Managed services News
ITBD CEO On Culture, M&A And The Kaseya/Datto Deal
“It’s being there for each other as a team. Not only do we just say it, we recognize it and we reward it. Every single thing in our culture is around being there for each other as team members, and we are all equal. Like I can be the CEO but I may have to mop the floor. I lead by example. It‘s about really helping each other create a bigger future and being there for each other.”– Sunny Kaila, ITBD CEO, on the culture of his company.
In the last year IT By Design brought on 200 new team members (now totaling 600), 200 new MSP partners, two new partnerships and multiple new platforms. They’re scaling so fast that they’ve outgrown their own conference venue and are moving to a larger space.
Although the company is scaling up, the Jersey City, N.J.-based master MSP wants to remain community based. Company leadership wants to focus on their team, their culture, the MSP and the end user, the SMB.
“The bigger companies were always there, Microsoft and all the other companies like Dell, and there were different changes with time,” Sunny Kaila, ITBD CEO, told CRN. “What I believe is that when these companies are getting bigger, I already see it, their target market is changing. Their ideal customer profile is changing to a little bigger. Their target market is expanding to midmarket. So this space will always be available: small businesses. They don’t do business with corporate. They want that boutique experience and they’re always going to want a boutique experience.”
He said as companies consolidate platforms, it creates more room for entrepreneurship.
“MSPs will always have the opportunity to serve under-100 people small businesses, that‘s how I see it,” he said. “Consolidation will make companies bigger and those bigger companies’ ideal customer profile will change in terms of who they want to go after and who they want to serve.”
ITBD continues to focus on the smaller MSP and its people. In the last year, ITBD launched both Team GPS and IT CoPs (Communities of Practice).
Team GPS is an employee and client engagement platform that measures a team member’s job satisfaction and performance, recognizes and rewards them, and provides avenues for them for grow with the company. IT CoPs (Communities of Practice) is a peer group experience that challenges individual and leadership development through collective problem solving.
CRN sat down with Sunny Kaila and his wife Kam, president and chief community officer, at their Build IT Live conference in New Jersey last week to discuss the M&A market and their thoughts on the Kaseya/Datto deal, employee culture and the future of ITBD.
Sunny, you talked about moving to the U.S. from India and driving a taxi. Now you run a successful technology company. What inspired you to go from, as you coined it, taxi to tech, and how did that inspiration and your journey translate to how you lead a company?
Sunny: It was the American dream to come here and to make some dollars. After a year or two year I told my father that I really wanted to complete college. I had to choose a major and the first visit to a community college had me connected with someone from India who could speak my language. It was January of 1996 and that person gave me a little bit of guidance that computers are up-and-coming and said that’s one field that I would want to really explore.
I was good in math and science and because of that guidance, what drives me to pay it forward is that guidance. I had to work hard and go to college as well but that guidance really is what transformed me. I finished my computer engineering [degree] in 2000 and that‘s when I started working for a company. But I always wanted to be an entrepreneur. After working for two or three years, I started knocking on doors of some law firms and said, ‘I can be the tech [expert] for some small businesses.’ That gave me an entry into something I didn’t know was called an MSP. I was just there to help some people, small businesses, with their technology problems and there happened to be this space that turned out to be a great space for me.
As an immigrant, when you come you leave everything behind, your family, your siblings, your respect, your reputation. Everything is back there. You start fresh. When you start at 17-and-a-half, then you have nothing to lose. That is the rock bottom. Your tolerance level for frustrations, pain, everything goes up. That humble beginning gives you more humility, and how I lead is with that humility. If you do lifelong learning then the sky‘s the limit. You can break all the barriers. It’s a result of [driving a] taxi to having that educational drive and hunger for learning. It made me be that tech and the hunger for learning made me go find [ConnectWise] IT Nation and others which gave me a lot more of these friends. It was the drive to go somewhere and learn. It’s always that drive.
Kam: And his fearlessness. I think it also made him just not scared.
Sunny: It‘s really that courage to be uncomfortable.
Kam: That‘s important when you’re a CEO and that‘s important when you’re leading a company.
Sunny: That courage to do something bigger than what I think I can gives me a challenge. It gives me that sense of pride and progress. Then when I start doing the bigger thing, it becomes normal. That courage builds a new capability and that new capability gives me more confidence to go to the next, bigger level.
You shared data that said 25 percent of MSPs are losing money or breaking even. How is that, especially during the pandemic when we all went remote and automation and technology is at the forefront of every business?
Sunny: It‘s because of growing labor costs. Every single person out there wants at least 50 to 60 percent more. It’s really labor costs increasing, inflation in general increasing - from their rent to everything else that they pay for and their tool costs going up - it’s really shrinking margins. Customers are resisting price increases and it‘s the only thing that can happen between revenue and the bottom line, your margins. Even your profit gets impacted. So 25 percent of MSPs is a very conservative number that are losing money, especially in the last few years. The problem is even bigger because a lot of people don’t even know that they‘re losing money.
You announced two partnerships, one with N-able and the other with Vijilan Security. What was the idea behind those partnerships?
Sunny: To solve the profit problem and the talent problem. The problem is missing, or lack of, a unified NOC [network operations center] experience. A unified NOC means that NOC requires manpower and technical talent to deliver service. NOC requires technology to monitor and manage servers, routers and switches. Technology and service had to marry to create that one center of responsibility and accountability. When NOC problems are happening, sometimes MSPs are calling the NOC provider and they’re thinking, ‘It’s not our fault. It’s the tool.’ It’s the finger pointing and the blame game that happens. Who is suffering is the MSP and the end customer. So what we are saying is that we are accountable and responsible for the technology that is being used for [the] NOC and we are responsible for any delivery issues as a result. Now people, process and technology is with one company and that‘s why we call it unified NOC.
You expanded offices into the Philippines in the last year and you also mentioned Costa Rica.
Sunny: That‘s another roadmap. We are planning to create at least one additional talent market every year, geographically. There are a lot of other markets that we have been studying and we just want to take it a step at a time. We have been building the Philippines [team] since last year and now it’s totally self-managed. As a visionary for the company I have to go find another market, another product, another partnership. My next stop is somewhere in South America and Costa Rica: From our recent feasibility study there a lot of universities there and a lot of tech talent. A lot of technology companies are setting up business there. That‘s a natural location for us to expand, but one market a year.
What made you choose the Philippines?
Sunny: They‘re born service people. It’s in their DNA. They want to really care for people. So when we have been studying markets, the Philippines can be defined in one word: service. That is the core value of the country: family and really helping others. The Philippines used to be an American colony, and because of the American culture and influence it is culturally very integrated with the US. So when Filipinos are talking to our American business customers, they can talk baseball. There’s much better alignment in terms of customer experience.
What is the biggest challenge you're facing right now?
Sunny: Our number one challenge always is going to be scale. How do you scale without compromising your culture? Because we’re a people company.
What are your partner's biggest challenges right now?
Sunny: Profit, because of talent cost, talent availability and price increases. When it comes to talent it’s the speed-to-hire and the hybrid work model. It’s people‘s resistance to come back to the offices. How do you keep your culture strong in the hybrid workplace or the modern workplace?
And then cybersecurity, it’s the risk that these businesses have. There‘s so much going on in the cybersecurity space and, then, as a small business, it’s not having enough resources for them to protect themselves and their customers.
You guys emphasize people and culture at ITBD. What makes your company fun?
Sunny: My wife Kam. She‘s very creative. Her personality comes out in these videos [shown at Build IT Live]. She keeps us all bubbly. And making engineers do those types of dances…the fact that she’s able to really think about these ideas and have a team behind those videos is really amazing.
Kam: They enjoy it now. It was hard the first time we did it but we‘ve done so many of them. I remember the first time they were like, ‘You want us to do what?’ We were upstairs and we did (a video) to Justin Timberlake and it was cold but we had such great feedback from it. People started to love it. We’re creative and we want to have fun. Everything we do are in-house productions. From the music to everything else, the entire team gets behind it. The reason I mention that is because it‘s a community effort. They all love being a part of it. That just shows you the spirit of the team. They’re all so happy and engaged to be part of this. They‘re all so invested in this because they see how important it is not just to us, but how important it is to our community and the give-back initiatives that we’re doing.
Sunny, you said during your keynote that you design your company culture. How would you describe the culture at ITBD?
Sunny: It’s being there for each other as a team. Not only do we just say it, we recognize it and we reward it. Every single thing in our culture is around being there for each other as team members and we are all equal. Like, I can be the CEO but I may have to mop the floor. I lead by example. It‘s about really helping each other create a bigger future and being there for each other.
When I talked to you both a year ago you said your challenge was talent shortages and retention. Are you still dealing with that?
Sunny: When the challenge was bigger last year we built a better recruitment capability, so we added a lot more fuel to our recruitment team in terms of the people and process. From the retention point of view, we are laser-focused on career development. Why people leave, normally, is to find a better future and a better quality of life. What we have done is we had those conversations and we call it culture by design, which is basically a pipeline for every individual. We look at the bigger picture of the individual. What are your desires in terms of your health? What are your desires in terms of your career? What was your desires in terms of your family? What are your desires in terms of your legacy? So we created these four plans because that‘s what everyone wants. They want to know how you can support them with a bigger future.
In the last year you launched Team GPS and IT Communities of Practice, how do these programs help MSPs?
Sunny: It helps you align your people strategy with your business strategy, that’s Team GPS. When your talent is well aligned with your business objectives, then they are more productive, they produce better outcomes. If you’re creating better outcomes from the business point of view, then the profit problem is solved, there’s well-aligned talent and it brings a lot more value creation for the business and for the customer.
Kam: The CoPs (communities of practice) are about educating your leaders, helping them do their jobs better and helping them grow as individuals. It‘s really about being intentional about your own professional growth and that lifelong learning. These are courses that last a year, where we have 10 people in a class where we’re teaching them. Everything is very geared towards the MSP. We‘ve had the leadership group where we partner with organizations and we tailor the content so it’s specific and relatable to the MSP. Then every quarter we assign homework that is going to be implemented in the MSP, so they‘re learning, but the MSP is also gaining value. You’re learning and then you’re doing the practice work. CoPs are really people who are investing back in themselves. They‘re owners, but it’s them being able to groom those next layers of leaders.
Sunny: One of the business outcomes, from an MSP perspective, is retention. They don‘t have the training internally, so they need to be able to partner up with someone. In a recent survey we found that the biggest thing an employer can do for the people to retain them, at the top, was helping them learn. If a person is having that sense of learning and growing within the organization, they don’t go somewhere else to grow and learn more. MSPs being able to leverage CoPs, they are giving their investment, their growth, their learning to the person, and the outcome there is retention and more loyalty from that person, more love from that person to the company, and they produce more. The overall business productivity goes up. These people are happy and engaged, they are paid, they are well trained, they create a better value for their MSP customer, which means customer retention, as a result of their employee happiness.
What are your thoughts on the current M&A market. Have you ever thought about acquiring a company or even being acquired?
Sunny: Here‘s my general thinking on this: We’ve changed in the last two, three years. We all have to have some kind of exit plan, but as long as IT By Design…the way we are growing, it‘s really giving us joy and happiness and a sense of pride and progress. Pride due to progress. Progress means how many lives we are impacting, the community of practice, doing it not only in the U.S., but we are changing lives in India, we’re changing lives in the Philippines and other countries.
I don’t have to be Mother Teresa and go to Calcutta to change lives in India. I can be sitting here as an entrepreneur and create that opportunity in India to be the hero for someone. When money is not the main driver, your ‘why’ of getting up every day and being useful, being helpful, having a sense of progress, having that sense of growth keeps you young. If we sell, what are we going to do? I love it so much. I enjoy this so much that I never want to retire.
As an entrepreneur my work type will change, but then I can have a CEO and still be the chairman. I want to stay productive and busy and useful every day. This is our purpose and we‘re living our purpose and when you’re living your purpose it‘s not work.
Kam: Build IT Live is not a money maker. Build IT University, Communities of Practice, this is our gift back. It makes us feel good. Putting it together and the time and effort…it gives us that purpose. And the one thing I do want to stress as well is that it‘s important for us, we take the responsibility of the 600 families very seriously. It’s why we are still privately held, and people are quite astonished, that there‘s no PE (private equity) money. It’s all 100-percent us. There‘s no debt. This is us and every single office is owned and operated by us, every single employee is an IT By Design employee full time. We take a lot of responsibility for those families. And so when you say, ‘Do you think about being acquired?’ Those families are very, very important and their futures are very, very important to us. So no, we enjoy what we’re doing. We enjoy the satisfaction that it gives us and the difference that we‘re making not only in those 600 families, but the 500 attendees that are here.
Sunny: It’s that impact. Here‘s the advice to MSP entrepreneurs: A bored entrepreneur will die. A failed entrepreneur will not die because a failed entrepreneur will have a challenge in the next day. Entrepreneurs are entrepreneurs because they can navigate uncertainty every day. That’s what keeps them alive and happy. So a failed entrepreneur will have something to solve the next day and they will grow. They will continue to go about their life. When you are a bored entrepreneur you have nothing, no purpose.
What are your overall thoughts on Kaseya acquiring Datto and all the buzz it has stirred in the channel?
Sunny: We are tool agnostic and work with all companies. I think it‘s a clash of value systems. Datto’s core values and culture was very different than Kaseya. I’m not saying which one is good or bad, I don‘t have that insight or knowledge. But what I know for sure is, it was different and those differences just take time for human beings to reconcile things. It’s that value system difference and they have to just figure it out. Once they are very clear in terms of who they want to be, what their identity is as a company and the culture, I think the sooner they figure that out it‘s better overall for the companies.
I talked about a controllable list and a non-controllable list. What’s not in our controllable list is who Kaseya is going to buy, what companies are going to give them money to buy, that’s not in our control. But what‘s in our control is what Kam said in terms of keeping this ecosystem alive. We need to encourage more on startups. Those startups will stay small.
Kam: My only concern is there‘s so much consolidation. There has to be freedom of choice. When there’s more competitors, that inspires creativity and invention and more technology and better, faster, efficient. When there‘s less people in the space, and right now it just seems like everybody’s gobbling everybody up…we‘ve gone from this big of a channel down to this big of a channel because everybody is just getting bigger and bigger and bigger. I feel bad for the small MSP. There was such a good community feeling before.
When Arnie [Bellini, ConnectWise founder] was at ConnectWise…people have compared that to us, that passing of the baton of what it used to feel like where it was community and helping and everybody knew everybody. Now, as companies are growing and they‘re consolidating…I get it as a one-stop shop type, I just worry about how important are we [that are] left. Everything has now become so corporate. And I value the community. Maybe that’s just me wanting to stay in my little community bubble, I want everybody to be friends and we‘re on this little ship and we’re all together. And that could be me just being naïve. But it‘s important that those value systems stay in this and it doesn’t become Wall Street. We are a channel and it‘s been a small channel because we are a tight-knit community and I don’t want us to lose that tight-knit community.