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.
In this podcast, Sobel interviews Jim Lippie, CEO of SaaS Alerts, which provides a SaaS monitoring and alerting platform for managed service providers. They discuss the growth of the MSP cloud management market and why the market remains in its early days. They also share their views on private equity in the MSP space.
Transcript follows below.
Dave Sobel: Your resume reads a bit like the evolution of the MSP space. I look at it and say, 'MSP background, managed desktops, RMM [remote monitoring and management] provider, and now a company that focuses on cloud management.' What caused you to move into this space?
Jim Lippie: Yeah, it's a great question, Dave. It's timing. I think SaaS Alerts is at the intersection of some major trends. First of all, MSP. MSP has become really popular. There's a lot of institutional money now via private equity coming into the managed services space. People have finally realized that, 'Wait a second. Recurring revenue is pretty cool. The technology and the digital transformation -- all that's pretty cool. So, maybe we should be investing then.' So, you have that. You have the MSP phenomena.
Then you have cybersecurity, which is the number one concern of every small business out there and, by extension, their MSPs. Then you have SaaS applications, which have only been expedited by COVID. You've got more and more small business users using SaaS-based applications now, most of the time from personal devices [and in] a lot of cases from insecure networks, which creates security holes. And then AI or machine learning, which is in the back end of our platform. So, the question is, why SaaS Alerts? Why now? And it's really because we're at the intersection of these four major trends.
SaaS management's broad set of requirements
Sobel: What's your take and your vision on cloud management? What does this space need to accomplish?
Lippie: It follows the transformation of, I think, where small businesses are going. So, we have the traditional MSP model, which is managing company-owned devices on company-managed networks on server-based applications. Now we've got a transition where more and more users, as I mentioned before, are using SaaS-based applications.
So, first of all, SaaS management as a category is pretty broad. And you're looking at provisioning applications. You're looking at orchestration of those applications and tracking who's using what and where are they coming from. SaaS Alerts is specifically focused on the cybersecurity aspects of user behavior as it relates to SaaS applications.
Sobel: So then what's your take on the complete list of requirements? Obviously, you guys are starting in a particular place, but what's your take on the list of requirements necessary to solve this? I give you the magic wand, and you can just wave it at this, and you instantly solved all the development problems. What do you think you need to get to, to be a complete list of requirements?
Lippie: I don't even know at this point, Dave, to be quite honest. So, I had a really interesting conversation last week with Derik [Belair] and Gavin [Garbutt] over at Augmentt, and also I know Brian [Hamel] over at Nuvolex. They're tackling SaaS management from a completely different angle [than] SaaS Alerts. They're really [focused on] management orchestration. When talking to them, they're like, 'We're just finding more and more things to do around SaaS management.' And that's our experience, as well, on the security side.
So, when I talked to [SaaS Alerts founders] Chip [Buck] and Seth [Bostock] -- and Chip and Seth started this journey 18 months ago, developing the product -- they thought they knew everything they wanted to do within the realm of cybersecurity for SaaS. And then they started realizing, 'Wait a minute. We can go deeper and deeper and deeper, and we don't know where the bottom is yet.'
Sobel: So, this is going to cause a real problem with potential scope creep then, right? Because you could do [SaaS management] in so many different ways. What then are going to be the guardrails that keep you focused?
Lippie: Yeah. It's a great question, and it [relates to when] we do demos for folks now. They're like, 'Well, can you do this? And can you do that? And what about this?' And we often will say, 'You know what? That's a great point. Somebody else does that, and this is who they are.' We are focused specifically on the user behavior around those SaaS applications as it relates to security rules. So that is our guiding principle. We want to be the cybersecurity standard for SaaS applications in the MSP community. Bottom line, that's what we want to do.
And we're having great conversations, by the way, with a lot of other platforms out there that do other great things around leveraging our technology, taking our piece that we do -- monitoring and alerting around SaaS applications -- and embedding the OEM relationship into their platforms.
Why MSP cloud management software has lagged in development
Sobel: It's interesting, because, as an analyst, I'm excited about this space because of exactly what you've described. I'm looking at the space [and] saying, 'I don't know if these people are competitors. I don't know if they're cooperators. I don't know if I want to mash them all together into one product. I don't know if they're going to duke it out.' It's exciting to watch a space form.
But my take is that this space -- cloud management for providers focused on the SMB as a broad swath -- [has] taken a bit of time for there to be offerings here. If I were to get into the DeLorean [time machine], I think this should have happened a few years ago. What's your take on that statement?
Jim Lippie: I think you're absolutely right. It should have happened before now. Do you want to delve into why it hasn't happened until now?
Sobel: One hundred percent. So, my next question would be, 'Okay, so why?'
Lippie: Yeah. I mean, just from an MSP perspective, right? This is MSP Radio. So, I mean, this has been tackled by the enterprise. There are enterprise tools out there that do a lot of what we're talking about. Specifically, around the security piece, there's something called a CASB. It stands for cloud access security broker, and you've got awesome tools out there. McAfee's got a great tool called Mvision. Netskope. Microsoft has a product. They're all relatively complex, single-tenant model, monolithic-type platforms that most likely the average SMB is never going to be able to afford. Gartner follows it. There's a Magic Quadrant around it.
So, they recognized the problem. The SMB will follow the trends of the enterprise. So, I think a large part of it is that the software ecosystem that surrounds MSPs hasn't done a great job innovating around this space over the last several years and we've got a lot of legacy tools out there. Not that they don't do a good job in what they do. They all do what's necessary for the traditional model. But there are tools that haven't been created for what's coming and what actually, in many respects, is here now.
Sobel: That's my take, too, that we're almost a little late to the party, that we need these tools now to solve these problems. So, I'll be a little direct here then. Why didn't the companies like the big four [MSP software vendors] take on this space? Why didn't they?
Lippie: So, full disclosure: I'm a shareholder of Kaseya. Everyone should know that.
Sobel: I'm still a shareholder of SolarWinds.
Lippie: There you go.
Sobel: It doesn't mean I can say they're not doing this.
Lippie: Right, exactly. So, they're all backed by private equity. The big four, in some way, shape or form are backed by private equity. SolarWinds obviously has a public component to them. Now Datto is public. Those companies, as currently constituted, are not set up to innovate. So, every single month, every single quarter, there's pressure on them to produce profit. And when you're set up that way, it doesn't lend itself to innovating new and different products, because innovation requires a lot of investment. And when you're constantly trying to comp the last quarter, then you're always looking for that dollar, and, lots of times, it's taken out of innovation.
So, what the big four have done is they've looked at it and said, 'Wait a minute. There are other companies out there that will innovate for us. They will be much smaller. And then we will essentially evaluate those and make acquisitions as it makes sense.' And I think ultimately that is why we haven't seen tools like this in this market yet.
Sobel: So, I would then posit that you're probably not particularly worried about them competitively in the near term.
Lippie: No, I'm not, just because, again, they're not set up to go into an endeavor, creating a whole new product line for the most part. [It's] not that they couldn't, but the level of investment and the level of internal tweaks that would be necessary to make that happen, I think, is relatively unrealistic based on what I know about a lot of them.
Private equity in the MSP software market
Sobel: That's fair, and I share some of that thinking, too. And I think I probably go even more aggressive than many others, saying that I think in some ways their choice to not innovate is becoming bad for the space. But I want to be a little targeted then with my question to you, [which] is what's your take on this influx of private equity money into the space? Good, bad, both? What's your take on it?
Lippie: I think it's positive. And, again, full disclosure: I'm an advisor for Nautic Partners, which is a really successful private equity firm. We are doing a lot of acquisitions. We'll be doing a lot of acquisitions in the MSP space. I think that, first of all, not every private equity firm is created equal. Some are better than others. Some have just different attitudes about things. I like Nautic. They believe that people make the difference and that really good people can create great companies and culture matters. So, I think that, ultimately, private equity in our space is a good thing because it raises the game. It requires a certain amount of operational maturity to operate in that type of environment, and I think that's ultimately good for us.
Sobel: It's fair. My take on it has been it has the potential to be [good], but I actually think it requires solution providers to be much more aggressive about accountability of their vendors -- a much higher level of accountability -- because when organizations are founder-led, you can get a relationship, a personal relationship. You know that individual founder. But when they become driven by shareholder value, be it public or be it an investor, that becomes a little bit more clouded [in terms of] what their timeframe is or their perspective is. And so, it puts the impetus on providers to be much more skeptical. Again, I'll ask, is that a fair assessment of things?
Lippie: I think it's fair. So, when you say providers, are you talking about MSP specifically or the software providers?
Sobel: The MSPs. I think the MSPs need to hold these organizations to a higher account and drive them, and thus be more willing to change providers or voice their displeasure as customers, based on knowing that it's not necessarily a personal relationship like it was with a founder.
Jim Lippie: Yes, no question.
MSPs' top challenges today
Sobel: What's the big challenge you see coming for what we're doing? What is that big challenge that you're worried about on the horizon here?
Lippie: Ultimately, I want to make sure that MSPs understand the challenges. So, I did a presentation for about, I don't know, 30 MSPs or so the other day. And the feedback from some of them was, 'I didn't even know that this was a problem.' Exact quote: 'This wasn't on my radar.' So, I think the biggest challenge from our perspective is getting people to understand that this is an issue. It's being solved in the enterprise. People have recognized it in the enterprise. I mean, there's Magic Quadrants out there on it. [It's] making sure that you understand, Mr. and Mrs. MSP, that this is a problem for your small business customers. I can't tell you how many times, Dave, I hear, 'Well, my customers don't use those applications,' or, 'SaaS really isn't that big of a deal for our customers,' or, 'You know what? Our customers don't use Dropbox.' How do you know? You've never had a tool that actually monitors the usage of Dropbox or Salesforce. So how do you know?
Sobel: Well, it's a fair point, and I'll include the link in the video for those. My most popular video on my channel is a piece I did last summer called, "If I Was Starting an MSP Today." It talks about the creation of a business process-focused provider, where I would start with a business application and work down [to] where infrastructure is the afterthought, because I have to do it. What I've also talked about in this space is exactly what you just highlighted, which is, 'These SaaS applications are in your customer organizations, [and] you don't know. Oh, and by the way, businesses that start up in the last 12 months, 24 months, they've not put in servers. They've not put in all of these legacy pieces.'
If you're a new business -- and we know in recessions, lots of new businesses get created -- you're going to go out and buy a bunch of SaaS applications and be off and running. And if you [as an MSP] can't serve those kinds of customers, you're a legacy of the past. I think, from my perspective, you're exactly right on the risk [being] not just your existing customers. [The risk is] that you're not even accounting for the new space that's [being] created. Again, if you and I start a new business, as you've in a way done, you're not buying anything legacy. It's all in the cloud. Tell me, everything that SaaS Alerts does, everything's in the cloud, right?
Lippie: Absolutely. One hundred percent. And I'm not even smiling at everything you're saying right now, because this is ultimately where a SaaS search starts.
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.