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Maciek Szcześniak - Transforming Resellers into MSPs · Partnerships Unraveled

• 0:07
  Speaker 1: Welcome back to Partnerships Unraveled, the podcast where we unravel the mysteries about partnerships, and channel on a weekly basis.
• 0:13
  Speaker 1: My name is Alex Whitford, I'm the VP of Revenue here at Channex and this week I'm very excited to welcome our special guest Magic.
• 0:18
  Speaker 1: How are you doing?
• 0:20
  Speaker 2: Hey, I'm doing really great.
• 0:21
  Speaker 2: Thanks for having me again.
• 0:22
  Speaker 2: It's a very powerful and very popular way of talking to thousands of partners.
• 0:28
  Speaker 2: I'm really happy that I'm here with you.
• 0:30
  Speaker 1: Yeah, you're one of the few second time guests, magic, so clearly you did something very right the first time around.
• 0:35
  Speaker 1: Maybe, for those who didn't listen to the first one, you can give us a bit of an introduction about who you are and what you do.
• 0:41
  Speaker 2: So I've been working for many years in the IT industry, mainly with a compact HP, hpe, and about two years I left to focus on the journey of connecting academia, business and together to form a kind of a collaboration ecosystem to help partners to better serve small and medium businesses.
• 1:09
  Speaker 2: And I'm super happy to tell you that we are just starting in Poland, as a proof of concept, the first in the world program that will help partners to transform, to properly transform from the reseller traditional ecosystem business model to the managed service provider and the future models which will be brought by the, by the artificial intelligence, to the channel so I'm interested because I think I know a lot of resellers, I know a lot of managed service providers, but it is.
• 1:41
  Speaker 1: I find two things interesting.
• 1:43
  Speaker 1: First, that this initiative hasn't existed before, because I hear so many partners clamoring that they want to get the exit criterias that msps get, rather than what resellers get.
• 1:52
  Speaker 1: But maybe the first bit is what motivated you to sort of build this initiative at hp.
• 1:59
  Speaker 2: I've heard from many resellers most of the hp partners are resellers and when I spoke with them they've seen those kind of shrinking margins and the challenges with positioning themselves with a traditional value proposition, which is logistics and basically installation of equipment, and then basically kind of moving to the next project, this kind of a project-to-project business model.
• 2:25
  Speaker 2: It's losing its appeal, both with the customers but also with the vendors, which means lower margins, less stability.
• 2:34
  Speaker 2: Therefore, I have spent a lot of time really understanding the managed service provider concept and how it's currently working and how it's going to evolve into the future.
• 2:44
  Speaker 2: And when I spoke with a lot of resellers a lot of them are friends good friends really and I asked them why don't you migrate to this way more stable, way more profitable business model?
• 2:56
  Speaker 2: They were like hey, it's not such an easy exercise.
• 2:59
  Speaker 2: We've tried.
• 3:01
  Speaker 2: Some of my friends tried to acquire an MSPP and it didn't result in a great solution.
• 3:09
  Speaker 2: Some of them tried to simply add many services offering to their portfolio.
• 3:15
  Speaker 2: It didn't work out for various reasons.
• 3:18
  Speaker 2: So I had to really investigate what's going on and why they are failing, and I believe that I found a formula that will help them to accelerate and successfully complete the transformation.
• 3:31
  Speaker 1: And I think maybe let's start with the outcome and then work back to how.
• 3:34
  Speaker 1: Why should traditional resellers be interested in becoming true MSPs?
• 3:42
  Speaker 2: There will be several different motivations, alex.
• 3:45
  Speaker 2: Okay, for most of the partners it's going to be the profitability of the business.
• 3:52
  Speaker 2: A typical profitability of a reseller is in the range of 8% to maybe 20%.
• 4:00
  Speaker 2: Many of them have EBITDA of one to three points when you look at the most successful managed service providers and that was a shock.
• 4:10
  Speaker 2: For the first time I went to the MSP event and I started to listen to partners talking between themselves how they are planning to move their profitability from 50% to 60% margin, and that's a massive contract 8% to 20%, 50% to 60%.
• 4:28
  Speaker 2: It's a completely different league.
• 4:30
  Speaker 2: So profitability is the number one reason partners will look at the managed service provider model and will try to transform to this one.
• 4:39
  Speaker 2: The second one is stability.
• 4:41
  Speaker 2: One is stability and stability is extremely important in creating the value of both the customers, the vendors and potential investors.
• 4:53
  Speaker 2: I spoke to a lot of partners that have started their business in the mid-season and right now they are at the stage in their career when they are thinking about the succession planning and when you have a company that is moving from project to project to project, it is very difficult to convince your potential investors that they need to invest in a company where the project to project to project execution is typically connected with the best salesman in the world who is the owner of the company.
• 5:25
  Speaker 2: So if you want to kind of create a value for the investors, moving to a business model that is more services-driven, more processes-driven, way more stable from the monthly revenue perspective, right, there is a monthly recurring revenue concept, three-year, five years contracts.
• 5:46
  Speaker 2: It's much easier to convince the investors.
• 5:49
  Speaker 2: It's also much easier to convince the customer to deliver the outcome as opposed to deliver the product itself, the infrastructure or the product itself.
• 6:00
  Speaker 2: And it's also much better to be in a position of a managed service provider in a discussion with the vendors, with your suppliers, because if Microsoft says that the good managed service providers deliver about $11 on every dollar of their revenue, google stocks about $7, so it's a comparable number.
• 6:26
  Speaker 2: That means that from the vendor perspective, you're an extremely important piece of the value chain.
• 6:33
  Speaker 2: If you just shift the box, maybe a direct model could be a more efficient one, but if you deliver the box and the license or whatever from the vendor, together with a bunch of services with another $7 to $11 of services, you suddenly are creating a lot of additional value around the products from the vendor, so vendors will respect you more when you are a managed service provider.
• 7:00
  Speaker 2: Yeah, I completely echo that.
• 7:00
  Speaker 2: Right.
• 7:00
  Speaker 1: I think the value to the customer, the end user, should intrinsically be higher if you've wrapped.
• 7:02
  Speaker 1: I completely echo that right.
• 7:04
  Speaker 1: I think the value to the customer, the end user, should intrinsically be higher If you've wrapped.
• 7:09
  Speaker 1: Let's just say, conservatively, another $7 worth of value around, that the end user value in creation is at a much tighter level.
• 7:16
  Speaker 1: Definitely improving negotiation position, I think, to add to your.
• 7:20
  Speaker 1: Maybe I can say it slightly more sharply when I speak to MSPs who've had successful exits, of which I name a few as good friends, they've made a tremendous amount of money by building a business that is two to three million EBITs.
• 7:34
  Speaker 1: Now there are businesses which are professional.
• 7:39
  Speaker 1: In fact, we had a guy on the podcast who called himself the Berkshire Hathaway of MSPs.
• 7:44
  Speaker 1: Right, his entire business model is how do we acquire?
• 7:47
  Speaker 1: I think they've acquired 100 different MSPs because their entire mission is we know how to scale MSPs, but there are not enough good MSPs, that sort of break through that one to three million EBIT number.
• 7:59
  Speaker 1: The thing that I find very fascinating is resellers are sales-led businesses and MSPs are typically technically-led businesses.
• 8:08
  Speaker 1: So if you'd think that marriage, if it can be done correctly, is really, really exciting.
• 8:13
  Speaker 2: It's extremely powerful.
• 8:14
  Speaker 2: It is extremely powerful.
• 8:16
  Speaker 2: So in my conversations with the resellers, I'm not trying to convince them to completely abandon the resale kind of a part of the business, the business.
• 8:25
  Speaker 2: What I'm trying to kind of recommend to them is to build this additional capability within their organization.
• 8:31
  Speaker 1: Being able to deliver services on a consistent, regular basis seems to be a very in addition to the resale business seems to be, like you said, the marriage made in heaven kind of a combination yeah, yeah, one of the things that I think maybe to zoom to the end user now, one of the things that I think is really interesting when I look at MSPs is because they are very technically led businesses and this is a broad brush statement, but I think it's broadly true is that MSPs very much struggle to acquire new end users to upsell very consistently right.
• 9:07
  Speaker 1: They're very sort of technically led businesses.
• 9:10
  Speaker 1: Benefit from word of mouth, benefit from, yeah, being that just trusted advisor.
• 9:16
  Speaker 1: When I think, when we look at where technology is headed, very consultative led sales approach, which I think is traditionally where resellers have have maybe had their strength, talk to me about where you think the market is headed in terms of why maybe resellers are actually very suited to where the market is headed.
• 9:36
  Speaker 2: I think resellers have an advantage of being a very sales-driven organization.
• 9:40
  Speaker 2: That is true, but also the sales process is going to change in the future and I think this is a danger of staying where you are as a reseller, given the changes that are happening on the market.
• 9:53
  Speaker 2: Everybody talks about the artificial intelligence and how much additional opportunity is there for the technology providers.
• 10:02
  Speaker 2: I totally agree with that.
• 10:04
  Speaker 2: But I think a lot of researchers make a mistake of believing that AI will sell like the technology was selling in the past.
• 10:15
  Speaker 2: That AI requires a very demanding infrastructure know, kind of a demanding infrastructure.
• 10:20
  Speaker 2: So I'm going to be able to sell another set of servers with my existing customer.
• 10:24
  Speaker 2: The challenge is that you know and there's a lot of research that is showing that just delivering the boxes for the artificial intelligence is typically not delivering to the customer the expected outcomes.
• 10:38
  Speaker 2: Artificial intelligence is typically not delivering to the customer the expected outcomes.
• 10:40
  Speaker 2: The expectations are very high and just putting a box and letting it be it's not going to change.
• 10:47
  Speaker 2: It's not going to deliver to the customer what he wants to receive from the purchase.
• 10:52
  Speaker 2: On the other hand, when you look at the margins of the largest companies selling servers today, they are currently shrinking significantly.
• 11:04
  Speaker 2: Look at Dell, look at HPE their earnings showing that the compute business is under enormous pressure because the percentage of AI servers sold is bigger and bigger.
• 11:15
  Speaker 2: It looks like in the AI space, ai infrastructure space, there's not much, even less margin than it was in the past.
• 11:22
  Speaker 2: So, long story short, the future of AI selling will be way more consultative and way more similar to the managed service it's going to be.
• 11:34
  Speaker 2: The AI will be delivered as a service, will be delivered as a service that is solving a particular business problem, and the best salespeople, the best organizations that are currently focused on selling artificial intelligence, are calling customers and asking them what keeps you up at night?
• 11:54
  Speaker 2: Where is the problem?
• 11:56
  Speaker 2: Where is the business problem that I need to, that I could solve?
• 12:00
  Speaker 2: What is the business process that I can automate and make more efficient with artificial intelligence?
• 12:07
  Speaker 2: And I think, when you think from the reseller position, you have to make this move to the managed service approach to be able to deliver something as a service, with all the consequences of different financial model, different processes.
• 12:24
  Speaker 2: First of all, many resellers don't even you know kind of a document, their processes.
• 12:29
  Speaker 2: They.
• 12:30
  Speaker 2: They just work from project to project, so they don't need such a robust process setup like it is with mPs, with the different marketing and sales compensation and sales structure and a different attention to how the processes can be optimized.
• 12:47
  Speaker 2: So resellers, in my opinion, will have to move to the other service world so then they can successfully sell artificial intelligence as a way of improving the processes, the business processes of their customers.
• 13:03
  Speaker 2: That's a kind of a two-step approach that I see.
• 13:06
  Speaker 2: So a lot of resellers and a lot of MSPs will have to turn into the business consultants.
• 13:14
  Speaker 1: Yeah, and I think you know I always like to make the cynical argument because I think that's what a visionary argument the visionaries will already get.
• 13:22
  Speaker 1: But my view is the end users are going to mandate this right AI.
• 13:27
  Speaker 1: While it is super magical really to make that very practical is hey, do we understand what our data situation looks like today?
• 13:35
  Speaker 1: Do we really understand the nuanced outcomes that we're trying to deliver?
• 13:39
  Speaker 1: That is very, very hyper-specific on a per customer basis.
• 13:43
  Speaker 1: It's very complicated to programatize that go to market.
• 13:46
  Speaker 1: And so I sort of vision that you have these tiger teams of McKinsey style consultants tied into AI engineers right.
• 13:55
  Speaker 1: That's sort of very like product wise where I can see the market headed, and the irony is you sort of have this category of resellers who are by proxy, having to be consultants on a day-by-day basis and you have this very technically led engineering base in MSPs and I do see that if you're able to have this foot in both camps, you are able to optimally serve customer demand and those are the ones that make all the money right.
• 14:22
  Speaker 2: But there's one more element in this.
• 14:24
  Speaker 2: I think there is an additional education on the business side, because neither the resellers nor the MSPs today fully understand what the MSPs are really good at.
• 14:38
  Speaker 2: It's solving the technology problem.
• 14:40
  Speaker 2: So, solving the problems with technology, their existence or their focus is.
• 14:46
  Speaker 2: A customer needs a seamless experience with technology that they have.
• 14:53
  Speaker 2: Let's say, a customer needs a laptop that never breaks.
• 14:57
  Speaker 2: The customer needs a server that never breaks.
• 14:59
  Speaker 2: The customer needs a server that never goes down.
• 15:00
  Speaker 2: The customer needs a cybersecurity coverage that is never broken.
• 15:04
  Speaker 2: That's how the MSPs operate, but it's all around technology.
• 15:09
  Speaker 2: Both MSPs and the resellers will have a gap Understanding other business processes that the technology can touch.
• 15:18
  Speaker 2: How does your customer support operate?
• 15:20
  Speaker 2: Because customer support is one of those areas that will be most impacted by artificial intelligence.
• 15:26
  Speaker 2: I mean, this is a very easy use case, correct?
• 15:29
  Speaker 2: Instead of having a number of people answering the phones and giving people answers around the tickets that they have, or answering the questions about what's going on with my order, what's going on with my I don't know delivery, you could deploy a bunch of AI agents that will be in natural language, providing that support to the customer.
• 15:52
  Speaker 2: It's a very clear business case.
• 15:54
  Speaker 2: But to deploy this kind of a system or process improvement, you need to understand the process and be able to break it down into individual steps and optimize those individual steps and then connect that obviously to the data and to the other processes within the organization.
• 16:14
  Speaker 2: It cannot just work on its own without the human supervision, without the hand over to a human, because you're going to run into challenges like I mean Klarna is one of the examples when they are moving back from the full AI customer support to supervised.
• 16:31
  Speaker 2: Or my personal experiences with one of the banks that promised me a free service using a chatbot and then charged me for it and had to kind of pay me back all the money that they charged me, acknowledging that the artificial intelligence made up the price list effectively.
• 16:53
  Speaker 2: So understanding the business processes, being able to take them apart and then automate and integrate them again into the company using, you know, with optimized those processes being optimized with artificial intelligence is going to be the future and I think both resellers and many service providers will have to learn how to do that.
• 17:16
  Speaker 1: Awesome.
• 17:16
  Speaker 1: So we've just spent the last 18 minutes or so talking about the market opportunity, both for resellers, msps and, ultimately, the end customer, in terms of how AI is going to transform this go-to-market.
• 17:26
  Speaker 1: Let's double click on what you're building in Poland and maybe what the contents and context of what you're trying to build there, and maybe down the line, where it's headed down the line where it's headed.
• 17:43
  Speaker 2: As we said, you know it's going to require the reseller or the MSP to take down the processes, the business processes, and automate and make it more efficient using artificial intelligence.
• 17:50
  Speaker 2: That's why we turned into the business schools for help.
• 17:53
  Speaker 2: They teach people they have all the MBA programs, postgraduate programs.
• 17:58
  Speaker 2: They teach people how to you know the MBA programs, postgraduate programs.
• 18:00
  Speaker 2: They teach people how to improve the business.
• 18:02
  Speaker 2: Generally speaking, the program that we have put together with Kuzminski University in Warsaw.
• 18:10
  Speaker 2: It's actually extremely specific on how to take a reseller-like company, focus on the transactional, traditional approach, take their business processes and re-engineer them one by one Logistics, offering, finance, marketing, sales Take those processes apart and re-engineer them to become the MSPs.
• 18:42
  Speaker 2: And then one of the elements of the program is how to then look at those processes and optimize them using artificial intelligence.
• 18:51
  Speaker 2: What happens is we are planning to help the resellers to become what Microsoft calls the customer zero.
• 18:58
  Speaker 2: Make the business transformation of their own company to the MSP, then automate the processes and then they will get the experience and the credibility so they can go to the customer and say like, hey, look what I've done with my business processes.
• 19:15
  Speaker 2: I have re-engineered them for the new era of business.
• 19:19
  Speaker 2: I have the most modern processes and the most modern approach that is currently in existence.
• 19:25
  Speaker 2: It's with the support of the knowledge that I got from the best university in Central and Eastern Europe.
• 19:32
  Speaker 2: I've done it, you know on my own.
• 19:34
  Speaker 2: I understand how those things are done.
• 19:36
  Speaker 2: Now I can go and do the same exercise for your dear customers.
• 19:40
  Speaker 2: That's a concept behind the program that we have put together with the Kozminski University in Warsaw, and there are other universities that I'm starting to talk to because poland, as I many times said, it's a proof of concept for me that's really exciting because I think well, I don't know much about the polish market.
• 19:59
  Speaker 1: I certainly know lots about the uk and us market and I see the same thing from vendors, partners and end users that the wave is coming and there is still such a gap within the channel in terms of how to service those customers most effectively.
• 20:14
  Speaker 1: So it's exciting magic to see how you're influencing that.
• 20:18
  Speaker 2: The program is pretty intense.
• 20:20
  Speaker 2: It's a one-year exercise to be done, but the way we designed it is, we have created a weekend program.
• 20:29
  Speaker 2: It's a post-graduate, it's an executive education program, so it's going to happen during the weekends and it's going to happen online.
• 20:37
  Speaker 2: Mostly why?
• 20:39
  Speaker 2: Because my intention is to bring to the lectures, for the lectures to be delivered by a very broad community of experts.
• 20:51
  Speaker 2: I have invited people from the distribution to talk.
• 20:55
  Speaker 2: I have invited people the resellers that have completed their transformation to MSPs to talk and I invited some of the best industry experts, like Robin Odey or Jay McBBain, also deliver the lectures, telling the resellers and the participants about where is this B2B market heading and what are the changes that are going to happen in the future.
• 21:20
  Speaker 2: So we have some good names, we have some good practitioners and we have the teachers, the professors from the best universities in Central and Eastern Europe.
• 21:29
  Speaker 2: It's a good package.
• 21:31
  Speaker 1: Yeah, Maciek, I'm very excited.
• 21:33
  Speaker 1: You've shared a lot of information and I'm sure myself and the audience will be waiting to hear which are the next juniors following this successful proof of concept.
• 21:42
  Speaker 2: Expansion to Europe, for sure.
• 21:43
  Speaker 2: You mentioned UK.
• 21:44
  Speaker 2: Germany is where a couple of researchers have asked me to you know when are we going to bring that?
• 21:52
  Speaker 2: And a few distributors are also interested in this concept and I'm kind of thinking that US might need also some help, especially taking this next step from MSP to the next generation MSP delivering AI services.
• 22:09
  Speaker 2: That's another space where we could leverage the knowledge of the universities and a structured program to help those guys.
• 22:16
  Speaker 1: Awesome.
• 22:16
  Speaker 1: Well, magic, thank you so much for coming on today sharing your vision around where resellers were, where MSPs are and maybe where we're headed.
• 22:24
  Speaker 1: It's been awesome.
• 22:24
  Speaker 1: Thank you so much.