Sramana Mitra: Interesting. How many customers do these MSPs typically cater to?
Fred Voccola: It depends. A typical profile of a manager service provider starts with an individual. They work at a large company in the IT department. At some point in time, they got laid off or they got tired of their boss. Usually, it’s by necessity that they left their job. It’s not easy for that individual to find another job. To pay the bills, they would pick up doing IT work for local companies in their community. Very quickly, they build a recurring revenue business.
That or the managed service provider was one of the VARs from the 90’s. As e-commerce destroyed the margins of reselling Dell computers or HP computers, they realized they need to get a recurring revenue stream so they started managing infrastructure. Most of these companies have 10 to 35 people. It’s usually privately-owned. These people make a lot of money and they are small businesses themselves.
There are some MSPs that have 250 people but they usually start the same way. We’re also seeing a trend where institutional money is used in doing rollups of MSPs. They’re putting MSPs together and buying 10 of them. The market is growing so fast that it resembles a SaaS market in a way. Institutional money comes in which creates even more focus on their industry. It’s a really interesting place.
The World Cup is going on right now, so I’ll use a football analogy. We’re midway through the first half of this game. There’s a long way to go. Our headquarters is down here in Miami. We have 250 people here, give or take. Most of them are either first or second generation Americans, but half of them were born outside of the US. Most of them are from Latin American countries. We have the World Cup on all the TVs all around the office. It’s a lot of fun.
Sramana Mitra: Everything you provided is a great analysis of the managed service provider market. How do you see this evolving as we go along? We are going into an era where technology is becoming even more pervasive.
As a matter of fact, even complex technology that was once upon a time only available to very large enterprises is becoming more and more available at the mid-market level. Cloud computing has really made a gigantic dent in that space. Now even stuff like AI is going to be accessible technologies for small to medium businesses. What role does the managed service provider play in that scenario?
Fred Voccola: That’s an awesome question. Let’s use one example. Let’s use artificial intelligence. AI and cloud are two macro technology trends. AI is a little newer, but nevertheless they’re both new for the SMB world. They have and will continue to massively impact small to medium business consumption.
Question is, what is the role of the managed service provider? Since a large portion of SMEs don’t have IT people, whatever type of business application that runs on technology, the MSP will be the organization that’s enabling that technology consumption. They’re acting as internal IT.