SMB Community Podcast

The episode’s primary focus centers on the introduction of China-based Alibaba's new artificial intelligence (AI) model, which is positioned to rival existing US-developed models. This development has triggered concerns within the US federal government regarding the potential superiority of these foreign AI models and resulting security and data governance risks. The discussion further noted that recent import bans in the US have included consumer and business products containing AI elements, such as robotic vacuum cleaners, reflecting heightened regulatory scrutiny and caution toward foreign AI integration in both enterprise and consumer environments.

Supporting details outlined that Chinese technology companies have released an increasing number of AI models, including both large-scale and smaller, task-specific models. According to the discussion, the trend toward “distilled” or smaller models, which are trained based on larger systems, introduces efficiency benefits but also creates concern about loss of fidelity or intelligence in iterative retraining. Reference was made to a lengthy public statement by Meta’s CEO on the risks and advantages of model distillation and to US regulatory actions responding to these broad technology shifts.

A key secondary topic was the launch of the Managed Intelligence Alliance (MIA), formed at ChannelCon 2026 to address AI standards, accreditation, and governance for MSPs. However, analysis pointed out that the Alliance’s executive leadership is comprised primarily of large aggregators and vendors, with a notable absence of direct representation from operational MSPs. The structure involves engagement with Texas A&M University for association-building, but concerns were raised regarding industry self-regulation, stakeholder representation, and the practical function of such alliances for the broader MSP segment.

TITLE: Probing Client AI Opportunities and Managing Leadership Meetings for MSPs
Question of the Week: What are some good pre-sales probing questions to get the conversation going with a prospect around AI opportunities?

AI: Chinese AI models, smaller/distilled models, and AI training
Meetings: How to run better weekly leadership meetings
ChannelCon: Managed Intelligence Alliance and MSP industry standards
Tales from the Field: The value of a small MSP business

The discussion concluded with practical implications for MSPs and IT service providers, emphasizing risk management, the importance of understanding both external technological developments and internal AI adoption, and the need for clear standards and governance amid evolving vendor and regulatory landscapes. The conversation highlighted the necessity for MSPs to critically assess tool adoption, process discipline in meetings, and asset valuation, while maintaining vigilance over the security, accountability, and ownership structures within emerging technology initiatives and industry alliances.

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Private equity (PE) acquisition trends in the Managed Service Provider (MSP) sector are targeting smaller firms at increasing rates, with offers now being extended to MSPs in the $1–3 million revenue range. PE activity, once limited to companies exceeding $5 million in annual revenue, is now resulting in more than half of current offers for these smaller businesses coming from large financial entities. This development creates both opportunities and risks for small and boutique MSPs, especially those with specialization or unique market positioning.

Market data and discussion on the podcast highlighted a “void” in the $3–5 million MSP segment, attributed to sustained PE buyouts and the slower organic growth required to fill this gap. Growth beyond the $2 million threshold remains a structural challenge for many MSPs, requiring investment in management layers and business process sophistication. PE acquirers are described as increasingly eager, but both success rates and culture-fit issues remain a concern, with statistics reportedly indicating that many PE integrations do not succeed in the long run. Diligent vetting of acquirers and focus on internal operational maturity were emphasized as risk mitigations.

Other topics examined included the implications of third-party cloud outages, such as the Microsoft incident of July 24, 2026, and their effects on MSP–client communication protocols. It was noted that responsibility for outages often lies outside the MSP’s control, making timely, empathetic, and proactive client communication essential. Additional segments addressed risks associated with misaligned business ethics—such as using misleading job advertising—and the operational significance of transparency and genuine client interaction. Opportunities for skill development were identified through emerging partner programs in AI, specifically pointing to free certification offerings from Google and Anthropic, with the observation that 65.7% of MSPs have no public-facing AI narrative.

For MSP leaders, these findings point to a need for robust organizational processes: strategic specialization, internal reinvestment, and strong core value alignment to withstand shifting acquisition patterns and integration risks. Vendor and platform accountability, particularly regarding service continuity, should remain central in client management practices. Skill development in AI and transparent business operations are positioned as differentiators in a market where rapid change and client trust are both key risk and opportunity factors.

On July 24th Microsoft had an outage that covered a lot of North America for about 5 hours. https://www.instagram.com/p/DbKyeZVmauy/

What if you don’t want to sell your company? PE is snapping up the larger end of the MSP market. Is that an opportunity or a threat for smaller MSPs? https://ctacquisitions.com/guides/private-equity-msp-2026/

The MSP of the future. Amy has been writing for 3 years on this topic and now has a summary article. https://www.thirdtier.net/2026/07/23/the-msp-of-the-future-pulling-the-threads-together/

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A key focus of the episode is on practical approaches to conducting pre-sales assessments for prospective managed service clients, particularly those with existing MSP relationships and under 100 employees. Hosts discussed that frontline assessment methods often prioritize observational “walk-arounds” and targeted questioning rather than the deployment of specialized tools, except in cases where complexity or asset uncertainty warrants additional rigor. The conversation emphasized that visible signs of technological investment (or lack thereof) and management engagement provide valuable risk indicators to help MSPs assess prospect suitability and potential client alignment.

Supporting details included recommendations against using automated network scanning tools as a default during the sales process, especially for smaller prospects. Instead, initial technology and business process understanding should be driven by reviewing company websites, social media, and conducting direct observation and informal dialogue with staff. For more complex environments or where asset counts are ambiguous, tools such as Galactic Advisors, RapidFire Tools, or Lansweeper were suggested, but only after careful consideration of the actual information gap. MSPs were advised to leverage preexisting documentation and probe for differences with prior MSPs, focusing on gaps in service, dissatisfaction, or unaddressed needs.

Secondary topics included the necessity of formal Master Service Agreements (MSAs) and the operational risks of long-running unwritten arrangements. The hosts reported that customer pushback on contracts is rare; those unwilling to sign can be managed through premium pricing or operational discretion. The use of digital document management and auto-renew online agreements was cited as a means to streamline governance and ensure that contractual terms keep pace with operational changes. The conversation also addressed best practices for Quarterly or Technology Business Reviews (QBRs/TBRs)—advocating for business-oriented, forward-looking discussions rather than technical or ticket-driven reporting, and highlighting risk in overinvesting staff time in meeting preparation.

The episode concluded with a practical case study on recurring revenue management, highlighting a systematic approach to price increases after extended periods without adjustment. The case demonstrated that fears of customer attrition due to price adjustments are often overstated, particularly when supported by transparent communication and a graduated rollout to well-aligned clients. The discussion reiterated the importance for MSPs to maintain accountability, regularly review contractual agreements, manage operational costs, and structure client engagements to reduce risk exposure while improving alignment with organizational goals.

Title:   How do you complete an assessment for a prospect?

Topics/Events

Question Of The Week: How do you complete an assessment for a prospect? 

What to do if you don’t have agreements in place, but you’ve worked with recurring clients for years. 

QBRs – what questions should you be asking during your regular QBRs with your clients

CMMC third-party audits are paused. The channel opportunity isn’t. ChannelE2E https://share.google/4vXDd5G3ysgflU6PU

STORY:  Reviewing a MSP’s current agreements, James realized the MSP hadn’t had a price increase for over 5 years. 

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A significant development discussed in the SMB Community Podcast episode highlights the evolving Microsoft Partner Program. Microsoft has updated its partner program at the start of its fiscal year, introducing new opportunities and incentives. Notable changes include the loosening of Agent365 licensing, allowing its addition to Business Premium licenses and other tiers, and offering a 25% discount on Windows 365 licenses for both new and existing customers. Additionally, Copilot for Business is now available with a 15% discount for the upcoming year through the partner program. These updates present potential financial benefits and strategic advantages for MSPs engaging with Microsoft's offerings.

The episode also touches upon the increased adoption of onboarding fees among MSPs. While some MSPs prefer to integrate initial setup costs into project-based work, a growing percentage now charge explicit onboarding fees. One discussed model involves charging a fee equivalent to one month's recurring service cost, with some offering waivers for multi-year agreements. Another creative approach noted is using the onboarding fee to fund sales commissions, providing sales representatives with negotiation leverage. This trend suggests a shift in how MSPs are structuring their client acquisition and initial service delivery processes.

Further discussions in the podcast address the broader labor shortage in the technology sector, which is reportedly more significant than concerns surrounding AI's impact on jobs. The shortage particularly affects highly educated IT professionals, including those with degrees and senior engineering expertise, with an estimated 50,000 jobs at risk. This situation presents opportunities for existing industry professionals to advance and for AI or new entrants to fill entry-level roles. Concurrently, there is a recognized need for enhanced business acumen and financial literacy among IT professionals to better understand client business needs and articulate the return on investment for technology solutions.

For MSPs and IT service providers, the updated Microsoft Partner Program offers tangible financial incentives and opportunities for service expansion, particularly with the introduction of the Copilot specialization. The increasing prevalence of onboarding fees warrants a review of client acquisition strategies, balancing revenue generation with potential client apprehension. The persistent labor shortage underscores the importance of continuous training and upskilling, with a particular emphasis on developing business and financial literacy alongside technical expertise. Finally, the discussion on mergers highlights the critical importance of cultural alignment and clear, written agreements regarding governance and exit strategies, as poorly managed mergers can significantly diminish business value.

Is it worth it to become a certified Microsoft Partner?   

Labor shortage link: https://www.linkedin.com/news/story/record-labor-shortage-may-pose-larger-threat-than-ai-8379017/

 

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The episode addressed the heightened challenges MSPs and IT service providers face in client acquisition, with specific reference to a recent Kaseya report indicating that twice as many MSPs describe obtaining new clients as more difficult compared to the previous year. This shift is attributed, in part, to changes in marketing efficacy and the increased reliance on referrals rather than structured marketing strategies. These findings emphasize the need for a consistent, proactive marketing approach—moving beyond informal networks—to counteract periods of slow business and ensure stable revenue.

Discussion highlighted that many MSPs lack a formalized marketing plan and treat the absence of active marketing as a matter of pride, despite clear evidence that consistent marketing activities are essential for growth and resilience. According to James Kernan, "marketing is the oxygen of your business," and its absence correlates directly with reduced new business opportunities. Strategies such as recurring in-person or online engagement with clients, regular assessment of marketing practices, and leveraging written marketing plans were identified as actionable recommendations for sustaining pipeline health.

A secondary focus examined operational risk and opportunity related to "shadow AI"—unauthorized or unmanaged use of AI tools by clients’ staff. Amy Babinchak detailed three core risks: accidental exposure of confidential data, violation of contracts or regulatory requirements, and a lack of auditable records for actions taken by shadow AI tools. The discussion identified practical risk mitigation steps, including staff education, policy development, and implementation of monitoring tools, all of which represent billable opportunities for MSPs while reducing downstream liability in the event of a breach.

For technology service providers and decision-makers, the episode underscores the operational imperative of formal, consistent marketing—even during slow periods—as well as the need for vigilant governance over emerging technology risk vectors such as shadow AI. By proactively engaging clients through both marketing and risk education, MSPs can better protect their businesses while expanding stable, recurring revenue streams rooted in demonstrable expertise and accountable service delivery.

Title:   How do I get more business when it’s slow?

M&A Topic: Why is an elevator pitch for my business important?

Article: Why is finding new clients harder? Double the number of MSPs in Kasaya reported said so. https://www.kaseya.com/blog/msp-growth-challenges-2026/

QBR Talk: Talk to your clients about Shadow AI https://www.thirdtier.net/2026/06/25/speak-to-your-client-about-shadow-ai/

Tales from the field: A fictional tale about the Trunk Slammer from Hell. 

https://www.reddit.com/r/msp/comments/1u82vnh/i_got_obsoleted_by_ai_so_i_wrote_you_all_a_bofh/

UPCOMING CHANNEL EVENTS

Mastermind LIVE in Omaha NEJuly 30-31st

Register: 

https://kernanconsulting-mastermind.mykajabi.com/mastermind-event

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