that support system to pick you back up.” There were a lot of scenarios and my dad was amazing, as well and I’ve talked about him a lot on the show. He died when I was 16, and he was always there, he set the stage for me though, you know, as far as good work ethic and was never the participation trophy Dad, I don’t think I’ve mentioned that about him before, but that, yeah, that wasn’t him you know.
Results matter!
Exactly but he was also truthful because he’s like yeah you messed up. Now what are you going to do about it you know and I’m going to be there to help you get through your screw ups too, you know, as long as he was alive, he was gonna do that and he did that up until I was 16 years old but that set a stage for everything in my life to do exactly what you’re doing, man that’s awesome to hear the background of of your family that’s foundational brother.
100%
I love it. I’m taking a look, there’s a lot of things that you’ve done, there was one thing that I noticed with pretty much every company that you’ve been a part of so far is that, you know, you’ve been part of the SAS industry for a long time, and pretty much all the companies you’ve been a part of have been acquired, which is, which is phenomenal because that’s SAS right, and we’re seeing a lot of that in the MSP space right now, it’s freaking hot, I mean it just lit up on fire. How do you see the comparisons between the SAS industry and the MSP space when it comes to M&A?
Yeah, exactly the same with a 15 year Delta, and I’ll tell you why. So, what the way software started or the second phase of software when open system software client server software started, you know the Oracles the sap is the identify software when the company that my partner Yoky Slonim and I did that sold to BMC.
It was right before SAS. So, SAS doesn’t mean that it’s cloud based, really what SAS is, it’s a business model. Software can be hosted or it can be on premise, but it’s subscription based. So, that fundamental software used to be sold on a license and maintenance basis right? We’ve all sold $100,000 worth of software, he charges 20% of your maintenance and the problem with that business model is you’re eating what you kill, you have a nice recurring revenue stream but the majority of your revenue is not recurring.
It’s akin to project revenue for an MSP, it’s nice but it’s not recurring.
Bingo, yep.
So, Salesforce was at the forefront of this and actually when BMC bought Identity BMC had a CEO named Bob Beecham they insti Salter was the CFO, then this is going back. Well I started thinking about “Well what if we rented our software?” Then computer associates were renting their software and that became software as a service before cloud delivery, and cloud delivery just changed the delivery vehicle for software so what that did was it allowed the revenue streams of software companies to be predictable and when your revenue’s predictable, you can then have confidence in your investment strategy, which means you can then put debt on the asset.
Bingo.
So, once you have a recurring revenue stream with long term contracts, so you have low churn, and you can put debt on it, the private equity companies just jump on it. What a great way to juice your return! That’s why we’ve seen the amount of private equity dollars in software and internet companies, you want to think there’s almost a trillion, that’s a T, dollars raised in the last six years by people like insight partners and EG and, you know, and others like Thoma Bravo, VISTA, the list goes on. For that purpose, and that’s why you’re seeing just such a huge influx of technology companies because the business model is so lucrative for everyone because of recurring revenue It’s not that the software is more expensive, it’s predictable.
So what’s happening with MSPs, is where Software and the community of investors around it was about a decade ago. Now we’re seeing investors looking at MSPs, and when I say MSPs I’m talking about the people that focus on small and midsize businesses.
Bingo, it’s something like $100 million in revenue for clients. Yeah, right.
Yeah, our MS, IBM, and Tata. And so, what they’re finding is the TAM, the addressable market is, I mean it’s gargantuan, it’s our hardest hit in the world, and this spend on technology by SMBs has grown at seven times the economy since 2012. It’s growing seven times GDP growth. That’s insane and now MSPs, the mature MSPs that hate saying the smarter ones but the more mature ones, that doesn’t mean bigger means more mature, they’re now entering into longer term contracts with their customers. So they’re not seeing revenue churn. So the institutional investors are looking at an MSP, and you know as they’re looking, and they’re seeing this: recurring revenue, low churn, huge Tam, which means you can grow rapidly, and they’re seeing, you know, decent margins that looks like a software company. So they’re throwing tons of money in it.
Now, the difference between the software and SaaS boom and the MSP boom that we’re starting to see I think we will see in the next 10 years, is the way MSPs grow. It’s a little harder to grow organically as an MSP.
You got it, bingo, yeah.
So they grow by M&A, they’ll buy lots of MSPs and they’ll grow it organically. Lots of people do that. So that makes the private equity buyer even more interesting because they can deploy more capital at a higher return. So, the long story short is, what we have seen the last decade with SAS companies. The same thing is going to is starting to happen with MSPs valuations are a little lower, because the gross margins are just a little lower, but it’s a fantastic business for private institutions and public investors to invest in because of the predictability, so sorry for the soliloquy, but it’s super cool to say it because I feel like I lived it for the last like 14 years.
You have yeah for sure. That’s why I love your perspective too in the comparison because I share that because it’s like we’re at the birthplace right now almost have like a gold rush in the in the MSP space, and, you know, at the Connect IT event talking about M&A w0hen my talk was around either scale or evolve, you know and how scaling you, it’s a tedious process it takes a long time exactly what you’re talking about growing organically. It’s like pushing a frickin rock uphill, you get to a point to where you mature, you know like Reach Out is, my MSP, and then now we’re jumping into M&A because in, we’re filed now with the SEC we’re going public, and that’s our capitalization process in order to acquire 50 MSPs over the next two years, and create the first nationwide brand you know but that’s how we’re going to grow fast and actually do something meaningful for the world
By the way, congratulations on that.
Thank you brother.
IPOs are, for those who haven’t done it’s exciting, it’s F ton of work, and it is yeah, it’s filled with government regulation and all the things you don’t want to deal with but congrats that’s super cool, super cool for the industry. You know, I think when we think about the M&A forum that we just had, you know, a Kinect, and all the folks that were there, one of the things that we’re finding at Kasaya, and I’m gonna say this, you know, in a way not to like piss people off but it’s the reality. The small to midsize business market is gigantic, and it’s only growing. Which means there’s more than enough customers for everyone to make a lot of money.
You got it sure as ever.
we’re finding that the winners are the better run MSPs, are doing. Everyone’s doing well, even the MSP that’s not maybe run exceptionally well they’re doing fine, but the MSPs that are crushing it like yourselves, are the professionally run well run MSPs that have things like a professional go to market team, they understand how to use inorganic growth which is a fancy way of saying M&A, they understand how to make technicians efficient, how to recruit and retain in this tight labor economy, and I think what we’re going to see in the next phase of MSPs, usually, not always, the well run MSPs are run by professional business people, which means they’re larger by definition, because they have institutional capital and stuff so I think that in order for the MSPs that want to remain small and independent because the markets so big. They need to start thinking about how to make their company, which happens to be an MSP professionally run.
Think about sales and marketing as a professional, think about the finance function as a profession and I think a lot of folks, a lot of MSPs, they’re running an 8,10,12, 20,30 person company, they may not want to be a business owner, they want to still be an MSP if that makes yeah, oh yeah, we’re gonna see more and more M&A, and it’s a, it’s just super, super exciting.
Yeah, no joke man. As you’re talking about this too I’m starting to think about this because the capitalization structures and you’re saying and running by professional people, you know, one of the things that has made everything possible for what I’m doing is, literally, by being the face by putting a face to the brand, and I was at an event, just about a month ago and the speaker made a comment, it was actually, Tony Robbins made the comment that a faceless,
I love Tony Robbins.
I know he’s phenomenal, he said a faceless brand takes way more capital and way more time to build, and, you know I think to when, you know, even with the breaches that took place, you know, just a couple months ago with Cassia, you know, I was watching you and your media appearances, I was doing a couple of Bloomberg appearances and everything else, and seeing you jump into the media I mean global media at that point so that people felt safe and secure was incredible. Did you ever think that like when I grow up I want to be on CNN, I want to be on Bloomberg and, you know, representing the company that I’m working for.
Well, if I ever did it was under those circumstances.
Sure, no doubt.
Listen, I grew up in New Jersey as I said earlier, you know, relatively humble, you know, yeah, never wanted for anything, you know, like my father worked for the government for most of my young life and we were just a great family and I wanted to be a baseball player when I was a kid then a football player that I wanted to go in the military and all the things that most people do when they’re growing up. I took a liking to innovation, partially because of my dad.
Yeah.
I was lucky that when I was born I was like the client server and the internet. Booms if you will. And that just made things that were never physically possible now possible and what’s been my kind of calling is how technology and innovation that was once the domain of large enterprises and large governments, now the domain of a dental office, and the MSPs that serve them like that’s pretty cool so it’s being the face of Kaseya, like man I get I get really nervous speaking in front of groups. I just spoke in front of 3000 people at our Connect conference, I was super I don’t like that I don’t like going to networking events around people I know I get nervous I’ve had the same friends since I was in kindergarten, I like you know, I just get nervous, but it’s part of the job.
To your point, and to Tony Robbins point, keep talking about Tony Robbins out here guys, leadership is you got to be the, you got to be in front. And when we had our security incident someone took it really seriously, you know, if I smiled or made a grin like it’s just out of embarrassment.
That’s a serious thing and it requires the world or our constituents, our customers of the world give a shit about that but our customers really know that we take it seriously. Yeah, and our customers are small business owners or mid sized business owners or in your case large business owners but, you know, in the scheme of the world Apple’s a large company, your company, you guys are getting ready to go public, but we’re all small businesses,
For sure.
We’re 400 million in revenue or small business, and we impacted a lot of people’s lives. It was important to do that, but to directly answer your question: No way in hell. When people saw my friends I grew up with, that I do jiu jitsu with, they saw me on TV they sent me, they made memes out of me, they made fun of me.
You made it Fred you’ve got memes of you now!
Put me in a prison garb, like, you’re going to jail.
My team likes to do that internally when I say something really stupid on the show, they’ll do the same thing. It’s awesome, that’s when you know you’ve made it, right? Dude, that I appreciate it I mean I’ll just say this on the record as I did before I appreciate it Kasaya’s response to the security incident to me was incredible, and even with the, with the globe and media appearances, I was doing on Bloomberg and and shatter and Newsmax and Fox, it was my focus was more so on the MSPs, you know, because it was interesting to me and this is part of the the state of the industry like as I talked about last week, too, is the brutal truth of the MSP space and why I see there’s so much M&A going on, is because there is a genuine lack of competency around cybersecurity.
Oh yeah, and it’s because there’s, it’s overwhelming man, you know, and I’ve got background from education from the CIA and the NSA you know as a civilian for contract work and I see things a little differently than most but you know I showed my stack from three years ago and as a board when we, you know outline this everyone talks about layers in the MSP stack, there’s like 27 of them, you know there’s something like that we’re up to right now, it’s insane and I see MSPs out there with three or four items as part of their quote unquote cyber offering, and it’s it’s getting difficult to compete because the rules of today are going to be freaking obsolete tomorrow for the small shops.
It is, I think you bring up so many interesting points one. I learned a lot during this, during this cyber incident we spent so much time with domestic agencies.
Yeah.
I had some exposure to some of the International, or the other three letter agencies, which is legal, the way that it was done, you know, they’re all adopted states but it was, it was. I learned so much. First off, I got to give these guys and gals, listening, homeland, Sisa…
They’re incredible, aren’t they?
Say what you will if you like the government if you don’t like the government like wherever you stand our tax dollars for these areas are very well spent. It was like some of the things they were doing. I mean, so we’re, we’re a $4 million software business, we have about a $200 million security business, we have some very well paid very smart engineers, as we can imagine, right. There’s like James Bond stuff. I mean, amazing capabilities, and they care. It wasn’t like I was expecting a lot of empty suits to be honest and I was floored. But if you think about the situation of the world wreck and this forced me to do a little like, like thinking I you know, I’m a product of the New Jersey public school system so my intellectual horsepower may not be so great, but no here’s a couple of interesting facts, if you think about it. So, as a western society. So this is the EU. North America, Canada, Australia, New Zealand. We spend about 1000 times 1000. The amount of financial resources, combating illicit drugs, then we do cybercrime 1000 times the economic output of cybercrime, in all its forms, not the result of it the output from, the gains from those who participate directly and indirectly, is about the same as the economic output of the illicit drug trade.
That’s it. So what that tells us is, you know, and I think it’s, it’s not with any mal intent but the, you know, the, the governments in the western world don’t fully understand cybercrime, because they’re allocating 1/1000 of the resource to protect us from it. So what that means is it’s up to us to protect ourselves and for MSPs to protect themselves and their customers. So it’s completely unregulated, two other things on top of that, but we’re not saying regulations are a good fact.
One is if you or I were to walk into a bank with a note, pass the note and say give me $25,000 Or I’ll shoot you with a gun in my pocket, or if we, you know, through various means of cybercrime, stole $10 million from the same bank. Our prison sentence is about 15 times longer for the armed robbery.
Yeah.
Second thing, 100% of ransomware, and about 82% I believe is sold, of all cybercrime is conducted with Anonymous currencies, and the number one way criminals in all aspects of professional organized crime are captured by law enforcement is through financial crimes. Al Capone went to jail for tax evasion.
Yeah.
You know, because some dude like, you know, had a gun, it is virtually impossible to follow the money with anonymous currencies. So we’ve created a state where criminals have a very light prison sentence if they get caught,
there’s not a lot of police or you know, authorities trying to catch them. And on top of it, the compensation they get for their crime leads to no paper trail for them to get caught. This is going to get much, much, much worse.
Mind blowing.
Yeah, and to your point, you know, though without having any bad intention. Because like you I got to talk to a number of government people in the EU in the States. In the last three months, and they’re just learning it, they’re learning what we probably knew seven, eight years ago. So, we are on our own to protect ourselves and our customers. And I think all of us, software vendors like Kasaya, Microsoft I hit 15 times, like 16 times in the last year, it’s Microsoft, my favorite company in the world, you got it. Yeah, it’s, it’s something that is fundamentally going to alter Western civilization if it’s not addressed properly. Right now, people like, like you and other MSPs, are the frontlines in protecting, it’s it’s a, it’s an interesting fight.
For sure I just saw an article just this morning that Microsoft out of their study over the past six months deemed Russia as the largest threat for nation state backed cyber attacks, and you start to see that because we’ve seen executive orders by this administration and the previous administration so this isn’t a partisan issue. Which is what you’re talking about, you know, and even when I was in a room at the White House last year in the Secretary of War Room pushing an AI Bill across the table. It was really cool because you’re talking about DHS. That’s who was in the room with me, DHS Sisa and I’m at the foot of a big table with the Secretary, Director, Deputy Director of Defense at the head of the table talking like I’m just a guy, right.
As I’m talking to everybody in this room, it blew my mind because just like you experienced. It was so just incredibly lifting to me to see that they really cared about the people and that they were trying to protect, and then you see the Senate reports of the special inquiry committee where they rated the different government agencies as far as their cyber readiness, and I think the DHS got a B+ in the State Department got a D- or something like it you see the discrepancy right and but you also see that they’re really on the forefront and it comes down to tax dollars and then the Air Force Lieutenant that just resigned a little bit ago. Because he said that he compared us to China and said that we’re at a kindergarten level from a government perspective for cybersecurity readiness and preparedness compared to China. So all of these things just backup your points, that it’s now up to the MSPs.
Yeah. Another point to all of that is you and I, we need a license. If we want to drive a car. We have the license. If we want to get married, your marriage license is right. Yeah, we don’t need a license to control all of the systems and data and information and security for all of our customers. I’m not saying that we want to regulate them. I’m just pointing out it’s not even on the government’s mind, Yet it’s getting there, and there’s no, this stuff, you know, the anonymous currencies combined with the technology innovation that cyber criminals have. I don’t want to sound like an alarmist or some kind of crazy person. This is the only threat to our way of life, because, for sure, there’s very bad things that can happen, again if you can’t go online and do anything. That’s not just going to your Amazon account and buying your weekly supply of shampoo. That’s the supply chain stop supermarkets don’t get stocked in three days, bad things can happen. So, it’s up to us, and that’s one of the original points about everything I’d get in front of a camera, or CNBC. No I didn’t. I hate doing it like, even things like this I love the opportunity, I just I get really nervous i i hate hearing my own voices in my own face, but it’s part of the job and we’re doing good in the world we’re not just making money we’re doing good in the world, and that’s pretty good.
You got it, brother. You’re doing well in conversation today. I’m enjoying our conversation so far. This is why M&A is so big right now too because it’s difficult. Now when I say for smaller MSPs, you know, I’m really talking, which is the majority of MSPs that are sub 5 million in revenue even sub $1 million in revenue they haven’t cracked that million dollar glass ceiling yet, and I remember it took me because I started as an engineer, man, you know, when I was laid off, working for BestBuy right. I was the first freakin Geek Squad agent in Chicago, after the acquisition of Geek Squad and Geek Squad. I still got my badge right.
What an opportunity missed by Best Buy with Geek Squad, they could’ve turned that into a national MSP.
Oh my god that Yes, exactly. So, I’ve had thoughts about that too about walking back in, you know, to Best Buy headquarters in Minneapolis, it’s some point and be like, “Yeah, I’m a public company now, and I was putting together and I trained all of Canada for the rollout and a lot of the United States, you know, let me tell you where you went wrong.”
But try to unify that and that’s what I’m trying to do even with the public offering is try to help unify the fragmented space but the smaller MSPs man. The only way I see that they’re going to compete is really by almost like investing their company into a larger MSP, in order to even still be relevant, and then they actually get some good things like, I love being a public company because there’s stock that’s involved in all these deals, too. So, the stock launches you know wherever it’s at $1 a share whatever, imagine that being $10 a share $20 a share $100 a share in the next 10 years and now there. It’s incredible and now you’re part of this amazing thing to actually begin to compete against all the threats that are out there, I’m not even talking about other MSPs, but now you have a freaking fighting chance.
Yeah you know the IPOs are. It’s interesting, so two to two things that you say, you brought up that maybe just think a little bit. One is, you’re right, our data has about, if we’re talking globally.
Western or EU, Australia, New Zealand, North US, Canada, Mexico and Argentina and South Africa. That’s how we look at it, and we have about 140,000 MSPs, most of them under a million, and that’s what a lot of our lifestyle businesses, wife, husband, two friends, they have $700,000 recurring business have 14 customers and they’re not interested in growing globally and doing different things.
Yeah.
You know, it gets harder every day for them to deliver the quality that they need to and some do and some don’t. But being public, I think you’re right in the market, it gives you a firm like yours or say doesn’t the publicly traded equities a nice currency. It’s great because it’s liquid, you know, if you give someone 5000 shares in your private company, it’s worth a lot of money. You can’t, you know, turn it into cash tomorrow and go pay for their kids college tuition, on what currency you can, so it allows you to share in the upside with instant liquidity, I think we’re gonna see more and more of that I think you’re gonna see you know like data went public, you know, Kasaya’s most likely going to go public.
That’s actually one of my questions for you, what were those plans that, by the way, took my ticker, it took MSP but I was smart, I gotta tell you.
That was one of my competitors. So I love them when they don’t do well. But, a very very good ticker.
Very good it’s a good company Tim’s did a good job, but the. So, it has a lot of good things for us. Yeah, we’ll be a public company, we’re very acquisitive, our strategy is a little different than Datto and some of the others, we have a more platform view. We believe that the problems that you indicated MSPs have, we want to stay ahead of it. You know we’re buying two to three companies per year, we’re integrating those technologies in our stack because there’s so much innovative stuff that comes out to deal with the threats that are emerging every day. But either way, hopefully we’re right but we’ll see.
It’s really cool watching your strategy and as you add these different components and just puzzle pieces to what you’re doing, and I’m sharing the same as I’m looking for MSPs, to acquire I’m trying to find ones with specific competencies too, you know, if it’s Apple or if it’s even a SASS company or if it’s someone that actually has a couple of CSOs on staff and that’s an area that they specialized in yeah exactly to have all these competencies, because just like when can say I started, I remember can say a decade ago, right. It was just the RMM, and that was it, you know, it’s cool, it was it worked really well, phenomenal but as you added these components to it, you’re able to do so much more to where it’s a one stop shop and MSPs now actually have an opportunity to be able to have this platform-based solution to where they can just plug in and offer things they never could before.
Yeah, that’s exactly right in our view the world, and keeping this away from being a cache commercial So our view the world is analogous to how Microsoft viewed the world in the 90s, with Microsoft Office, for those of us that are a little older, we remember when Excel wasn’t the number one spreadsheet Lotus was word was the dominant word processor and Harvard graphics was the dominant presentation layer not PowerPoint and Microsoft did that was the two things really interesting one, they recognize that a white collar worker wants to have access to ask, you know, to this much of this much functionality in excel in PowerPoint, you don’t have an Excel or a WordPerfect guru in the office.
So what they did was they bundled all of the different independent tools, and they integrated them. So now you get Office. So, you can right click on PowerPoint and it opens Excel, and it became available to everyone, because what the user wanted was everything integrated, we, our platform called it complete. We have the same view, the MSP technician, very, very few MSP technicians do only one thing, most of them, they might be backing up a VM they might go and patch your machine and they do different things, a lot of areas of expertise but most are multifunctional our platform is purpose built for them. We like to think it includes all of the functionality that the MSP technicians need to deliver all of the managed services to their customers and it’s all done in an integrated way, and because we provide all of the different technologies. We don’t need to make all of our money in any one, we charge 1/3 less than what our competitors do for the same functionality so the MSP can make more money because as an MSP you have two costs. I mean, multiple two primary costs labor and the cost of the kit to deliver your service. We can make your labor 20% more effective by integrating things, and we charge you 30% less for your free kit.
We think that we can make an MSP, even grow their profit by about 50%, without adding a single new customer and that’s our job, that’s what we try to do.
I love it man. I’m looking at this too, it’s like hey, that’s what I’m doing with the roll up too, because we’re gonna be able to charge a premium but providing the entire solution set all the competencies and cybersecurity to clients SMBs across the United States in North America for a little bit less than some of the premium MSPs that are the smaller ones and it’s amazing to me because you talked about data a little bit too, and how they went public, say I was planning on going public reach out my MSP is going public, what are the benefits of that because I remember data got a bunch of backlash from the MSP community when they did, especially over the ticker that they chose. I do that too. I think that was freaking brilliant, you know, like son of a bitch. I was more in admiration that I was pissed off.
Look, it’s a great question. I mean I think being public sucks for you and I. Doing that it’s a pain in the butt. Yes, everyone listening, it’s thinks you have liability issues personally you got to worry about now. You know in this climate, the political climate is like if you’re a business person, you’re kind of deemed as bad by certain parts of society which blows me away but you’re demonized if you try to build a business.
There’s so many good things that come with being a public company. One of them is as you said it earlier, you have the currency to invest in your business and if you know me, I’ll say this: I think data going public, the perception that will become corporate, they won’t care about me anymore that’s not if you’re public or private on the show.
You got it.
If you have leaders in the company that give that care about their customers, then being public gives those people who care more resources to do what they want to do, and, you know, if the people running the show or empty suits and quite frankly if technology companies aren’t run by business people, they’re run by finance people like sometimes that might change. Okay, you’re gonna lose a lot, not because finance people are bad but their finance people, and it’s more important to look at the leadership, and how they’re building and staffing their teams. My opinion anyway. But fundamentally, you get whatever the strategy is, and whomever the people are, when you’re in public get more wood behind the arrow to double down and if the people in the strategy are good. It’ll be a good thing for the customers. If they’re not, it’ll be progressively worse because they have more financial resources to invest in stuff that’s not gonna help the customer so
For sure. I see data going public, you know, Kasaya’s, you know, likely plans of going public Reach Out going public is a very very good thing for MSPs.
Yeah I mean it’s the fact that you guys are gonna go is phenomenal. You know, if I’m an MSP, if I’m one of the masses of MSPs, I’m not someone like you, you’re, you’re an exceptional MSP right but if you’re, you know, a typical 15 person MSP. All of this publicity is good, because all it does is incent more and more institutional money to look at this space, which means there will be more small, medium and large, private equity firms buying small, medium and large MSPs, there’ll be more focus on technology the customers will become more aware of the values of technology and the overall ecosystem grows. Look I’m a technologist, I’m a software engineer, I’m a nerd.
Same here, brother. Geek Squad. Porn-scrubber.
We’ll have a conversation in no time about it but we’re all nerds, and whether we are nerds. Or maybe we are, let’s say we’re chefs, and we’re very into making the best food, or maybe we are tailors and we’re into making the best like men’s suits or women’s clothing. Fundamentally, an MSP is a business. It’s not about the technology they need, but you know SP. What I find is the MSP world, because it’s made up of so many purists, technologists, anything commercial is viewed in a negative light, by my fellow geeks. You know I mean I got past that phase. Nothing is good or bad and, yeah, I find the commercial aspect as intellectually stimulating as the technology. I like it both.
But, you know, if you’re a three person MSP and you love doing everything yourself. It sucks that it gets harder and harder to be a purist, it just, it’s, it’s unfortunate like you’re an artist and your artists want to you want to do the best job you can so I think some of that is there and those tend to be the loudest voices on Reddit or on all these forums for sure. Yeah, they’re the ones that have the time to do it, and, again, nothing wrong with it. It’s just I think we see that in every industry, as the industry is of all,
No doubt, I’m always gonna try to stay anti-establishment, you know, that’s why I don’t wear a suit. I wear black T shirts everywhere I go and jeans, You know, but that’s how it is.
Yeah, and the fact that you said that this would be just unsolicited advice is, I think, why as a public company, back to your question about data, I think you’re gonna rock as a public company, because you’re aware of that, you know, you’re like, it’s not about. It’s not just about the shirt you wear it’s how you view things when we spoke offline, you genuinely care about your customers and the business. Yes you care about making money. Yes, but you are a technologist and you are a customer service professional customer solution professional. And I think that’s so whoever’s listening. Once you guys are public, that’s more wood behind your arrow to do what you want, which is the right thing by your customer.
Thank you brother, I appreciate those kind words. What are you excited for the most about the future of our space of the MSP industry over the next decade.
Yeah, so I’ll answer it about the industry not, I mean I love my company I love what we’re doing. Yeah, people so that’s super cool but for the industry. I think there’s two big trends, and I talked about this at the keynote at connect. So, I didn’t say this part, I have nieces and nephews. I have six of them and they’re wonderful. I had a conversation with one of them about what they want to do with their life and I’m like, “I’ll buy you an MSP.”And she said, “MSP, what does that mean?” I explained it and you know she’s young, she’s not not done with her education yet, but I said to her that you want to take as many IT and software engineering courses as you can, because technology is the future, and here’s the biggest, I think, 10 to 15 year window and that’s for the proliferation of spending by SMBs on tech. And I think there’s two big things that we’re going to see in our industry that just alter everything as much as it has in the last decade. The first is we’re seeing mid size businesses, I’m defining that as companies with one to 15 ITP.
I think by the end of this decade, there will be 1/3 as many internal IT shops of that size people like you are gonna be doing all their IT that triples the amount of spend MSPs can get, and this isn’t a dental office spending 1500 bucks a month, being a pain in the butt every time something goes wrong. This is a $30,000 a month Community Bank where you’re augmenting their IT group or maybe even replacing it. So you have a long term contract, sophisticated customer, and professional relationship. It’s a much better type of customer so MSPs have to learn how to sell those kinds of companies. You guys do it but again you’re an exception, it’s a different conversation.
For sure.
Yeah, so that’s gonna alter and massively open up the market and it’s gonna make more sophisticated MSPs more successful. The second, and this is another interesting cataclysmic in a positive way, evolution. So if you think about the typical small business under 100 employees that make up about 90% of customers of MSPs and about 50% of the revenue of MSPs, a dental practice, a big one, they got 20 employees they spend, you know $8,000 a month with their MSP and it’s a nice little customer.
If you think about what that dental practice spends money on, there’s about seven business service providers that they spend money on: their lawyer, their accountant, their payments organization, their IT and security person, their digital marketing person, their HR PMO, maybe their Managed Print if they’re in certain businesses.
Yeah.
Those are all now technology enabled services. I think by the end of the decade, the number of vendors that a typical small to midsize business leverages for business services will go from seven to three. I think the finance person will remain their finance person. The accounting person, the law firm, all other business services that touch technology. Anyway, it will be done by the MSP.
Yeah.
They’ll be doing all their payments, they’ll be doing all their voice, or their unified communications, all the IT and security, like they do now remember, was only six years ago MSPs also did security.
Yeah, yeah, you got it.
Those two trends will depend on how you look at it and again I went through all the numbers at connects a little while ago.
It’ll probably be triple the TAM available for MSPs, that’s exciting, and could say a plug. Our strategy is to make sure our platform has technologies. So MSPs like yourselves can go and get every dime of managed service technology enabled from our platform. And so, I’m excited for, say, that. And I’m excited for the industry. I think it’s super cool. I think we’re in the third inning, and as my good friend, is that really my friend but the famous surfer Kelly Slater said. When asked why he wins the national surfing title every year, he said, “Well the first thing I do is I pick the right wave.”
I love it, man, there’s something key out of what you said on how the TAM the total addressable markets going to triple, and at the same time I had I was on the phone with Gary pika just a couple weeks ago, he was my very first mentor in the MSP space and we caught up. He’s amazing. Yeah, we caught up on the phone just a couple of weeks ago, and we were going back and forth and both of us were like we think there’s going to be. So you’re saying that the TAM is going to triple, so the amount of revenue dollars for MSPs to grab is going to triple yet, there’s going to be 1/3 Less MSPs around.
Yeah. So Gary works at Kasaya and I don’t know, we’ll see what happens. I don’t know if there’ll be, I think it’ll be the same number of MSPs, here’s what I mean by that, there’s a ton of M&A, right, you guys are gonna buy hundreds and and you know, there’s tons of M&A, but there’s also a lot of niche IT service providers so some using not MSP, coming up for example, there’s an outfit, out of Long Island. All they do is compliance management for doctor’s offices on the island.
Yeah, right on.
That’s all they do, the guy’s got about a million and a half dollar business. He has two employees, makes a lot of money and of course he uses our compliance product for it. There’s a plug, but regardless of that, I’m sorry I could help it, but, you know, security, compliance, management, there’s a lot of niche services. So I think that the markets are gonna triple. There’ll be a ton of M&A. I think we’ll have roughly the same number of words, but that means the organs are going to be 3x bigger. Yeah. So, and, you know, who knows, you know Gary and I talk about this a lot and you know it’s, I usually lose my arguments to Gary so he’s.
He has a way of speaking doesn’t he.
I know I’ve learned so much that you know, he’s got a huge ego so now his ego is gonna be twice as big as me saying that but I love a man
He’s a mentor that’s turned into a friend.
Yeah, the year I mean 2013 Right, right at the beginning of when he was really starting to methods and everything I was one of his first you know however many clients that was on there and I credit a lot of my success to him and I like I like to Josh them a little bit too and be like, “Dude, I kind of improved on some of your methods a little too man.”
One of the jokes, one of the jokes that we have and this is an MSP, you know, conversation, so most of your listeners will probably know it. So Jim lippy you know Jim, let me. Yeah, from SAS alerts he’s worked to save for a long time. Great guy. And so we always tease. Gary that, you know Jim lippy is becoming a bigger deal in the industry than he is inside the plug my good friend Jim, let me, and he was listening, he’s got a great company SAS alerts check it out.
I love it man. So Fred, as we round this out, man, what’s next for you because you’ve taken could say, from what like 85 million to 400 million in revenue, you’ve been a part of so many here you’ve got a public offering you’re teasing now as a possibility with Kasaya what’s next for you personally man. Where do you see yourself going,
I hang out with my friends from childhood, my mom, my brothers, my niece and nephews, my dog, I do jiu jitsu I suck at it but I try to do it all the time. I box I suck at that too but I like getting knocked out, and I work. I love what we do. I really enjoy it, as you mentioned earlier, most of my companies that I started before were single product companies they got the 50 at 100 million we sold them we did well and all that kind of stuff. This is different, this is a platform and I think I’m going to mean unless I get fired, which you know can happen they can get sick of me and who knows what happens. I think I say is three 4 billion in revenue by the end of the decade. I think we are the number one SMB business SMB facing solution provider by the end of the decade worldwide including. I think we have a really unique opportunity, and I love it. I love our company. We’re based in Miami, you take a look right it’s freaking out.
So yeah I plan on being here. I love our customers. It’s cool to deal with owners and executives of companies, talking about their business, not selling some application release automation product or some dude at Citibank could care less, you know it’s a big difference.
I love it. I’ll be here. I love it man. If something happens you know there’s always a home for you with me too I’m just gonna throw it out there.
Oh thank you.
Yeah, no problem.
I feel so embarrassed about these things.
I love cameras, I’ll be the one that goes on all the global fields. Fred. Thanks so much for being on man, it was an amazing conversation just a lot of insight you bring.
Well thank you and again, congrats on the filing that is a huge deal for you personally, your company, obviously the MSP industry.
I’m pumped.
That’s good to hear. All right, guys, take care.
Thank you.
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