Q&A: ConnectWise CEO Arnie Bellini On The Future Of The MSP Market

The Future Of The MSP Market

The MSP market has opened its arms to reinvention, or if it hasn't, it needs to. That was the theme of ConnectWise's IT Nation event in Orlando, Fla., earlier this month. However, what is the end goal of the reinvention? What's the ultimate opportunity there? How does an MSP position its business to take advantage? ConnectWise CEO Arnie Bellini answers these questions and more as he evaluates the future of the MSP market.

First, how is business going for ConnectWise?

Phenomenal. Pinch-yourself-in-the-morning kind of phenomenal. We're just exploding. We're having a record-setting month every month. We've got all kinds of new market expansion going on. We've got all kinds of new applications that we're putting out with super enhancements and "brain friendly" interfaces. It's just going great, it really is. We are, as a company, hitting on all cylinders. I would tell you -- I can't be prouder to be CEO of this company and this team because, wow.

What kind of partner growth are you guys seeing? Is it accelerating?

It is absolutely accelerating right now. Like I said, we're hitting on all cylinders. I think there's new people in the market and that accounts for some of it. We're hitting some new markets ... I think because of the growth in the technology sector and the growth in our industry right now, specifically without partners, a lot of people in the technology space and technology solution providers are growing right now. We're not in 2008 anymore -- the unemployment rate is way down, Wall Street is way up. There's a lot of optimism, so there's a lot of growth going on right now. That always helps us whenever there's growth in the technology space -- people need a more sophisticated solution, and then they seek us out.

What's the state of health of your partners right now?

The partners are doing good. There's always challenges. The constant in our industry is change, and I always find it amusing because every one of us jumped in as a technology solution provider with advanced knowledge in a specific area, and that's how we made our business, but so many people in this space then just stand stil l... it just doesn't work that way. You have to constantly be reinventing yourself. That's why the message this year was so strong on reinvent because the opportunity is now. You see everything changing in front of you. You see every industry being completely reinvented or rethought by companies who you think could never take on these Goliath industries, but because of these interesting ways they combine the technology, they're being very disruptive.

What's your message to partners about reinventing themselves?

My message to everyone is you don't have to be a Tesla, you don't have to be an Uber. You have plenty of ideas that if you zoom out and look at your business, there's all kinds of ways that you can create unique new practice areas and improve your business and drive yourself to greater success. The opportunity is now. It is absolutely the best time to be in the technology industry in the history of the world. There will be no time greater than this. It's very similar to the turn of the century during the industrial revolution, once so many enabling capabilities and technologies came into place ... It doesn't take massive investment, it just takes a little bit of rethinking of your business and a little bit of zooming out ... I think that is the real opportunity that every single partner has right now.

Why isn't every single partner doing that, if it's such a big opportunity?

The reality is that in every endeavor in life and in everything, there are people who will embrace new solutions to its fullest and there are people who will put them on the shelf ... My message today is there's no need to be afraid of this. It doesn't have to be this big thing. Take the time to zoom out, look at your business, find the places that you can reinvent. No one feels like there's a compelling reason to reinvent or to change themselves or to do a makeover. My message to them is that we all picked the technology space. We know that the only constant is change, so we have to constantly be rethinking and reinventing. That's how we started our business ... We have to continue to invest in the company and reinvent the company, especially in the technology space, so that we'll be relevant for tomorrow.

Do you think most guys are doing that? Or is it a minority?

A lot of them are. It's the younger companies and the newer companies that are starting off fresh and new; you get that for free. But there's a lot of technology entrepreneurs that understand the value of that constant reinvention. Those are the ones that have tremendous success. Those are the ones that grow. Those are the ones that bring a lot of revenue to the bottom line and they end up being very large companies typically. You've got to have a disposition for that. What is success is different for everybody. Some people they want to grow and be a publicy traded company. That's a pretty big goal. But a lot of people just want to have a lifestyle business ... There's nothing wrong with that except for the fact that if you pick the technology space, you can't ride that wave until the end of your career.

Why is this so important right now?

I really do believe that it's a significant time in the history of the world right now. Just like you saw how much the world was changed by the industrial revolution, the information revolution that we're going through now is changing the world at an exponential rate. I think the industrial revolution was a very nice, multiplied effect. We probably became five or 10 times more efficient than we were before, maybe 20. But now we're talking about raised to the power of 10. That's the possibilities with what we have sitting in front of us with technology today. I love this example because it's so simple with the electronic toll collection ... You can only hold back reasonable and necessary change and profitable change for so long. You can't ignore the facts. Eventually, the reality of this cost savings and this advancement of whatever area we're talking about, it's going to win out sooner or later.

For the MSP market, how long do you think they have to 'get with the program' before they start facing real business-ending change?

I am very optimistic about the managed service area. I think that you're going to see a natural verticalization there happening. What I've noticed is that when a lot of partners turn themselves into managed service partners, what they do is they find a niche ...The thing that's changing is that technology is becoming so embedded in business that you can't separate the two anymore. You can't separate the infrastructure from the information that you get from it. It's all one and the same thing. Because of that, you're going to naturally see any IT solution provider start to create niches and verticalize their solutions. The days of being a generalist in that area will only be around for maybe another five years. The people who will really succeed at a high level will be the people who are able to zoom out and say we're really good in this specific area.

How has ConnectWise done that, for example?

We still have a very vibrant, very profitable IT solutions company in Tampa, Fla. What we found is that we're really good at construction companies. There's a lot of them in Florida, so we learned every bit of their software. Now, all of a sudden, we've extended ourselves beyond just taking care of your infrastructure. We said, "Let's stop trying to compete with everybody. Let's just go dominate that space." That doesn't mean, by the way, that Friday we make the decision, and Monday that's all of a sudden all we're doing. It means start building a specialized practice where you really go a little bit deeper with technology. People have to go beyond the infrastructure. Now, you have to actually help them with the information on those systems, and I think a natural place that we're going to see people excel is business intelligence.

Do you have a sense for after everyone gets to this verticalized place, what comes next after that? What do they have to go into next? Or do we not know yet?

Well I'm a big believer in understanding what has to come first. If I could just convince people to jump that first hurdle, they've got time to jump that second hurdle ... The first hurdle is start thinking about reinventing yourself. Start thinking about all of the ways that you can build on the shoulders of giants and can create new solutions by combining technology together in simple and easy ways. I think the sky is the limit after that. The great thing about most of the entrepreneurs in this space is that they love that change, they embrace that change, they're dying for that next technological innovation. As long as they are inquisitive and thirsty for the new innovations and are almost childlike in their ability to explore and play with those new technologies, they'll always find new practice areas that they can make money in.

What does that mean for ConnectWise going forward? What's your road map to keep up with that?

Our main job is to look out two or three years from now and anticipate where the industry will be, to understand what problems we'll have and to start solving for them today. What you saw on the main stage today was just a proliferation of innovation. The cloud manager is a great example of that. ChatAssist is a great example of that.

Are the clients ready to embrace these changes as well?

I think the real opportunity today is that a lot of companies today actually do hire internal IT people, but I think it's inefficient. I think the business model suggests that it can be done for a whole lot less by outsourcing it on a monthly basis -- the entire thing -- to an external company. That's where the industry is going. There's a natural tendency in business to save money because they can save money by outsourcing the care of the entire IT function. Here's where everyone's making a mistake: Everyone's taking a half step towards that, maybe a three-fourths step towards that. The companies who are saying, "I'm taking over all of your IT and taking care of all of your issues," you no longer need that person under your roof ... that's where the real opportunity is, right there, is taking full control of the IT infrastructure and the needs of those knowledge workers.

What does a solution provider have to do to get there?

It will require all solution providers to augment their staff. They've got to start hiring some MBAs, they've got to start hiring some business people as well as technical people, or you've got to be really good about educating the people that are on your help desk so they can answer those business questions ... You're not making business decisions for them, but you certainly can organize the information in a way and support them in a way that allows them to get to that information easier and quicker and to make business decisions better and faster, hence more profitability for their customers. It's a real win-win. There's a natural migration in this way that people don't even know they're migrating in this fashion, but that's where supply and demand and price will intersect at a point where it's most efficient, and we'll become most efficient when it's outsourced. It's an inevitable solution. It's an inevitable reality.

How far do you think we are from that point today?

I think it's happening now. But it is one of those things where it's a cultural change and culture takes time to change. As the IT industry matures, it's going to become obvious that [businesses] don't need that under [their] roof and that that's something [they will] want to outsource and [they'll] save money that way. The IT professional is that professional service that absolutely every company needs, and for some reason there's confusion that they think they need it under their roof. That is automatically going to change because of efficiencies and because it is no longer financially reasonable to do it that way. That's why I'm very optimistic. I don't think that there's anything that anyone has to do -- I think that is going to happen automatically. I think that our partners and all IT solution providers need to understand that this is happening. Get in front of it. Take advantage of it. Take full control of that infrastructure.