MSPs Consider What’s Next as M&A, Talent Shortage, More, Impact Them

CHANNEL PARTNERS CONFERENCE & EXPO, LAS VEGAS — The future’s so bright for managed service providers that it’s time to start thinking about what’s next.

That was the word from six MSPs this week during the “What’s Next for MSPs” session at the Channel Partners Theatre in the expo hall.

Indeed, with all that private equity money flowing, new platforms and capabilities coming out practically every day, and incessant demand from end users, the possibilities appear endless. Juan Fernandez, chief encouragement officer of the MSP Growth Coalition and panel moderator, said as much.

“I think that everybody out there in the MSP community is looking to see what’s next,” he said.

But first, MSPs have to confront the IT talent shortage and figure out how to hire – and keep – great employees. A lot of that boils down to pinpointing the right people from the beginning. At XperTeks Computer Consultancy, retention averages around seven years. The secret, said CEO Marcial Velez, lies in identifying a certain characteristic.

“When you first meet a candidate who wants to be in this business, you’ve got to look for the passion,” Velez said. “That’s the person you nurture.”

However it comes about, MSPs understand that “what’s next” ties closely to who’s on the employee rosters.

“There’s a big, huge fight for talent,” said Paco Lebron, founder and CEO of ProdigyTeks. “I think MSPs are starting to take that seriously now.”

The Elephant in the Room: M&A

Another “what’s next” stems from activity that has picked up steam in 2022: mergers and acquisitions. The MSP sector is nothing short of hot, hot, hot. (Just consider the announcement earlier this week that Kaseya is buying Datto. That deal is garnering a lot of MSP reaction.)

That’s both appealing to and daunting for the MSPs on Wednesday’s panel. A lot of smaller companies want to find ways to serve customers without sacrificing their independence or culture. Some, like Synetek Solutions’ Nancy Sabino, welcome the chance to lighten the load. Sabino last fall sold her company, SabinoCompTech, to Synetek and became the vice president of sales and marketing. That exit strategy proved the best one for her, Sabino said.

“There’s no right or wrong answer. It’s all about your own personal experience,” she said. “It set out to build a company I could sell rather easily. … Now, being part of a larger company allows me to do a lot more … be a part of something bigger. … It’s freedom. Ownership ties you down a little bit.”

Of course, as Fernandez pointed out, “you don’t always have to sell.”

A workable way to compete against the conglomerate MSPs, then, lies in MSP-to-MSP collaboration.

“The little guys … can come together collectively … without having to go through mergers and acquisitions,” said ProdigyTeks’ Lebron.

Smaller MSPs also can join forces with larger firms in some way, Josh Weiss, president and founder of L.A. Creative Technologies, pointed out.

“We focus on some pretty specific niche verticals,” he said. “One opportunity for us is to bring our … expertise … into a larger business that wants to focus on those verticals without developing them.”

Fernandez agreed.

“These are our businesses, we get to choose what we do,” he said.

However, Sabino said, “if you have not thought about what is next as far as your MSP goes, maybe it’s the time to exit.”

Other Alternatives to Exiting

With that in mind, another “what’s next” exit strategy may have nothing to do with teaming or exiting. Instead, it could be creating new products and services (“Maybe it’s unique IP,” Fernandez said.). Whatever the case may be, Sabino challenged her peers to think bigger.

“We’ve had the mastermind groups, but now it’s time to take it to the next level,” she said. MSPs are “actually doing business together because we’re competing against these conglomerate MSPs.”

To that point, several of the MSPs on the panel are looking at automation and analytics as promising upcoming opportunities, both internally and externally. First, MSPs need to “make sure your company runs as efficiently as possible,” said XperTeks’ Velez. Then it’s possible “to come up with innovations for yourself and clients.”

Along those lines, Matt Wren, vice president of business development at Moser Consulting, said his company is thinking about making its own analytics products.

Finally, for MSPs choosing to use and sell existing technology, L.A. Creative’s Weiss has this piece of advice: “Pay attention to the small players and the small tools.”

Fernandez concurred.

“A new era of vendors is on the rise,” he said, pointing to cloud marketplaces as a prime example.