The Future of Managed Services

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What does the next generation think?

I believe a younger generation of MSP leaders is out there waiting in the wings to shake up this industry. Naturally, I wanted to talk to one.

Nick Lorizio is the founder of Astute Technologies known for his expertise in cybersecurity, IT infrastructure, and software development with a focus on AI and IoT integration. He’s also the author of Digitalization, The New Normal of the Post-Pandemic World, which means he had a lot to share when he stopped by for a bonus episode of The Business of Tech.

From legacy providers’ cyber problem to transitioning to a SaaS model, here’s Lorizio’s vision for the future of MSPs.

Lorizio’s Background

Like many fresh college grads, Nick Lorizio didn’t know what to do with his degrees (a blend of business, leadership, and management information systems). So, right after college, he started at a small family-owned IT services firm to gain initial experience working with multiple vendors and technologies.

After three years of learning the ropes, Lorizio went to the private equity backspace at one of Boston’s largest IT networks. He worked with the 4-5 companies a year that were brought into the organization, and really enjoyed working with the owners to integrate their portfolio of accounts during the leadership transition.

Lorizio knew that to become an owner himself, he’d have to dream up his own business one day. So, after developing a personal brand, writing blogs, and publishing a book, the idea for Astute was born. But that wasn’t the end of his journey—he also went back to enterprise to work for Experian, a large credit bureau, and has been focused on stopping and preventing fraud through cyber security.

Why Lorizio Started Astute

Astute was developed in response to Lorizio’s observation that many of the legacy MSPs that were selling were 20-30 years old. Essentially, they were spun up around the dot-com boom, and haven’t changed their service model much since. They still do a lot of break-fix, hourly billing, etc.

He summarized these MSP’s problems with three challenges:

They still rely on channel sales and word of mouth (they sometimes don’t even have Google reviews.
They don’t leverage the power of the gig economy.
Despite starting as help desks, they are trying to be security companies now.

“I noticed a tremendous amount of change happening really rapidly. I said, now is a great time to start anew and build a new service model around it,” he said.

Can MSPs Make the Leap to Security?

That last point felt the most important. Why doesn’t Lorizio think the traditional infrastructure MSP can make the leap to security?

In short, when a large portion of your time as an engineer is focused on troubleshooting, servicing on-premise hardware, managing a private cloud, or trying to compete with massive players like AWS, Azure, Google, and Oracle, you just don’t have the bandwidth to also figure out how to survive.

In his words:

“If they’re not engaged in M&A, where they’re able to kind of buy in and modernize, then I don’t see them surviving this next few years here, especially with the acceleration of AI adoption… Just like when these companies started in the dot-com boom, I see the same thing with the AI boom happening right this very second. It’s kind of leveled the playing field, if you will.”

Blending the Future of Cyber, IT, Software, and AI

So, how can someone bring all of these complex services together in a way that connects with customers? It sure sounds like a tall order, but Lorizio seems to think he’s figuring it out. In some ways, his solution isn’t that different from my usual take that IT folks need to view themselves as drivers of business value (and not just techies):

“I still see your IT partner as a critical aspect of your business. You want to trust that person and know him intimately or her intimately. It’s having a business conversation, saying, let’s put a budget together. Let’s look over the next three, five, seven years and what’s that going to look like… You need to show that value somewhere else, and that’s really where I see cybersecurity services coming in, where you used to pitch cloud or disaster recovery. I see that really taking over as a trusted partner, a trusted instance of AI that might not be publicly accessible.”

That’s the first half of his vision. The second half involves moving away from hourly billing to charging success fees, set-up fees, and other similar fees.

Most importantly, according to Lorizio, we need to move to a SaaS model.

How Astute Positions This to Customers

I asked how Astute pulses this off, and explained the company’s per-user flat fee model, which is currently at $200 a month per user. And, like an insurance bill, things go up over time.

However, Lorizio makes it a point to pitch this model to financial decision-makers whenever possible. When he reaches them, he really focuses on having a collaborative, authentic conversation about their tech investments:

“That person, I don’t always expect them to be the most technical. I want to come in and have a business conversation with that person. It says, how do we get to a SaaS model? Perhaps we look at your IT expenditures over the last three, four, or five years. and let’s break that out into a monthly. I don’t expect the buyer to have all of this intimate knowledge of what’s happening behind the scenes. I just want to give them a very simple structure that’s easy to understand.”

His long-term goal is to take this model to the mass market, so he’s figuring out how to make this conversation replicable. He’s been successful so far by focusing on the value of predictability, which financial folks love.

For example, Lorizio’s conversations often sound like…

“How do we go from where you are now to getting to that predictable monthly fee and really committing to a 36-month term or a four-year term, as opposed to this kind of beat-up-your-IT-vendor, right? Let’s find a number that works well. And let’s plan on doing this long-term, right, so it’s a mutually beneficial agreement and not necessarily a tense one.”

Digitization in the Post-Pandemic World

As for Lorizio’s book, he has some ideas about the pandemic’s impact on digitalization. He explained that one of the core premises of his writing is that when the world shut down, things were great for IT leaders who could adapt to remote services – specifically by sustaining a SaaS model.

In his words:

“What I see happening is the SaaS model continuing to dominate. I see the acceleration of services like cybersecurity now that mass cloud adoption has occurred. The ones that didn’t adopt cloud probably aren’t still around. All of these things have happened, and now it’s like, what’s next? That’s the big focus on cybersecurity.”

He sees the biggest boon for the cyber focus within financial institutions. His book has a whole chapter about how these types of organizations may one day make decisions on behalf of their portfolio companies about what technology partners to use. In Lorizio’s view, paying attention to what those decision-makers want from tech service providers now is the key to staying relevant in the future.

Lorizio has even more ideas we couldn’t squeeze into today’s newsletter, so watch his interview here or check out his book Digitalization, The New Normal of the Post-Pandemic World for more of his next-gen insights.

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