ERP134 - Navigating Rapid Change in the MSP Channel

Ever wonder what really happens behind the scenes when a rocket-ship MSP vendor goes from scrappy startup to multi-billion dollar public company? Today, I'm talking with Michael Fass, former Datto general counsel and now CEO at Slide. Michael's seen the vendor/MSP relationship from every angle—legal, operational, and now as a co-founder, building Slide for the MSP channel.

If you want a brutally honest look at what hypergrowth actually looks like from the inside, why most MSPs never get past "just technical," and how to avoid being the cobbler with ragged shoes, this episode is for you.

You'll walk away knowing how to spot your "butter zone" in leadership, and a new way to think about partnering with the tech vendors in your stack.

This episode is brought to you by Opsleader Pro. A place for MSP owners and managers to get the systems and tools they need to build a stable and growing MSP. Part group coaching, part peer group, everything you need to run a successful MSP.

What is Evolved Radio?

Evolved Radio Podcast: Interviews with technology experts, industry thought leaders, business leaders and other interesting minds. Exploring the evolution of business and technology.

Michael, welcome to the Evolved Radio podcast. Thank you, Todd. Pleasure to be

here. Excellent to have you. So you have

a very interesting career in the MSP space.

To kick things off, do you want to tell us a bit about your journey?

It's a long adventure. You can give us the shorter version of this,

where you've been, where you've come to now.

Okay, I'll try to keep it short. I'm an old guy,

so I'd say I'm an accidental lawyer.

I graduated law school not knowing what I wanted to do with.

I graduated from college not knowing what I wanted to do with

myself. I still don't, but that's

another story. And

enjoyed history, political science, political

philosophy, and studied and decided to go to law school

like a lot of other people at my, at that phase of

life at that time. And

you realize when you're in the middle of law school that the only thing that

you're, they're training you to do is to go work at a law

firm for like five years to learn to actually practice law.

It's like think about a doctor who just gets out of medical school. They're not

ready to practice unsupervised.

And so that's what happened. That's what I realized. And so

I took advantage of that realization, worked

as a lawyer, and then

once you're five years into working as a lawyer, you've got a lot of sunk

costs into the deal. So, so I kept working as a

lawyer. And by the time I was 42

years old,

I had practiced law and done a few different things, but

mostly in the legal field, but was really

unsatisfied with the legal career up until that point. Really

very much of a journeyman, I would say, jack of all

trades. And just

so happened to be across the old conference room table

with a 27 year old founder named Austin McCord

at the time. This is 2013

and I was looking for an adventure. He was

on an adventure and needed a, needed a

Sherpa of some kind. He and I, or

caddy, he and I hit it

off quite well. Our personalities

and the, the things that he needed were things that I was

capable of helping him with. And so that

spawned a

interesting partnership. And for me it was the beginning of an adventure in

MSP land. I joined the company as general counsel.

It was about 100 employees at the time. And Datto

grew to be a public company with more than 2,000

employees. I was the general counsel and head of

HR for two different CEOs over the

years and got to be a part of that

entire journey of scale. And

I thought, I mean, I think that that was the best job in America. I

did that for like nine years. When it came to an end,

I pivoted a bit and started

working in venture capital again with Austin and

his, his other partner, Teddy. And

about a year into doing that, we, Austin and I

decided to. That it was time

to rekindle the magic. And

that's how we started Slide. Awesome.

So we'll. Yeah, we'll, We'll. We'll. We'll jump forward a little bit here.

I want to linger a little on Datto, because it is.

It almost has sort of this mythic status in the MSP ecosystem because

of. I think the timing was so right

and the sort of

meteoric growth that you guys had. And when a company grows

that fast, there's sort of this public narrative of success,

but privately, there's usually some cost in the background.

What did you guys see as a leadership team and as

individuals, that it sort of cost you or the people around you?

And how did that influence. How were you going to do things differently in Slide?

Well, there are so many costs. Most of the costs

are, you know,

like badges, you know, so they're, they're,

they're less. The generals badges, you mean? Yeah, or like a Cub

Scout or Boy Scout badges or whatever, you know,

I think their lessons learned.

And so as much as they may have cost, they were valuable.

They were worth the cost, I would say. I can't ever regret

any costly mistake or endeavor because

we always learn so much from them. We had a lot of different people

in different leadership roles over the years

in Datto. And I think that the most interesting

observation from looking back on that entire

arc of time was the, the ability

for the business to evolve with different

people who spiked in different areas

at different times in the timeline of the organization and its development.

And not everyone is right

at all the right times. And

that's a hard lesson to learn sometimes because

a lot of people that bring you there don't

necessarily

have the experience to do the things that the company needs to do

in the future. And a lot of people that join who have a

lot of experience aren't really set up for the swashbuckling

craziness of a startup. And so timing

is really important throughout the life cycle. When you talked

about timing, I'm thinking to myself, well, you know, at which,

at which era, in my mind, I have many eras

in that adventure.

So the

mistakes are

pearls of wisdom. As long as you don't die from them.

And so there's innumerable. But I'd say

the most important takeaways there were that we

all have our sort of butter zone. And

being able to identify people's butter zones is

a learned attribute that I think has helped me

in this adventure that I'm on now. Cool. Okay.

That sort of pace of evolution and the changes that you guys saw,

I think there's a parallel with MSPs as well, especially now.

I used to joke that the IT industry is a great

industry to be in because the novelty, because the change, like

everything has a shelf life of about six months. And now with

a lot of the technology changes we're seeing, it's more like the technology has a

shelf life is six weeks. So the pace of change is just so

wild. That sort of rate of evolution,

what are you seeing as far as impacts or

questions from the clients that you're dealing with now about how

that is impacting their business or how they need support from

you guys as a vendor? What does that materially change or

what observations do you have about how that evolution is changing

the MSP channel?

So I, I think my, that's a

really good and difficult question.

The I, I

have a very strong thesis on the value of MSP

as the transit transmission mechanism

for IT services to be delivered to small and to medium

enterprises across the globe. And so as

small to medium enterprises manage

greater complexity in their

digital space, they become more and more reliant

on the effect of MSP to

run their business and not get caught in a, you know,

catastrophic cybersecurity event or a similar

disaster or, or

not keep up with modern workflows

and so as not to keep up with their

competitors. So today, this day

and age, well, we've seen waves of technology

fall over the SMB IT

space and we've seen timing be so important

for the growth of the MSP delivery

mechanism. And so I, that's only

strengthened my thesis for the, the, the MSP space.

And as we move into a world of AI and digital

transformation at a pace that no one's ever seen,

the MSPs that are

looking around the corner, looking around the bend, learning

modern workflows, learning modern tools, learning

modern security threats and.

Living with that, learning IT for their own businesses so that they can then

translate that into being that for deployed AI

specialist, for the SMBs who are going to need them

for that so badly, those MSPs that get that

are going to be exceptionally

valued and there's MSPs that are not going

to get that or they'll be behind the curve and they're going to

struggle. Yeah, like one of the sort of the dirty secrets

is the open secret now of the MSP industry and

service leadership has talked a lot about this historically of

25% of the industry is break even or losing money. Do you feel like

that curve will get steeper as maybe there's increased

consolidation or the threat of

these MSPs needing to adapt as things get harder and harder

for them in the channel? Do you think this is a different

circumstance than it has been through the changes in Cloud and the changes in

security? Does this feel more existential? Maybe.

The greater the reward,

the greater the risk. Right. That is the essence of this Life.

And the

MSPs that don't stay ahead of the curve

with modern technology are, are

going to die

and. But that's always been the case. Is it

more, is it more existential now? I think it may be. It

might move more quickly. But I also

think that there's always, there's always winners and losers in

all of these technology transitions. And my

expectation is that this technology transition is going to be so

overwhelming and massive that there's so many opportunities

for winning that I just assume pay

attention to that side of the, of the wave, then

worry too much about the backside of the wave. Yeah.

Okay. Both at Datto and with Slide, you guys have

been very intentional about leveraging the channel as

a go to market strategy, not doing direct sales and a

real strong belief in what the MSP channel provides as a

partner for you guys as a vendor. You kind of talked a

bit about this of like a really strong thesis of the importance

of MSPs. But what is sort of the internal discussion, especially as you guys

rebooted with the go to market for slide

of why the MSP channel as a delivery and a sell

through model is so important. What are your thoughts on that.

Thing has changed in Austin

or my philosophy around this? If you go

and read the S1 registration statement from

2020 from the Datto days,

it's long but there, you know, most of it is, is

legalese. But there's some really important provisions in there that really set

out the thesis and

there's just no way for. Well, as, as

SMBs manage more and more complexity in their

businesses related to their digital

transformations that they're all going through and that

complexity relates to how their work gets done, how

secure their environments are, how,

you know, how, how efficient their people are and

that's just getting fat that's just moving more and more quickly because

SMBs have profits that they need to protect,

they have stiff competition, and in order

to stay ahead of the curve, they need to be digitally transforming all

the time. And so that, and again that pace is just

getting faster and the complexity is just growing. And

so that just makes MSP more and more central

to their success. If they're to be successful,

by and large, they will need excellent

IT Sherpas.

And that's just a

virtuous cycle for me. That's an exceptionally

exciting marketplace to

have an opportunity to participate in. Yeah, I think we

agree pretty strongly on this point about the, the importance

of MSPs leveraging what they're learning and

how they're adapting their businesses and what they can actually teach their customers

about those lessons. I don't feel like this is something that a lot of

them recognize in themselves of the,

the necessity for competition and understanding all the aspects

of business are pretty universal. Like they, they tend to be

technically led organizations, so they do focus a lot on

technology, but as they continue to grow, they focus a lot more

on the traditional HR functions and management and scale,

the marketing and sales functions, which don't come naturally to a lot of the

technical founders. And I think that there's a lot that they can turn and

lend to their customers around digital transformation of the things that

they've learned about their business, but are probably 80% applicable to

their customers as well. This is sort of that evolution of how

people are consulting to their customers and

moving more to a business consultant rather than just purely a

technical consultant. Right.

MSPs that I talk to, that I

listen to most carefully, whom I learned the most from

are ones that are digitally

transforming their own businesses. And

they are taking the learnings from that

process and then being able

to translate those learnings into tangible results

for end clients. And at the end of the day, if

there are no tangible results,

this ain't gonna work. And so the only

way for one to obtain tangible results is to know it and live

it. In my view, eating our own dog food. And so there's

no room for the cobbler whose kids

shoes are shoddy or whatever that

metaphor that I just mixed

really means. But the MSP

cannot be that effective for deployed

AI and security engineer,

digital transformation consultant, without

having really understood it and lived it

themselves. And so the ones that,

at least that's my takeaway from my learnings

to talking to MSPs whose opinion I value

more than others. Perfect. The other part I'm

interested In it's just a bit of your guys's view of market

dynamics. Right. I think

Slide, do you go. Maybe I'll ask this a different way

to sort of get sideways into this question.

Do you guys view Slide as a bit of a rebel in the industry? Is

that part of what you would identify as sort of the

hallmark of how you guys are participating in the channel at all? Or

is that maybe me extrapolating things onto you?

We're really not seeking to embody any image other than

a partner, a

true partner. And maybe that

is a rebellious part. Is that the rebellious part? Maybe,

I don't know. Our job is to help MSPS build their business

and I think there are a lot of

technology companies in the MSP space who

may not view their jobs that way. They may view their jobs as to extract

as much value out of msps.

We're trying to sort of, you know, make

the, the tide rise rather than, you know,

suck the, suck the water out of the, out of the bay. We really

want MSPS to be successful. We think we're going to have the best

solutions to help them become successful. And so we think that's going to help

us in the long run. But I, but if you think about the values that

this crew of individuals carry

with them, it is aligned with

doing the right thing, doing what's best for the msp, not

looking after short term gain, doing your life's work. And

so we don't really think about how that might

impact our image across the landscape other

than as a strong partner and a great technology

company. Okay. And part of the reason that I'm curious is like I

do feel like there is an intention to do things differently. Right. Like you guys

had some type of magic with Datto

and you know, the post acquisition and maybe things

felt or looked different, not what was imagined in the

earlier days. And Slide as an opportunity to sort of

revisit what made the, the sort of, the, the earlier days of

Datto magical. Is, is, am I again, am I applying something

that isn't there to you guys or that there's some truth to that?

Yeah, I think the whole idea here is

that there is a need in

the market that we identified, I believe

for a couple things. One,

technology that is developed

in the very recent past, you know, modern

technology using modern tools to solve business problems

using the freshest, best

people and tools and technologies underlying them. And

it's, you know, when we challenged this team

to build a modern BCDR infrastructure,

we asked them to go to first principles and

build something that was.

Markedly better than, than what was there before.

That was always our pedigree. But you know, it's hard

to, you know when you, when something is

rests on a 20 year old foundation, there's only

so much you can do with it. When you start from

scratch and you spend a year and a half, two years in the

lab, you have the ability

to be inspired and to create that inspiration that we

always sought in the old days. The

other piece that is super important is

I alluded to this a little bit before. The values

to us, it shouldn't be

thought of as doing things differently as you described. It should be

described as doing things,

doing the right thing, taking care of your partner,

being a true partner, valuing the long

term relationship over short term gain, doing, you know,

encouraging, inspiring. Hopefully your, your. The people around

you to do their lives work.

That's, that's different. Okay. I

mean I don't know. I mean I think that that's the best,

the best I can be the best I know how to. Those are the only

tools I have in my quiver. Only arrows I have in my quiver.

And so the fact that those values

carry on from one

organization into a new organization, well that's just a

reflection of the human beings who've, you know, who've

assembled together to form that organization.

Cool. And like related but not related more on sort of the technology

and the sort of the, the idea of the

direction for the organization. I feel like the era of

platforms is very pervasive in msps and there's

sort of a strong pull for a lot of the vendors to

create a one stop shop in everything that they do.

And you guys have been obviously very intentional about the

solution that you provide and doing it really well. Has there

been temptation to do other things as you start to scale

up and grow or what do you guys talk about internally of

maintaining that sort of deliberate focus on. This is what we do. We

do this really well in enabling our customers to

have the best platform or the best solution possible for

go to market. Is that a temptation based on market

dynamics or how do you guys think about your,

your deliberate focus on what you guys do? Currently

we're pretty, we're pretty deliberate in our passion for

our chosen field. Right.

So we are a backup company. We, we are

MSP only. Right Channel only. And so

MSPS backup and our

have the privilege of protecting data on behalf of their end

clients that lives in lots of different places

and that's laptops and desktops and mobile

devices and Azure Workloads and workloads

that sit in O365 applications like that,

additional servers, virtual servers, et cetera, of Linux

boxes, Microsoft environments.

We have a massive

field to cover. We have only,

we've only touched on one piece of that so far.

We will be the backup company for MSP's period

paragraph. Our first shot out of the Canon is the

BCDR piece. There's a few different reasons why we chose that. First,

it wasn't obvious originally. A lot of

investors and other people say to me, why would you do that? Why did you

do that? And we were very deliberate about that choice. One,

this is BCDR is

an extraordinarily hard technical problem to solve, believe it or not.

Many moving parts and

low level access to some really

dense stuff. And then you have to,

you have to coordinate all these, all these data flows. You have to

present them in an elegant way. You have to keep them secure.

You have. And so

that technology in MSP land

rests on 20 year old tech for

the most part. And it's so,

it's the most neglected piece of tech out there in our view. It's

a big piece of the market in our view, in our experience,

and it's not going anywhere. As it moves, it evolves.

Some workloads go here, they go there, they come back,

they navigate, they migrate. At the end of

the day there's a massive need out there to back up server

workloads on prem server workloads. And the tech is old.

And so we thought, well, that's also the basis for backing up

on a direct to cloud basis. It's also the basis for backing up

a workload that lives in a virtual server

in Microsoft Azure. There are so many

foundational pieces of our future stack that are

based on the big BCDR product.

So that's why we started with the hardest problem first. We had the time that

we needed, we had very talented people and we, we were

looking to be audacious. So long

story longer, we, we have a

massive field to cover before we start getting cute

and doing other things. That said,

we're also entrepreneurs and stuff

happens, like opportunities

happen that you don't know. You're walking on the ground. You

see a $20 bill in the park,

it's a $20 bill, you pick it up. Sometimes there are opportunities that you

don't expect. And so I'm never going to be dogmatic about all that stuff, but

we're very clear eyed on all the things

our partners are asking us for and all the things we feel

like we can help them with. So

fantastic. You've had a really interesting seat, I think,

like because being in the early days of Datto through sort of the days

of, you know, the funding run up to going

public and then the sale and the transition, all

that, that, that history I think is really fascinating.

I'd love your perspective on how sort of different

funding vehicles and money in the MSP ecosystem is sort

of reshaping things. So there's obviously the private equity both on the

MSP acquisition side as well as private equity in the vendor side.

And there's obviously some mixed opinions on. Now we're actually seeing

VC money coming in as well and there's mixed opinions

on the pros and the cons of the PE

involvement with both MSPs. And there's

been some great wins and there's been some

eroded trust as well. And I'm curious, sort of what you think about

PE money in the industry as a whole, where it's been acquisitive

or helpful or, and some areas where it's

maybe created some rifts or some

broken trust and what sort of those

money vehicles mean for Slide and how you think about

approaching or taking on investors, those sorts of things.

Very good questions. It's, it's a very complicated

question because.

There's, there's a great VC

behind some of these companies, right? And

there's VCs that are, I wouldn't qualify characterize as great

behind some of these companies, right. There's private equity

sponsors that are,

are doing great things, they're

building great businesses that are going to be very valuable and that are

delivering value to their, their customers.

And there are private equity shops that are

not, I'll say, and I'm

not really trying to be political here. I'm trying to just be. As I've seen

it. I'll give you two examples. One, when

Datto originally we were planning on going public

back in 2017 and we made a

strategic decision to, to,

to sell the company, a majority of the company to a large private

equity firm that the private equity firm merged us

with Autotask and what emerged from that

was a private equity backed

monolithic, if you, if you will. That's a term that I use a lot of

the time. Platform is a term you use

that from my point of view for several years

continued the magic.

I mean I really, I feel like that last four years of

running Datto as we went and became a publicly traded company and then,

you know, hooked in, given the fact that we were now

A platform. We had to fill out the platform. Right. And so we did some

interesting tuck in acquisitions and it was an incredible adventure. And

at the end of the day, throughout that process, those values

were etched on the walls. It doesn't matter who owned the majority of the company.

We ran the business the way that we

wanted to and that was successful. That was a rising tides

scenario. I have seen other scenarios where private

equity, and again when private equity comes in, depending on where

they are in their journey, they usually pay top

dollar for the business. So their

opportunity is both grow the

business but also make the business more efficient.

And so they will seek to do both really strongly. And

some firms are more focused on cutting the

costs and getting

the most out of getting the most out of that business

in cash. Some of them are more focused on building a bigger

business and reinvesting some of that cash into the business.

I've seen both. I happen to believe that

right now in MSP land there is

a glut of

platforms, as you would call them, that

in my view are

running largely outdated technology

that are not great at any of the things they

do, that are not differentiated in any of

those things, that are not

focused on necessarily

the kinds of values that make us successful, in my

view. And so we're seeing a lot of

MSPs look to non

platform vendors to get the best products in the space and

expecting those, those best of breed vendors

to play nice together and to have strong

APIs and have modern tool stacks and to integrate with

one another and to enable them to grow their businesses and do

that in an efficient way. And that's sort of where I stand in this whole

thing. Fantastic. I guess just

looking to wrap up. I'm curious, given

the different levels of exposure that you've had to all sorts of

parts of the industry, both on the client side as well as the vendor side

and the different funding vehicles and all the adventures that

you've had. Any general advice for

both the MSPs themselves

as well as maybe some smaller vendors? We're seeing a lot of

sort of stuff bubbling up from the surface as people are

breaking away and kind of doing their own thing. A lot of

constant entrepreneurial spirit in the msp. And

what would you sort of suggest given your experience for both of those parties with

those MSPs looking to digitally transform and the vendors looking

to break into the market and grow their companies?

Get out there. MSP land is the best. MSP land is

the best. There is nothing like being

on the in a boardroom or in

a. On a conference, you know,

expo floor. When you have curious

MSPs wandering around that floor and seeing you and

your competitors going at each other trying to, trying

to compete for business,

that's where great ideas come from. That's where the competitive

juices emerge. That's where MSPs go to learn

this stuff. That's where. That's where vendors

either rise to the occasion or wilt.

You have to be out there, get out there. This is a unique space where

anyone can get out there. There are more opportunities

than you can imagine to get out there and just

whoever you are, if you're an msp, go to an event

where your vendors that you're interested in are present.

If you're an MSP. I'm sorry, if you're a vendor,

go to where MSPs are hanging out and get as much

feedback as you can from them and talk to them, learn from them

and your business will be better for it.

Fantastic. I appreciate your time, Michael. It's

always interesting to catch up on what

you've seen and the insights that you have. So I appreciate you sharing and coming

on. Pleasure. Thank you, Todd. Great to see.