Virtual CISO Demand, AI Adoption, MSP M&A Market, Edge Computing, and More — Business of Tech: Daily 10-Minute IT Services Insights

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It's Thursday, September 5th, 2024, and I'm Dave Sobel. 4 things to know today. The Sonomi Report revealing high demand for virtual CISO services, but few providers are offering them. Congress to hold hearings on the CrowdStrike outage, Scalepad's founder Chris Day returns as CEO and what's he looking to do, and private equity rollups dominate the MSP M&A market. This is The Business of Tech. Sonomi's 2024 State of the Virtual CISO report highlights a significant gap between the high demand for virtual CISO services among small to medium-sized businesses and the limited supply offered by service providers. With 75% of providers reporting demand but only 21% offering these services, there is a substantial growth opportunity. The report attributes the rising need for virtual CISO services to increasing regulatory compliance, escalating cyberattacks, and a growing cybersecurity skill gap. Service providers adopting virtual CISO services report improved margins and revenue-enhanced customer security and engagement. The majority of providers plan to offer virtual CISO services in the near future, recognizing the competitive advantage it provides. A new study reveals that small businesses can significantly benefit from generative AI if employees are encouraged to use it. Despite job security and data privacy concerns, many employees recognize generative AI's productivity advantages. To overcome hesitancy, small business owners should centralize data management and integrate generative AI into their operations, emphasizing its role in enhancing productivity rather than replacing jobs. Employees should be encouraged to experiment with the technology to understand its capabilities and limitations, fostering a collaborative environment and prioritizing data privacy. Why do we care? I'm highly skeptical that customers ask for a virtual chief information security officer by name. I doubt they're asking for generative AI by name. Although broadly asking for artificial intelligence. It's the services they understand and certainly need. This is why I advocate for a holistic approach to technology advising. Customers want their technology needs addressed and look to you to guide them. We care about studies like these to identify customer pain points. Customize your services to those needs, yet avoid the trap of branding to a customer offering that they wouldn't recognize. Address the pain, not the buzzword. Today's episode is supported by Huntress. You want to focus on your clients and are always looking for ways to get more time. Use Huntress's fully managed cybersecurity platform to fight off cyber threats. Huntress is more than cybersecurity software for endpoints and identities. It's a 24/7 security operations center. Its security awareness training, community engagement, and dedicated partner support with an average CSAT score of 99.3%. Technology can only get you so far. Human expertise is what's needed to truly elevate and protect small businesses. And you get that with Huntress. Secure your clients and help them thrive with the number one rated EDR for SMBs on G2. Visit Huntress.com/MSPRadio to find out more. The White House has published a roadmap to enhance internet routing security, specifically targeting vulnerabilities in the Border Gateway Protocol (BGP). The report highlights BGP's inadequacy in security, leading to incidents like route hijacking, which pose national security risks. The roadmap promotes the adoption of Resource Public Key Infrastructure (RPKI) to mitigate these risks, aiming for increased implementation in both public and private sectors. The FCC supports the initiative and emphasizing addressing BGP security to protect critical infrastructure and personal information. And a congressional hearing on the global CrowdStrike outage is set for September 24th of this year. The hearing will assess the company's trust levels in Washington and among customers. The incident caused by a faulty security update affected approximately 8.5 million Windows devices and has led to increased scrutiny of CrowdStrike's deals. The hearing aims to highlight the importance of cyber hygiene and supply chain security. Why do we care? Slow is the hand of legislation, yet continuing to push forward. We'll keep tracking. I have 3 tactical moves to talk about. Verizon is acquiring Frontier Communications for $20 billion to expand its fiber network, adding 2.2 million subscribers and enhancing its competitive position against AT&T. The acquisition aims to address Verizon's slowing revenue and leverage Frontier's existing infrastructure, despite Frontier's recent financial struggles, including a Chapter 11 bankruptcy in 2020 and legal issues regarding internet speed misrepresentation. Chris Day, founder of Scalepad, has taken over as CEO, focusing on creating an integrated suite of products rather than pursuing new acquisitions. Outgoing CEO Dan Wensley will remain as shareholder and advisor. Day aims to double subscription revenue in 2 years and enhance user experience through technology investments, particularly in data science and AI. And TechCrunch with a profile of Fleet, a bootstrapped laptop leasing startup based in Paris, aiming to be the IT companion for small businesses by offering hardware leasing alongside software services like device management and cybersecurity. Despite challenges in the French tech ecosystem, Fleet has diversified its revenue and client base, now serving 1,500 companies across 120 countries. The company focuses on optimizing operations without external funding, emphasizing its vision to provide an all-in-one IT solution for small and medium enterprises. Why do we care? Verizon's acquisition shows a continued lack of competitiveness in connectivity in the U.S. There's now one less player. I will generally observe that a founder's return is not an endorsement of the management that's leaving. I have a bias here. I worked for Dan Wensley on the vendor side. Something wasn't happening as fast as ownership wanted. So here we're looking for that change in strategy. Less acquisitions, more investment. We'll see where it goes. Thanks to listener William for the attention to Fleet. Consider an organization handling the hardware and software stack as a full lease for SMBs and doing it entirely bootstrapped. That's an MSP. I have some big ideas for this shortened week. Wanted to highlight a piece in Forbes. Is AI right for your SMB? Consider these 5 points first. Small businesses should carefully evaluate the implementation of AI by considering its alignment with their identity, the potential impact on personalized service, the availability of expertise, ethical implications, and the hype surrounding AI. A measured approach that focuses on genuine value and aligns with long-term goals is essential for successful integration. And Rich Freeman in ChannelHolic dives into the economics of private equity purchases. His article discusses the ongoing trend of consolidation in the managed services industry, driven by private equity firms engaging in platform grabs, where multi-MSP roll-ups acquire each other. Predictions indicate that over half of M&A deals in this sector will involve larger PE firms buying smaller ones. Operational integration is essential, with successful roll-ups needing standardized processes to achieve higher valuations. Additionally, the article touches on the cautious approach MSPs are taking towards AI, highlighting the need for confidence and knowledge in delivering AI services to clients. And reiterating a conversation I had with Anurag Agarwal on the live show recently, The New Stack with the article "The Future of LLMs Is in Your Pocket." The future of large language models is shifting towards local processing on consumer devices, moving away from reliance on cloud-based systems. This transition will reduce costs, enhance user experience by eliminating latency, and improve data privacy. While current high-parameter models may not run locally, smaller models can deliver effective capabilities, and advancements in hardware and software are facilitating this change. Developers will need to adapt their strategies, focusing on fine-tuning and creating differentiated models, while new opportunities for infrastructure innovation will arise to support this evolution. And I want to highlight a very long read by Nicholas Carlini called How I Use AI. Here's a snippet. So in this post, I just want to try and ground the conversation. I'm not going to make any arguments about what the future holds. I just want to provide a list of 50 conversations that I, a programmer and research scientist studying machine learning, have had with different large language models to meaningfully improve my ability to perform research and help me work on random coding side projects. Among those: building entire web apps with technology I've never used before, teaching me how to use various frameworks having never previously used them, converting dozens of programs to C or Rust to improve performance 10 to 100 fold, trimming down large codebases to significantly simplify the project, writing the initial experiment code for nearly every research paper I've written in the last year, automating nearly every monotonous task or one-off script, almost entirely replacing web searches for helping me set up and configure new packages or projects, and about 50% replaced web searches for helping me debug error messages. Now, why do we care? I love use cases, and here a researcher gives some helpful insight into their process. These real-life use cases tell me a trend is taking hold. I included the Forbes article to provide insight into what customers are reading and the logical process laid out by the author. And endpoints are becoming interesting again with AI requiring compute power at the edge. And Rich provides insight into growth and investment dynamics. I give you lots to ponder. Looking to reach an audience of thousands of MSPs and IT service providers? Put your ad right here on The Business of Tech and be on the show that 64% of MSPs report having listened to. A recurring top 50 tech news podcast. There are affordable options for you to reach our audience, and we can support any budget. Podcast listeners are more engaged, have a higher level of brand retention, and are more willing to listen to ads here than any other avenues. Wanna know more? There's information at mspradio.com/engage, including a button to book a time to talk. I'm looking forward to that discussion. Thanks for listening. Today is National Cheese Pizza Day, which is good for my birthday. I'll enjoy one tonight. I'll be speaking at Pulseway Nexus on September 11th and 12th, so make sure to sign up and register to attend. The link is in the show notes and description. If you have a question you want answered, we take those. Send them in, ideally as a voice memo or video, to question@mspradio.com. I answer listener questions live each week on our Wednesday live show on YouTube and LinkedIn, 3 PM Eastern next week. And if you've got a comment or a thought, put it in the comments if you're on YouTube or reach out on LinkedIn if you're listening to the podcast. I will talk to you again on Monday. The Business of Tech is written and produced by me, Dave Sobel, under ethics guidelines post it at businessof.tech. If you like the content, please make sure to hit that like button, follow, or subscribe. It's free and easy and the best way to support the show and help us grow. You can also check out our Patreon where you can join the Business of Tech community at patreon.com/mspradio or buy our Why Do We Care merch at businessof.tech. Finally, if you're interested in advertising on this show, visit mspradio.com/engage. Once again, thanks for listening to me. I will talk to you again on our next episode of The Business of Tech.

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