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What do you need to start a managed service provider today?

If you want to get your own MSP off the ground today, you need to be cloud native, have a Microsoft-based software stack and know the right market to focus on.

Dave Sobel is the host of the podcast "The Business of Tech" and co-host of the podcast "Killing IT." In addition, he wrote Virtualization: Defined. Sobel is regarded as a leading expert in the delivery of technology services, with broad experience in both technology and business.

For this week's video, Sobel answers a user-submitted question about what he would do if he wanted to start a brand-new managed service provider today, reviewing the software stack and business ideas needed to be competitive against entrenched MSPs.

Transcript follows below

I was asked what I would do if I was founding an MSP today.

Let me start by reminding everyone that I founded an MSP back in 2002. My basic premise was that I knew coding and infrastructure and that infrastructure is an easier business. If I had a time machine, I would slap my younger self like Batman slapping Robin and say I was insane, and that building a product is far better than building a services company. Services are WAY harder.

They can, however, be much more rewarding.

The question has two components: What market focus would I have and what tool set would I use?

Let's start with market focus

This is a very personal decision, actually, particularly for services companies. You need to have expertise to pick a market, and while yes, you can serve anywhere, the vast majority of small services companies are local ones, and certainly start that way.

Thus, there isn't a great answer to give broad advice. For me, I live in the D.C. metro area, I'd likely focus here -- unless, for personal reasons, I was changing locations. My own expertise lies in not-for-profits and associations, and my region is good for that. I'd deepen my expertise this time out -- learning far more about the technologies they use.

That leads to the major point. Previously, I started my MSP by focusing on a "bottom up" technology approach, where I thought "If it uses Windows, that's good for me," and focus on all the network technologies. That's the major change.

My "Killing IT" co-host Ryan Morris puts forth some thoughts in his market maturity progression, the move into a phase where customer-centric factors win, moving beyond operational factors. Customer satisfaction matters more than ticket management, and entry into a vertical market based on business value matters more than technical capability.

That's my basic starting point.

I'd start instead by focusing on a line-of-business technology that I could leverage. For example, looking at association management software, and building expertise there to drive those business outcomes. This is the same as building around Salesforce as a platform. Thus, this is my key partnership to start the business with. One note: Azure AD compatibility is a requirement. We'll revisit later.

This core package would allow me to also branch out. All of the core business functions -- accounting, HR, sales, marketing -- allow me to add packages and offerings at the business layer as my new business grows.

My key differentiator would be the ability to deliver business results with technology specific to that industry. Thus, that's my key driver, and most of the rest will get driven by that.

As I transition to tools, let me say I wouldn't do a thing that wasn't cloud -- and fully cloud native. If you're on prem, you're out. If you are even that weird hybrid "dedicated VM that we call cloud," you're iffy at best. There would have to be a pretty strong business case for that, or a roadmap to go all cloud, because otherwise, non-starter.

Now remember, you asked about a new MSP -- this rule can't be hard and fast for transitioning, but that's the rule for a NEW one.

Basing services around Microsoft technology stack

I've already selected my core offering -- a product focused on solving a core business need. I'm going to add in that infrastructure service piece in order to block competitors. I'll start with partnering with Microsoft. I need to offer the core technology stack -- Office -- to customers, and I'll do that with the Microsoft 365 offerings. Amazon doesn't play in this space, and while I'm "Google curious," there's another reason to go with Microsoft.

If I select Microsoft, I can base my infrastructure offering off Azure, and specifically Azure AD. I'm going to set up my customer's workforce this way and integrate as much as I can into the authentication and access management. My MSP play will not focus on devices, but instead on data -- I'm securing the data, and I'm using Azure AD to do it. Remember that requirement from earlier, and now it's here to be leveraged.

Next up, I layer on Intune. That's my management layer -- or more accurately, this is my endpoint management solution, as I will be heavily using policies to secure data. To do business with me, it's my policies or the highway. I'm not dealing with one-off device policies -- and I can get away with this because my core offering is the line-of-business application, NOT the infrastructure. When my business offering is that I'm increasing your membership reach by 10% or 20%, customers will sign up for my locked-down environment.

I'll select any remote control tool based on Intune. That's the key there.

What other technology do you need?

I built my stack starting with what I needed to solve the customer's problem -- the line-of-business application -- and I built from there. This takes me all the way to my management technologies. I know you're all now dying to know what I do about managing my internal processes, aren't you?

Where's your professional services automation, you scream.

Yeah, not so much. First off, all their CRM functions are garbage, and so are the marketing technologies. Stripping it away, there are two functions I need to really worry about -- billing and work management, and billing will drive everything.

I'm going to build a stack the same way. I'm starting with QuickBooks Online. I'm American, so I start there -- if I was in the U.K. I'd probably say Sage, for example, but I'm American, so I start with my financial package. That's first.

From there, I just build modules around that -- again, all cloud. I'm keeping QuickBooks as the source of all -- not any PSA. My next requirement is Zapier -- the integration platform. You don't work with Zapier, you're out.

I'd go with Zendesk, probably. Here's my thinking -- this is actually customer focused. PSAs are really ticket focused, but ultimately, who really cares? A solution like Zendesk is a CRM and a customer service platform, which is the main thing.

And ready -- cause I'm going to blow your minds. I'm going to de-emphasize tickets and time.

Here's my thinking. I'm going to focus on billing for a package of services, not for time, and I'm going to work to make this a benefit for my engineers too. Closing issues will be their metric, not time. Customer satisfaction.

I'm not actually breaking the cardinal rule -- sure, it has to be in the system to count. I'm just not going to burden my people with stressing time sheets. They'll be salaried, and instead I'm going to focus on culture and having it be a good place to work. One of my benefits -- no time sheets.

Again, you have to log the work. There has to be notes and everything will happen in customer system. But I'll leverage the tech itself -- those chat logs? Yeah, that's the record. Everything flowing through the system means that the data is there, but you're just not stressing every last minute.

Now, ready for the next crazy bit? Backup technology, antivirus, antispam, whatever. Just pick some good, best-of-breed technologies -- but I am not building my business around any of that. They need to be competitive and they need to be good, but I am not banking the farm around that. Just pick some.

Final bit -- you may want to add a monitoring platform here. Now, I'm not saying an RMM. I'm specifically saying something to monitor stuff. I want this as broad as I can get it. I want to see as much as I can, because I want to leverage Intune correctly and make sure my policies are right. Management isn't the trick -- and don't stress so much about all this crazy automation. You're not going to do it and it's too much of a pain. Just assume the endpoints are the Wild West, because if I leverage the Microsoft 365 platform right, I've protected the customer by putting the data in a secure place and I'm restricting access. I'm protecting data, not devices.

Let's review this MSP we're building

We went really deep here but think about what we built. This new, fresh MSP is entirely focused on expertise in a vertical, specifically focused on a line of business app that will transform the business. That is my lead -- and the infrastructure is about making sure that works right. I focus on protecting their data, by centralizing it in a collaborative workspace based on Microsoft technologies, and I assume the endpoints are insecure.

And you know what? When every month I work with them to ensure the core business application is driving revenue, or membership growth, or whatever that metric is -- they'll be delighted.

Now, for many of you listening to this, you think I'm crazy. You have all this money invested. What about the core technologies of an MSP? What about integrations?

Remember the question: What would I do if I was starting TODAY. If I start today, I have no legacy baggage. I don't have to deal with that stuff. But I know you do.

MSP competitor of the future

What you should think about is what this competitor looks like. This is the competitor of the future. You may not be able to look like them -- but you can move towards that. You don't HAVE to do things the way you always did. You don't HAVE to stay the same. This is a business of change. Everything changes all the time.

The relevant follow-up question is this -- if I was managing an MSP right now, what would I transform?

That's another question for next time.

About the author
Dave Sobel is the host of the podcast "The Business of Tech," co-host of the podcast "Killing IT" and authored the book Virtualization: Defined. Sobel is regarded as a leading expert in the delivery of technology services, with broad experience in both technology and business. He owned and operated an IT solution provider and MSP for more than a decade, and has worked for vendors such as Level Platforms, GFI, LOGICnow and SolarWinds, leading community, event, marketing, and product strategies, as well as M&A activities. Sobel has received multiple industry recognitions, including CRN Channel Chief, CRN UK A-List, Channel Futures Circle of Excellence winner, Channel Pro's 20/20 Visionaries and MSPmentor 250.

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