2025 Report: What Two Industry Leaders Forecast

All right, what's up, guys? Hope you guys are having a fantastic day. Hope you had a great holidays, actually. I think now we can say Merry Christmas again. We can say Happy New Year. We could say all the stuff. So it's really good to see you guys. I am super, super pumped to be here. Have a very special guest with me today, Mr. Fred Bacola from cassette. I don't even think you need an introduction. What's up, my brother? How you doing?

Hey, Chris. How you doing, buddy? Thanks for, thanks for having me. I think last time we saw each other, we were with Timmy Conkle.

Dinner in Dallas. Yeah, that was awesome.

Jimmy Lippy was with us.

Yeah. So we got, honestly, we got as much time as we want to take today. I'm in the Caribbean. I know you're. You're in Miami. So we're kind of hanging out, doing our thing. I love this. I think you said this is the first time you've ever done a Facebook live, so that's kind of fun.

That's pretty cool. Check off the bucket list.

I love it. Check that off the lot, the list. So we are going to have a ton of people watching with us live. We are on a webinar in the Streamyard platform. We also have simulcast to our big MSP business owners group, also simulcast to my YouTube channel live, also simulcast to LinkedIn. So that's. We got stuff all over the place. We're probably going to see, I don't know, 10, 10,000 plus views on this as we go here over the next couple weeks. Probably bet you it's going to be probably closer to 40, 50,000 as we go with you.

Celebrity.

I think it's you that's a celebrity, man. Bring, bring the people in. So one of the things that you said, said to me in our green room was no filter. We don't care. So you guys that are with us, I don't have a filter either. So I'm a swear when I want to, guy. I just like bring it across raw. Fred is cool because he's that way also. But for those of you that are watching with us live, if you're in the webinar with us, ask your questions. We're going to talk about a bunch of different stuff today. We're going to talk about the MSP market. We're going to talk about the future. We're going to talk about 2025. We're also going to hit some of the challenges that Casse has had. You know, if you guys got questions about billing and let's, in fact, let's just hit it off with that here. I got, got my little questions kind of written out here for you. I'm gonna hit with this one out of the box. So the biggest question we got across the board was, and I have all my members, my seven figure MSP clients, quiz them on stuff like what do you want to hear Fred and Chris talk about? Obviously a lot of conversation about billing, trust, all those different things. How are you guys hitting that on? Because that's, it's one of the big controversial topics around the same.

And maybe before you go. And we said filtering, it wasn't just not cursing. I'm trying to work on not cursing so much. My niece is very unhappy with me. My brothers want to kill me when I drop like an F bomb by mistake. So I'll do my best to use the word other words. But, but I meant that like if people want to ask questions, Chris, like don't filter, man. If someone even asks like a jerky question, that's fine. Like it's. The reason for, for doing this is to do just that, to try to answer questions that maybe people aren't comfortable asking other forms or whatever. So let's talk about billing. I don't think it's a surprise when we. So in 2022, because they bought data, like the deal closed like July 1 or June 30.

I remember that.

Yeah, we announced, I think we announced, you know, Data was a public company, obviously we announced we were going to buy them I think in like April timeframe and there was a two or three month window quiet period where you, you close it. So I can, I can say this. If anybody here has any questions about how or challenges about integrating two companies, I'm probably an expert in it by now, you know, and I'm an expert because I made more mistakes than, than I care to mention. So Data was our biggest. Sorry, I got a little tickle. Data was our biggest competitor at the time. And it was no secret that it was the Datto management team. Great, great people and stuff. Cool dudes and women. They didn't want to do the deal. You know, the, the owners did and it was, it was, that was the situation. And so we conducted the transaction, we closed the transaction and then we started integrating the businesses. And In April of 2023, we integrated and launched a unified billing system. Here's the reason we did it. The reason that we did it was we wanted the experience and we want to always want the experience of our partners to be awesome. Part of that is having one bill that's really easy if you're using, you know, Datto Backup and Kaseya Security and all these different things. One that makes it easier. Most MSP keys, they don't have a dedicated administrative team of 3, 4, 5 people. They, you know, they, it's hard and we want to make it easier. A big part of our platform because they have 365 is to try to make things easier. Well, when we integrated the billing systems, we made some mistakes. They were looking at hindsight's 20 20, man. Like I look at it, Chris, I, I could some things that we did. I just want to go back in time and change the wheel. But we can't.

Well, hindsight's a great luxury.

Right.

There's not a single business owner watching this that can sit there and be like, I did everything.

And what sucked about the billing thing? The billing challenges where we set out to try to make our partners lives easier and we didn't. And it happened in pockets. So without boring everyone with all the detail, I'm going to give a little bit of detail because I think detail is important for context.

Right? Yeah.

So first off, we do about 500,000 transactions a month as a business. Think about that number. It's a lot.

Yeah, it said a lot.

Because if you think of it and you obviously you and the MSPs know it. MSPs are constantly doing things. They add a new customer, they move licenses, they do all sorts. We do tons of transactions and there's lots of different ways to transact. With Datto and Kaseya. Right. You know, pre acquisition, some people have, you can buy products from the product itself, you can call up and order a product, you can usage bases, all kinds of variables. So what we attempted to do was to not eliminate any ways of doing business because if you take something away from someone, you piss them off. Right. So we don't want to take anything away. We wanted to make everything available. So we're taking all kinds of different commercial models and putting them together. And that was a really hard thing to do. And when we went live in April, I think was 7 or maybe 9% of our customers, partners, MSPs were, were hit with what's called a billing issue. Now that was 7% each month. So it wasn't always the same 7%. And the other challenge was we didn't necessarily know that these billing issues happened for two, three, four, five months because we didn't think we were sending a bill incorrectly. You know, it's just until the customer told us it was incorrect. Sometimes it takes months for that to happen. So what? It created a challenge, just to be blunt, you know, And a lot of times we under build customers, which is bad for Kaseya, good for the partner. But a lot of times we overbuild. Sometimes people would cancel, like a BCDR contract and we wouldn't recognize or we wouldn't acknowledge the cancellation of that. So we bill an extra month or two months. The reason that happened was when we launched our system at the end of middle Of April of 2023, we did not expect the number of issues that happened, so we weren't prepared to house them. It's analogous to if you have a ticketing system or a ticketing process and you're used to handling 100 tickets a month. So you have five people to handle 100 tickets. Now we have 5,000 tickets a month. We didn't have the people ready to handle it. This is, by the way, this is not an excuse. This is Kaseya's fault. This is on us a hundred percent.

And it's also really tough to scale that kind of stuff. And I know, you know, there's some people that have talked about too, that there was billing stuff prior to the Datto thing. And I think that kind of. I mean, every company has billing issues. And, you know, you and I have known each other for a while. I. In fact, it's interesting. I've. I've had some people talk to me. I was on a couple calls this morning, and I said, you know what? I think, I think it's important you give Fred, the. The man, the human a chance in this whole thing because it's. This stuff's hard. Like, I. There's nobody that's out there that's like, I'm gonna purposely screw over my clients just to try. And I mean, that's not. That's not doing business, right, Chris?

You're right. It's hard, but it's our job to do it. And I mean that. Like, and I, and I, like, we took it on the chin and we deserved it. And that, that sounds, you know, I, I wish I could go back in time and change. I mean, this is my company. But I take a lot of pride in the value that we provide for our partners and that our partners rely on us. And the average, say, partner spends like 9% of their revenue with us. Yeah, that's. We have a serious obligation, these folks. So, you know, there was. And sometimes when I hear people say, oh, because they're Stealing money from me. Like, I get their frustration. I can guarantee everybody. The last thing in the world a 15 billion dollar company is going to do is going to try to rip off someone for a thousand or ten thousand or a hundred thousand dollars. It's not worth it. I don't think any of us want to go to prison. It doesn't look good. It's not a fun place to be. But it was hard and we're, we're through it. So now, you know, over the last nine months, we still have billing issues, just like, you know, just like most teams have billing issues. You know, we're back to what are pre integration levels. But our goal is not to be there. Our goal is to be much simpler. And a big part of that is simplifying how to do business with Kaseya. And it's an area of focus on. We have about 80 people that are doing nothing all day long but building a better experience. We call it a customer experience. That's billing. That's one, that's casse one. That's the end. That's all of that experience. And it gets better every day. And it's our job to make it perfect. So I will say this. We, you know, we made some mistakes. We've done. We are doing everything in our power to not make mistakes. But. And that's what happened. And it's. It was tough. It was, it was, it was tough for us. More importantly, tough for our partners. And hopefully we're through most of it.

Yeah. And I think, you know, you mentioned the, the only all in one thing. Let's, let's kind of pivot to that a little bit. If you guys got. I know we got some questions coming in here, so I'll come around with the questions a little bit more as we get. Get through this. But let's talk a little bit more about, like, what's, what's your vision? We're, you know, sitting here on January 2, 2025. What's our vision for, for Casayo with 2025? I know we got multiple. We got SAS alerts that just came into your portfolio. We got other things. Where's. Where's your head at on that?

Yeah. So excuse me, here's Chris. I'll answer, like, tell me if I'm answering it the way that you're. That your people want to hear it, but I'll, I'll give it a shot. Here's what Kaseya is all about. Here's our strategy. So I came on board here a little over 10 years ago and the idea was to build a unified platform for MSPs that they can have every piece of functionality to deliver every type of managed service that their customers have and will have in one place and to do it in an integrated way and to charge a lot less money. And it was called it complete 2024 was the first year that we released Kaseya365 which is the culmination of that. Here's why we did it today. MSPs so if we look at the like the worldwide economy, let's take a step up for a second. The vast majority of economic growth, the vast majority of job creation and wealth creation is being done by small to mid sized businesses. Go back 25 years ago, wasn't the case.

Yeah.

The reason that small to mid sized businesses have been carrying the economy is the technology. The business systems and the industrial systems that were only able to be used by The Fortune companies 10, 15 years, 20 years ago, they can now be consumed by small businesses. Now small businesses are 100% dependent on that technology to give them the productivity gains that are allowing unemployment to be at the levels that they're at still. It's just, it's insane. Insane. MSPs are the enabler of that. MSPs allow small to mid sized businesses to simply exist and they're carrying the economy. Here's the challenge. The average MSP in North and Chris, you probably know this better than I do. The average MSP runs at about a 10 profit margin.

It's exactly what we see.

Some do 25, some do 0, some are negative and that's not right. That's a, that's a problem because the most important part of the global economy, literally the MSPS are enabling the global economy to exist. They're running at 10% in aggregate. That's dangerous. That's freaking dangerous. A 10% profit. Companies to churn customers away from maybe going out of business. We all know, right?

They're one whale away. Honestly that's a lot of what we're seeing is they put it, they put all their eggs in a whale basket and don't build them properly. And know I'm going to talk about this in a minute here with you because yeah it's a big, it's the biggest factor we see.

So what we do because what our mission is like our North Star, right? Our, our, our vision is with Kaseya365 as the foundation. We believe that we've changed the unit economics for MSPS so that an MSP can run at a 30 to 35 profit margin. Just like the lawyers and the accountants that are serving their same customers. You know, if you're, if you're an architecture firm, a 50 person architecture, great client for an MSP, right? 50 person architecture firm, they have three business service providers, maybe four. They have their, their financial firm like their tax people. They have their, you know, their MSP and they have their legal firm. The legal firm does 30 to 40 percent profit margin. The accounting firm does 30 to 40% profit margin. The MSP which is the most important. 10.

Yeah or less, right? 10 points.

And the reason for that is because MSPs are for or have been historically forced to you their unit economics are broken because the stack of technology that they're forced to put together is made up of multiple vendors that are not integrated, that were purpose built for enterprise usage and they're also priced for enterprise usage. So if the average MSP spending 25 to 30% of their revenue on the software and hardware to deliver their managed services, they can't run better than 10% profit margin. On top of that. Those products, they're all wonderful products from great vendors. They're just not made for MSPs, they're not priced for them. And the second part is they're not integrated together because they're not owned by the same people who can build it together. So you're limited in the amount of automation you can get. So now MSPs are using a stack which is made up of great products, point solutions from great companies and they have to weave it together themselves, try to build automations and they're paying enterprise prices for it. That is why this industry runs at a 10 profit margin. Our goal with Kaseya365 is to change that. We've built this platform and this platform, like I said before, has, you know, I hate to use the word everything, but everything you need in one place and we charge a third of what you're going to. What an MSP would pay if they went out and bought 4, 5, 6, 9, 10, 12, 15 products from different vendors. And the secret juice to it is because we own the kit. We've spent hundreds of millions of dollars integrating this platform together so our AI engine can provide the automation, so the MSP can do more work per engineer without having their engineers work 80 hours a day and make fewer mistakes. So that's our North Star. That's what we're striving to.

Can I ask you a question on this? So how, you know, one of the things that we see and you and I haven't talked a lot about this, but in, in our seven figure MSP coaching platform we see exactly the same stuff you're talking about. So 10 or less gross, you know, gross profit margin, less net profit margin and we push the MSP to all inclusive sell at a higher price point. Are you concerned at all with the fact that you're going in what we actively say like MSP, learn how to sell, learn how to sell, be better be more of a consultative sales owner company overall. So you're not just pushing tech, tech, tech and then using price point as the deal which, and, and we push them to charge an 80 gross profit margin as their baseline. Best in class. That's what our goal is. That's where my, I'm very well known for this 300 per seat mindset. Right. So are you concerned with the fact and, and I think it's an, it's a great idea. I like your North Star. Are you concerned with the fact that we're talking about price at the individual seat price doing damage to the msp? That doesn't understand my model because my model is all about like let's sell better. Because if they're, if they're focused on price, then they take that all the way down the ladder to their client and all it is is price, price, price and at some point it maybe undercuts the market.

Yeah, I'll give you a great. So the answer is no, am I concerned about it? Look, I want every MSP, I want them all running 30, 40, 50 profit margin, making tons of money because as an American we need that like our economy needs that. The more financially stable MSPs are, the more they can invest in their own business. Which means that we're fighting these cyber bad guys much better because msps are the ones that are doing that. Fighting. Right, that's important. But to your point, I don't think the tour various. I don't think the two are related. So I believe like you, I think you're right on the mark, Chris. I think msps, if I owned an msp, I would make damn sure I was selling, amazed at selling value. I, I scare the death out of my customers. I make sure they realize, look, these cyber actors are coming after you, the small business. Here's the value we're providing. I make it very visual. You know, most, most architects, doctors, dentists, lawyers, they don't know it. So you have to get really good at selling them. And you do a good, damn good job, Chris, at teaching your people how to do that. Like I've seen your work. It's, it's really, really good that being like. So that, that's a statement. The second thing is they need to be good at selling it. But if their cogs are lower, it's even better and they're unrelated. You know, it's almost like if you're.

Selling, I just want to really make sure that the message and everybody that's watching this live and recorded, I want you to understand that just because your price point's lower, which I agree, everything you're talking about, right. Just because your price point's lower doesn't mean that you should go. You still got to learn how to sell guys. You've got to learn to make sure we focus on that with the end user client because times have really changed and they have to understand, you know, I love that also love the fact that you talked about, you know, you got to scare the bejesus out of them. Now that we're not saying at the same time, we're not saying go fud them not, we're not proceeding.

Show them the data, show them the reality, show them that the cyber gangs coming out of Ukraine, coming out of Russia, coming out of other parts of Eastern Europe, now coming out of Asia, coming out of Latin America, which we're seeing like Cassia, we have products that show the heat maps and they show how many attacks are coming and where they're going. Like 90x percent of them are going after companies of less than 200 employees. That's where they're going. They're not going after Citibank, they're going after, I don't know, the local bank of wherever you are, they're going after the small business because a fifty thousand dollar ransom, no one's going to prosecute that. No law enforcement has the time to deal with that. FBI has no cycles for that.

They're not even touching anything under a million dollars.

No, they don't. And the perception is it's easier to get and you know, it's, it's. So yeah, I think the ability for an msp, like let's, let's forget the word sell because selling has like a bad context, right. Msps in, in our opinion at Cassia, the and I know Chris, we share this philosophy. The better an MSP is at articulating the value they provide to a non technical buyer. That's the determining factor of MSPs that are getting 2, 3, 400 bucks a user versus the ones that are struggling to get 70. For a user, you Know the average.

We survey everyone that comes into our franchise. First time appointment, meeting room. The average we see across the world is 68 a seat.

Yeah.

What that is. And actually I had a question this morning that came in from one of our members. Jeff Sherman was talking about, you know, where's your head around all you can eat with. I'm like, every MSP should be providing that. So that flows directly into the, the Cassey 1365 model. Everybody should be selling that. But the MSP is so traditionally obsessed with I can solve that problem. So they throw a single tool at it. Yeah, I think, you know, your, your stack and your suite that you're working on.

I'll give you a great, I'll give you a great example that Chris. So this is when we were thinking about Cassia365. Over the years, one of the things, you know, we had a security incident cassette a couple years ago. So we were very security conscious. That was one of the thousands.

I remember that when that happened, challenging time.

I learned so much. Oh my God, so much. But one of the things is ever in theory, every single, let's say user or endpoint should be being monitored by a 24.7soc, right? Yeah, 100 should be. It's not cheap to do that. So if I'm talking to an architecture firm, again, I use an architecture firm. I use dental, I use dentists. Last year, this year I'm using architects. So I'm talking to Giordano's architecture firm. One of the guys went to high school with has it. So I had to put a plug for him. He's in Red Bank, New Jersey. For anyone who's looking for an architect in Red Bank, New Jersey. Now, if he's got 40 employees, he doesn't think he's a target. So maybe his MSP isn't successful at upselling him. Advanced cyber security. So now that MSP has to make a really hard choice. They're just signing up for, let's say standard essential services. And they're getting, you know, EDR and av, but they're not getting a managed sock or a SIM or whatever. So because they couldn't get them to pay the extra 50 bucks or 30 bucks or whatever, the pricing model is, what we're doing with our pricing model and our platform is saying for the MSPs that are good and are able to sell, you know, or position value better, they're making a ton more money. But for the majority of MSPs that are on the journey of getting there. Right, Chris like when you first get one of your clients, you take them on a journey and you teach them.

Yeah, exactly what we're talking about. Yeah, exactly.

So the last thing in the world that the, the person who's just starting the journey of being good at selling and positioning, you still, we still want them to put the manage sock, manage those endpoints. Because if that customer gets hit, no matter what the MSP gave them, they're going to get blamed. Yeah. So it allows the msps to do the right thing by their customer regardless of how good they are selling. And then the better they sell, the more margin they make, but they can still afford to do it at any price point. So we're trying to democratize the ability for MSPs to deliver the best service, regardless of how good they are at selling. If they're good at selling, they'll make more money, but if they're not good at selling, they can still deliver the full service.

That's kind of what's funny about that. You ask any MSP you remember, you've been here for, you know, over 10 years at Casaya, like you said, you remember the days when it was the precious metals plants, the silver, gold, platinum.

Yeah.

Good, better, best. Right. And now we're in this place. And it's funny because I start my talks every time I'm in front of a group of MSPs, I ask a simple question. If you had unlimited budget at every one of your clients, would you put in that good, the better, the best? They all say that every msp, every IT person knows, and they act like immediately they say, oh, well, I put in the best. So why are you allowing your clients to dictate the path of support on this and then letting them push it? Well, they don't want to buy it. You got to sell better. But I agree, like, having a tool that democratizes that is a really important factor.

Yeah. And it's. And it's only going to get worse. Like, you know, a lot of people talk about a race to the bottom, you know, and I've talked to MSPs. Some MSPs are getting beat up on price left and right. Some are getting, you know, hundreds and hundreds and hundreds of dollars per end. It's all over the place. There's a lot of factors, geography, industry, there's a million factors that drive it. But ultimately, ultimately, from a software perspective, technology gets commoditized. Technology gets commoditized. I always give the analogy. If you go back, Chris, I think we're roughly probably the same era. We're both in our early 20s now we're roughly the same era. So we remember when Lotus was the dominant spreadsheet and Word Perfect was the dominant word processor. And there I, I, my first internship I ever did was at Lockheed Martin actually was just Lockheed then and it was in there one of the finance departments. I was the computer operator. So I operated the spreadsheet for the finance department of a division of Lockheed. That tells you old I am. And the reason everyone didn't have Lotus on their workstation one, barely anybody knew what a spreadsheet was. They couldn't really use it. But two, it was expensive as hell. No one thinks about the cost of a spreadsheet anymore. It's there and we're better for it. So now no one has to make the choice is this employee worthy of having a spreadsheet? They may only use it a little bit of the time. The democratization, if you will, of office productivity software changed how office workers work forever. And in the MSP space, we're trying to do the same thing with all of the software. Everything from, you know, managing the infrastructure to cyber security to backup to everything and doing it while working with the msps. So the msps are doing the opposite. They're not commoditizing what their offerings are. They're continuing to articulate just how unique and special what they're doing is by making visual, easy to consume visuals for their customers to understand actually what they're doing. Because the average customer of msp, they don't know shit about technology and they don't understand what the MSP does. So that's how we think about the price point of lowering it. It should have a counter impact and it should allow the MSPS to further demonstrate advanced value which lets them charge the premiums that they should be getting for the services they do.

Yeah. So I want to pivot back a little bit again to some of the other stuff. Some of the previous questions I got how I know we, we've had some issues, obviously we talked about the billing questions and some of that. What are you guys doing in 2025 to kind of build trust back up? Because we've got a lot of, a lot, a lot of MSP vendors struggle with this. But how, what do you guys have in your arsenal that you're going to try and do to build trust back with your clients and more importantly, probably, probably more importantly your clients that already are there. But how do we talk about the, the issues that other.

Yeah, well, clearly the person who asked that question I Apologize that you don't have trust. You know like we, we did something somewhere along the line where we, we screwed up and, and you know, we, we, we broke your trust and that's, it's our job to fix that. You know. I think so 2024, we just finished the year. It was a really good year for Kasei. I mean we're, we're, we're doing pretty well. I think the most important thing that we can do, our goal, we want every single MSP in the world to be a Cassia 365 shop period. That's not going to happen if someone doesn't like us, if they don't trust us, if they don't believe in our vision and if they don't believe in our ability to execute on our vision. And I think the last statement I made is probably the most important. We have to continue to do what we say we're going to do in a reliable way. And that comes into two factors. One, I can guarantee everybody on this call we're not buying another Datto in the next year. So that won't happen. But we're making very substantial invest, continuing to make substantial investments in our products. We're continuing to make substantial investments in our infrastructure. When I say infrastructure, not just like our data centers and stuff like that but in like our billing infrastructure and the customer experience. Customer experience is a huge focus on 2025. I think another, another area is we have to be better at articulating things that we do on a standard basis for our customers. So we created something called our Partner first pledge in 2024. The partner first Pledge is a pledge or a commitment of business practices that Kaseya does that are MSP friendly. You know, like if you're a software company, if you talk to 50 software companies, none of them are dead. Very few of them, if any, are dedicated to serving MSPs. MSPs have some very unique requirements, very unique requirements, different. And our Partner First Pledge is trying to make those very obvious and make them stand out. You know, things like offering everything we sell on a one year and a three year contract, doing a price lock guarantee so prices will not increase at rates that are predatory. A lot of software companies have predatory price increase and we've contractually sat around.

The whole SAS world, right? Like big time.

18. I saw a report. 18 was the average price increase. 18%. You know that's legally impossible for us to do anything remotely close to that. So just trying to get better, you know. I, I, I think one of the Other things that we have to continue to do in the customer experience world is make things easier. You know, be easier. Like if you have someone has a question, a technical question, make it easier to get, make our knowledge base easier. These are investments that we're making and we have a lot of people on them. It's just making sure that we're prioritizing right and making things easier. So how to get trust back? We got to earn it. How do we earn it? We shut up and we do what we say and we get 15, 20% better every year.

Yeah, I think that's, that's. And you know, another thing that you brought up was how important I, I actually want to pivot back to this. You talked about how every MSP offering should be offering a full sock. And that is something that I full, fully, 100% believe in. Because the amount of MSPs that think that they can spin up a sock on their own is literally like a help desk is almost mind blowing. Yeah, well, it's, it's, it's not only just a lot of money, but it's just like to understand the amount of undertaking it is to spin up a sock and to do all these things is crazy. And one thing I want to point out to you that I've, you know, I'm got my ear to the ground on a lot of this stuff. All I ever hear is Kaseya billing problems. I never hear about the Kaseya product sucks. This product sucks. I've never, it's funny, I was talking to some of these guys this morning and how everybody's like, yeah, I've never heard any issues with the actual product. Okay, so we got billing issues, we got contract problems. We can work on that, we can fix that. But the underlying structure sounds like it's pretty damn good from what I've heard. And I haven't, I was gonna say a partner. 2005, I actually bought my very first Ms. Joe Blackie. Wow. Yeah, I had, I don't remember, I don't remember who my first rep was, but I bought two, 2004, 2005, bought my very first. I bought a hundred pack of licenses from the original Cassia way back in the day.

Perpetual, I'm assuming, right?

Yeah, yeah, exactly. So, you know, so how do you, how do, what's your thoughts on that? Like, the product itself's been good. What else are we going to look at down the pipe? Down, down the pipeline here?

Yeah, so I, I, I mean, I, I, so I'm a software developer. I'm a like a nerd and I, I think our tech is pretty damn good. I think if you ask 25 MSPs about the products they use, whoever they're from, you'll get 500 things that the products don't do. Well. Yeah, we have, we have, we have a tough audience and we should because this product is their business or you know, it's a super important part of their business. I think that the, this, the kit, I use the term kit. It's the, the you know, our platform or application or software. Pick your, pick your poison. Yeah, I think it's the best because the thing that we do that gets me like my end, the engineer in me like jazzed are these integrations man. It's, I always say to people, right click in PowerPoint, insert a table. That table you're inserting is Excel spell check your slide. You're spell checking not only the words in the slide, but you're spell checking the words in the header of the table that you inserted. In 1994 you could not do that. 1995, when Windows, Microsoft released Windows 95, you could do it. And it was so game changing that little piece of automation. Take that analogy to the integrations between RMM and edr, between IT glue. All these things are, they're so powerful and cool and they save so much time for msp. So yeah, I, I like our kit. I like it a lot.

I think you know, that time too is where a lot of your, that profit suck that you're talking about. Amount of bodies. You know, what's the, what's the hardest thing and the most expensive thing for people to do is hire engineers. And hire people is what kills the small business. You know, people cost, right?

Yeah. And you know, if, let's say you're an MSP with 20 customers and you have five employees and you land your 21st customer, if you have to hire another employee, that employee is only going to be 20% utilized. You're eating all your profit to hire that employee in advance. I mean that's, it's a little known secret that a lot of people don't think about. But it's, it's another problem to your point, Chris, in the unit economics. So, so I think our kits, it's strong. Could it be better? Of course we have thousands of engineers every day that are working to make our stuff better. But I think when you think about, when we think about like what's next, you know, where, what can we really do? I'm going to use the most overused term in the world and talk about AI. So I can be like every other.

Software just going to bring up AI. So I'm glad we're going down.

I'm like every other software CEO idiot in the planet. Talk about our AI. So we AI is interesting. It's interesting because, you know, people, everyone saw the Terminator and you know, everyone saw all these movies and they think about what AI can do, what I can't do. Well, for an msp, automation is the name of the game, right? If you can automate, you're making fewer mistakes. Your unit economics get better, right? Because now instead of, I don't know, 10 customers per technician, you can have 12 and your text. The turnover for engineers will go down because they don't have to work a thousand hours a day, right? Automation's awesome. You can report on it. It changes everything. The biggest, one of the biggest promises and drivers of automation is AI. So here's, here's our, this is what we're seeing in our platform. The rate of automation that we are including on our platform is growing exponentially because of AI. So we have about a million engineers, MSP technicians, engineers using our platform, about a million. So the amount of data, the amount of data that we collect from all of the usage patterns of those engineers is astounding. We know what they do, what buttons they click, how their workflows work better than anybody in the world. That feeds into. We grab that data. We also have so much telemetry or metadata or technical data from our products themselves. You know, our SOC or AV or our edr. I mean, just so much data about technical information that comes in. So we map that and we are building automations in our product that are automating the most commonly used or most common business functions that MSPs do. There's about 600 of them. They're called Cooper Bots. There's about 600 of them that are fully automated. So these are the most common things MSPs do. Now our Gen AI approach, you know, is. Sorry about that. Something's getting my screen. Our, our gen AI approach is called. What we're doing there is we're allowing the information we provide to allow an MSP to automatically open and close a complete business process. And because a lot of our MSPs are leveraging it glue, which automates the documentation and business rule management, it allows it glue to kind of hub and point and take all of the endpoint and backup and cyber security things to automate proactively the settings, the usage and the actions that are happening. So there's, I mean this is super sexy stuff like this. I love sitting down with our engineering and this is really neat nerdy stuff but it's the term that we use. I talk a lot to like you know, different press and, and both MSP industry as well as national press and they talk about AI and they ask us, you know, cassette, you're one of the largest companies of practical AI in the world of usage of practical AI to drive business outcomes and it's, it's manifesting in the form of automation and it. For those folks that you know that are leveraging our platform. First off, thank you for it, but make sure you're checking out all the Cooper insights, you're checking out the Cooper bots, you're checking all the self guided things. It's, it's really amazing what's happening.

And well and I think that's, that's how the MSP can take themselves from that 10 margin up to that 30, 40, 50. Our members are running actively like 70, 80, which is amazing to see. I'm kind of predicting, and I want to get your take on this. I'm kind of predicting that if the small MSP doesn't wake up and do something about their profitability, about their cash flow, actively focus on MRR, are they going to even be around in 24 months from now?

Yeah. So. And how would you define small? Like what is small in.

Well, I think under, under five. I'm gonna say under 10. 10 employees. Okay, so which are most are pretty damn small. You know they got 10 employees. Six to seven are tax. Million.

Million two of revenue. Yeah. So you know, making 100 grand a year hopefully, you know, owner salary of 120, you know, so it's such a great question. I get asked this a lot by our investors, our, our board, you know, like what was the market look like? We have like 50,000 or 45,000 MSP some number like that. A lot of them are one, two, three person shops. You know we have the, the 20s and the thrives and you know the, the integrases that are hundreds and thousands of employees as well and everybody in the middle and what I, the one commonality to this market is it's a local market. So a lot of the private equity firms that are buying MSPs and they're rolling up MSPs, they ask us, they ask me and others, you know, what do you think of the market? You know, how are, why are some aggregated MSPS successful and others not? You know and it's it's real simple. The MSP business is a local business and the, the customers of msps are small to mid sized businesses and there's a personal connection between the MSP and their customer and it's unlike, it's unlike most corporate types of relationships. So when you ask is there a future for 2, 3, 4, 5 person MSP? I think the answer is absolutely yes. Because that 2 person MSP is going to make, you know, their local restaurant or local construction company. They will always be available for them as long as that MSP makes sure their service delivery capability is up to snuff. Because I don't think we're going to see in the next five to seven years a Nash people buying I T and security services from a national brand because of the brand.

Yeah, I think you're right on that.

I agree with that because, because the average buyer of it, like the average architect or the average doctor, they don't know what it and security is.

Yeah, it's too consultative of a sale to do that.

It's too personal and it's so personal because so, so I do think there's a future there. Now here's the risk, what we're seeing and we spend you know, a lot of time talking to folks in Washington and in Brussels and London. We're seeing different forms of different dialogues, both legislative and industry related around standards and compliance and regulation and all that kind of stuff. I do think if the coming 24 months, if not sooner, we will see a awareness in the small to midsize business community of some kind of nationally recognized cybersecurity standard like essentially Australia. And I'm not saying it's going to be regulated, I don't know if it'll be legislated but I think that there will be a recognition that, that this is a minimum standard of what IT and security should be.

They're probably CIS8 or something like that.

Yeah. And as long as the local, the one or two person MSP can deliver to that level and have a piece of paper that says we're certified on this, then yes, they're, then they're doing everything that they'll need to do because IT security is so foreign. Most customers we have, we'll be making a big announcement for this stuff in, in February in Washington D.C. but that's coming and I think that that will give whoever can produce that piece of paper a huge step up. And I think that if you're a three person shop or a 300 person shop being able to make sure. That your customer feels special and you're articulating your value. That's there will in our opinion at least for the next four or five years. I think there'll always be a place for that.

Yeah, I think you're accurate on that. And I think what's really key, what's, what's really important about this for you guys that are watching this to understand, we just put just what Fred and I are talking about here, we just put that one to two person msp. You can be at the same exact level as your 100 MSP and compete because you're personal versus thinking about what did you always compete on historically?

Price.

You're like, I got to be the cheapest guy because I'm smaller, blah, blah. Well, we're offering the same stuff. You have to make sure you're delivering it right. What I do like about the Kaseya scenario is it's a single all inclusive stack that they're, you're pushing that on them saying do you allow, do you allow msps to buy piecemeal if they just want to be the nickel dime shop? Or is that something that you try and push them the other way?

What's your thought? I mean, look, so, so great example. So in Cassa365, there's RMM capability, there's EDR capability, you know, there's antivirus, there's backup, a lot of things in it. We will sell RMM standalone, we will sell EDR standalone and we have the best RMMs, the best EDR and all of that. It's, it's just, it makes, it's not just the pricing. Like if I, I would love to sit down with every MSP if you can't take one thing because they have 365 will cost you one third of what you're paying now. That's great. It's a great benefit. That's a great benefit. The bigger value is in the automation you get because everything is together. We build all of it like we can build.

We're encouraging the full package is what's key.

Yeah. And we try. You know, I want to get back to one thing you said, Chris, which is interesting about the, the 1, 2 person, you know, 5 person, 7 person MSP competing against the 3, 4, 500 person MSP, this little guy David versus Goliath. Right. That happens everywhere. One of the trends that we're seeing, and I know you and I talked about this at dinner with Tim, so we've talked about before, is there's a Gigantic market of internal IT shops that are made up of one to five internal IT and security people. We're seeing that by the end of the decade the vast majority of those will be outsourcing some if not all of their IT and security work. Because if you're a three person internal IT shop you just can't do it. You know one like you just can't.

Right. They grew up on tech, they didn't grow up on security.

Yeah. And that might be like, like a small bank. A small bank or, or a law firm that's got 100 lawyers, that has four IT people. They can't do it. Yeah. So they are starting to. We're seeing with the co management that's happening a lot now. It's going to go research.

We've seen everything. The mid market is the biggest opportunity the MSP industries ever had.

Now the MSPs that are a little larger, you know, 30, 50, 100, 200, 500 people like Thrive Networks. Right. Great. MSP, Rob Stevens is their CEO. Thrive, they don't like to look at deals less than 5, 10, 15,000amonth. Right. That market is where they see it. Right. I'm using Thrive as one of many examples. So I think the outsourced IT and security market is growing so rapidly that I think the opportunities for the, you know, the 2, 3, 4, 5, 10 person MSP are actually increasing because the private equity backed 500 person MSP shop which wants to organically grow and build itself on its brand is going to be selling to the larger regulated co managed and then fully managed. Twenty, forty, fifty, a hundred thousand dollars a deal, one hundred thousand dollars a month deals. Because the alternative for the twenty thousand dollar a month deal is to go to IBM and IBM isn't going to look at a deal that's less than a million a month. I mean there's, there's a huge gap in that market. So I think, I mean right. Was it rising tide lifts all boats or whatever that cheesy phrases? Yeah, I think that big, small, skinny, fat, all types of MSPs can grow as long Chris, as they're selling value. They're focusing on efficient operations and they're focusing on their customers.

100% you brought up too is the automation side. Minimizing your cost of doing business is really important whether you're using Kaseya or whatever you're using. I think it's really critical that you're doing that. And I will tell you guys just this is a message from Chris. Please get out there and Price your services properly, sell properly. Because for so long the MSP industry has focused on being the nickel dime. We're gonna be, we're gonna win on price. That race to the bottom that you talked about earlier and it is so critical that you're charging properly because this is the best time we've ever seen in this market. I've been here for 20 years. This is the best time this market I've ever seen it as an opportunity to make money. By far.

By far.

Okay, so let me just see. I got a couple other questions that came in here talking about compliance manager. I see that it's kind of hard to keep track of all these. We got a lot of questions and comments here. There's somebody that had asked earlier about what the billing. Somebody looking to start a brand new msp. Is Cassia a fit for them? What does a billing structure for Casseo look like for somebody that's looking to start an MSP on the small.

When you say billing structure, what do you mean by bill?

How do they come in and buy Kaseya and what's the price?

Sure, sure. Yeah. So like the licensing. Yeah, I, if I was starting an MSB tomorrow, I would, you know, again, I've never run an msp, so like, I'm not a, you know, I'm not a, I'm not an MSP doer. I'm like an academic. I can talk about it, but I've never done it. But I would, I would. 100 buy cassette 365 immediately. You have everything you need in one place. We license it by one or a three year contract. Start with 20. You know, let's say they have one customer. I don't. They have, you know, 25 users. Start with 25 users. You know, it's. Does that answer the question, Chris? Like, I think absolutely. We have, you know, we have lots of small MSPs. We have all the biggest MSPs and everybody in the middle. You know, our intention is not to. I had someone ask me once, are you focused on the biggest MSPs? Like, yeah, what about the little guys we have? The way we segment our company is we have like account management organizations that develop expertise in focusing on different types of MSPs, MSPs that are buying other MSPs and aggregating MSPs that are, you know. So the answer to your qu, to this person's question is of course, we'd love to, we'd love to help you get started and get you on your way.

Well, and I will tell you something that I just heard you can start out with as few as 25 seats or I don't even know what the minimum is. But you just told somebody they could start with 25 seats and a one year commitment. Yeah, that's pretty damn good guys. I'm sorry but that is like, that's very reasonable.

Yeah. And you know, I know you and I talked a little bit about multi year prices. The best pricing someone will get from Cassette, it. Sorry, the best pricing that Cassette gives is not a three year contract. If someone wants to do a one year deal, a one year deal, it just costs a little bit more and.

I think that's my program. It's exactly the same. Like I'm going to give you better pricing on a turn deal. Side note guys, you should be selling your services.

100. Oh my God. It amazes me when I talk to MSPs, they're like we want to earn our business every month. I love the fact that the MSP wants to do a great job but oh my lord, like running a business month to month, it's, it's, it's very risky.

Man, we got to go kill your dinner every night. It's very difficult to eat guys. And something I want you to think of our baseline in my coaching program. Seven figure MSP is we tell you to sell baseline $300 per seat based on an 80% gross profit margin on a 36 month commit. That's what we recommend. Can you pivot that around?

Sure.

But the stack stays the same and all in one stack. And then how do you change your price based on term agreement? They want, they want a shorter term. Okay, what happens to the price? It goes up a little bit. How do we get a better price? We extend the term. Gives you a base. Yeah.

And I, and, And for the MSPs there, here's, you know, selling a three year deal. Some people say, well, it's hard. The reason three years came about, just so everybody knows, is in the old days of software when there was no subscriptions, when people were buying perpetual licenses with maintenance, you spent a hundred thousand dollars and you spend 20 a year on maintenance. 3. When, when not even SASS, before SAS, when subscriptions came out, people want to subscribe. Three years was the depreciated period of software.

Exactly.

That's why it came to be three years. That's why it's not four or six. Right. So the, the great part with, with Cassette and I'm, and I'm assuming with most MSPs, when we sell a three year deal, the price is locked for three years. Yeah, you know, so the average Software goes up 17 a year. You're almost doubling the amount at the end of three years. If you buy a three year deal, you're locked and then the price only goes up, you know, 4 or 5% with cassette after that. For MSPs, if you're out there selling your services to the law firm or the architecture firm and they say, well why would I want to do a three year deal? It's the same reason, you know, they can lock it in now. You may, you know, there's different pricing philosophies and I don't claim to be the master of MSP pricing, but it gives that, that's such a powerful statement in, in the era of inflation which we are in. And you know, whatever the government says about the inflation rates, the real inflation rates, probably closer to 12 to 15 a year. I think all of us feel it every single day when we go to the grocery store. It's real life. And I think that's not going to change anytime soon. Hope it does, but that's, that's what's gonna happen.

Yeah. Okay, let me just see here. Anything, Anything. We got like four minutes left here, so I'm be super respectful of your time. I really appreciate you being on with me today. Anything else you want to kind of hit on? Looks if we got another couple questions here, but let's see here. Can you speak to the roadmap for Datto, Rocket Cyber and continuing to develop the stack to be competitive with other products in the marketplace place like Ninja 1 and Huntress.

I mean I, I think we're better than them.

Of course.

I think, I think our, I think our platform is better. I mean I can get into like bits and bytes and features and functions and stuff, but I, I, it's probably not the right form for that. But I can tell you Hunters and Ninja, great companies, you know, I'd like to see them both fail, but they're great companies, you know, like they're my competitors. So we don't like our competitors, but I can tell you we spend exponentially more, we have exponentially more money and more hands on keys building products and integrating products than they do. And that doesn't mean they're bad companies. You know, Hunters is a great company, Ninja's a great company. I just think that it's, math is, math works for a reason. Right? Because it's, it works. And we have more money and more people working on those products than they do. And the people working on our products are also Working on integrating them together inside of the application layer, which those companies can do. So that's at a high level, you know, more than happy to schedule something, Chris, whoever it is, just send me a note and I'll connect them with the product people and they can get.

Yeah, I think that's a, that's also. I, I have no problem bringing you back and talking to me if you're willing to do this. Point coming back, talking some nerd stuff. I don't. I'm not often talking nerd stuff anymore, but it's fun once in a while.

It is, right? Get back to when we were young.

Yeah, right. Any last things you want to say? And again, guys, I had Fred for an hour today, so I'm trying to be super respectful of his time, but more than happy to, to try and get you back here and talk a little bit more stuff.

Chris, this is great, man. I, I'd like to make it more common. Habit of it, if you will. And 100%, I think, I think that, you know, there's, there's. This industry is so big, so complex, yet so simple, you know, And I think sometimes, sometimes if we just make things simple, everybody wins. And I think that I. When I think about what MSPs, when we think about what MSPs have to deal with every day, I mean, these, you know, you guys, meaning you guys and girls, the MSPs in a line you take. A lot of your jobs are really freaking hard. And, you know, I can just say that we're fighting, we're fighting to try to get you the, you know, the respect, the recognition, the reward, whatever the rewards, all it. That's what we're trying to do. We will continue to make mistakes, unfortunately, because we're a company of human beings. Maybe one day we'll all be AI bots and we'll spend about a billion dollars, probably a little more than a billion dollars in 2025. And 100 of that 1 billion plus dollars is spent trying to make MSPs more successful. That's all we're doing.

I think that's key. Yeah. All right, man, it's good to see you. Appreciate you being on with us guys that are. That are with us today. Really appreciate your questions and comments. We're going to try and answer all of it. Fred, if you want to jump on any of these, feel free that they're on the Facebook group on, on YouTube. Some of that's stuff I'll, I'll get with Javi and we'll go through some of that stuff.

Javi can raise the right people to, you know, technical people, commercial people. You know, if someone just wants to.

Damn laptop guys. Just make them answer all these. No, we'll try. So. Okay. But I hope you had a great holiday season. It was really great having you on with us today. I really. From me to you. We're friends, but I appreciate you being here and it means a lot to me. We'll have you back in Q1 here. I'd love that. And we'll see you at the Casaya shows. So we'll see you guys. Have a great day. Have a good New Year and we'll talk soon. Take care, guys. Bye. Bye.