[57] – The MSP Series: Special Guests Daniel Johnson and Nate Taylor of machineLOGIC

Welcome to PSA Impact, your podcast for all things PSA, RMM, and MSP, with your hosts, Rae-Ann Buccianico and Chris Timm. Learn how to get the most out of your PSA tool and manage your business by maximizing profitability and increasing efficiency within your MSP business. Let's listen in. Hi, everyone, and welcome to another episode of PSA Impact with your hosts, myself, Chris Timm, and my co-host, Rae-Ann Buccianico. Hey, Rae-Ann, how are you doing?

How are you? How are things on your side of the water? Great. Thank you. The sun has started to shine.

It's almost spring, so things are going well over here in the UK, and we've got no more COVID, so that's great. No more COVID. Well, tell the rest of the world how to do that, right, because we're still struggling over here. Well, you know what? They just stopped talking about it on the news.

That means it's gone, right? It's gone, right? Apparently, so, hey, we're just back to normal, so I'm okay with that. I'm happy with that. How about you guys over there?

We're doing fine. You know, the sun is shining. Well, I'm in Florida, so it's been spring already for a couple of weeks, but we have some guests today, and I don't know that they're experiencing spring just yet. And we actually got a very special episode today as well. We're going to kind of talk about a very kind of hot topic in the MSP industry at the moment, all about the Microsoft NCE stuff, and the guests that we have on today are experts in that field.

So, do you want to take it away and just introduce who they are, Rhea? Absolutely. So, today we have Dan Johnson and Nathan Taylor of MachineLogic out of Inverness, Colorado, which is right outside of Denver. So, welcome to the show, and thank you so much for taking time out of your day to come and join us today. Do you want to tell us just a little bit about your company and your relationship and how you're handling the changes in the channel?

Sure. Thanks for having us on the podcast. We appreciate it. My name is Daniel Johnson. I'm the CEO of MachineLogic.

We are a managed service provider in the Denver area, but we work with companies all across the U.S. and globally. We are a Microsoft Gold partner, and for this podcast's purposes, we are an Autotask and Datto partner on the PSA side of things, very much involved in Microsoft's CSP program. We've got quite a few licenses under management, and we've got a great team of folks that tackle security and cloud transformation for midsize companies. And joining me is Nathan Taylor, our CTO. I'll let him talk about his role a little bit, too.

Yeah, thanks for having us, guys. It's definitely not spring in Denver. We're going to get two to four inches of snow any minute now. It'll be falling right outside the window here. So, yeah, I'm the CTO, so I manage our engineering teams and kind of lead a lot of our architecture and project efforts as an MSP.

But we also are very involved in the community through a couple of key vendors. Tight relationship with Pax8, who's an indirect provider here in the States that's been incredibly helpful for some of these CSP transitions, and we sit on a couple of advisory councils with them and are grateful for their partnership. And we also have a pretty tight relationship with Microsoft. We have the privilege of being on a few advisory councils for them and also being involved in some of the, even some of the internal conversations about NCE as it's been getting implemented and trying to help Microsoft understand why it's having such a big impact on us partners. So excited to be part of this conversation today.

I'm just so excited that you are here because there's a lot of questions going on in the channel and a lot of misinformation. And I think, you know, people are just really confused. So, Chris, did you want to start firing some questions at them? Yeah. So I think one of the ones I think I wanted to ask is certainly round about this time, and I know before we started recording, you guys mentioned about dates and timeframes and what have you.

So we're almost in the 1st of March when we're recording this. So, you know, if an MSP hasn't kind of started getting everything in order by now, is it too late? Do they still have time? Do you want to just kind of talk us through a little bit of that process? Sure.

I'll start off with a couple and I'll let Nathan kind of double click into the details. There's a couple of major things that are happening. And one of them is kind of what I think is generating some of the confusion on the transition to the new commerce experience. One, and that is Microsoft is raising prices on key SKUs. And that's driving the first bit of reaction in the market and change.

But it's actually probably the least impactful of the changes within CE. Those price changes are going to go in effect March 1st. But the more important piece is the ways in which you will obtain those licenses and the commitments around them. So whether you go month to month with a surcharge, whether you choose an annual license or a multi-year license, and then if it's an annual or multi-year license, whether you choose to pay that all up front, pay that monthly, as most people are used to paying, or some combinations thereof. So that transition, new orders will have to be transitioned to that new ordering model and new commitment model on March 10th.

And then all licensing has to be converted to that new model by June 30th. Yeah, a couple of things I want to tag onto there is one thing I'm hearing a lot in the industry, in the conversations, is that a lot of partners are hoping that this will go away, that Microsoft will understand the impact they're having and change things. And I think there's a very strong likelihood that that's not going to happen. Every conversation I've had with internal people at Microsoft, every conversation I've had with indirect resellers, people like Pax8, there is no indication that any of this is getting slowed down or changed. It's something we have to embrace.

It's something we have to understand. They may take the edge off of a couple of the painful parts and might give us more key points of flexibility on some details over time, but I would expect those things to happen over the next 6 to 12 months. There's a possibility that maybe a date, like a June 30th date, might slip a couple months, but the reality is this is our future. This is going forward, and we either embrace it or get out of selling Microsoft licenses. Those are kind of your options at this point.

So it's time to, if you haven't dug into it, it's time to dig in and really figure out what you're going to do. So I have a specific question, right? So our options are pay a 20% premium for the monthly invoicing or pay the full year up front, or is that not correct? One option for annual. You can have a one-year commitment and pay it monthly.

So as long as I commit to the year, I'm going to pay the higher price, but I won't get the 20% surcharge. Is that correct? That is correct. And by when do I have to commit to that year? June 30th.

You'll have trouble transacting new licenses outside of a commitment starting in March. You want to sign a new customer, they want to add a new SKU, you're not going to be able to do that without making that commitment or paying the premium starting in March. But in June is when you won't be able to even change current existing subscriptions without making that commitment. So a question from my side, from what I understand, is that also this means that commitment means you stick with whichever vendor you purchase it from. So if you buy it from Pax8, you committed to them for that period of time.

Correct or no? Yeah, there's two interesting pieces about the commitment. Well, maybe three. One is you're making a commitment to a certain license, a level of licenses, a certain quantity of licenses, meaning you can increment, but you cannot decrement. So if I buy 50 licenses for a one-year contract, I can't decrement that until the anniversary of that one-year agreement.

So that's an interesting thing. And we'll kind of follow up on strategies around how to best manage that and how that ties into the PSA. When you talk about you're making that commitment, the shift is the partner is now making the commitment for those licenses and they are committing to the channel in which they purchase, meaning a customer can't, in the current NCE rules, a customer, once they make that commitment on that license, they've made that commitment with that partner, but the partner actually holds the liability for that financial commitment. And you can't transfer that around like we've been used to, where, hey, I have a new MSP comes in, the customer allows them to transfer their CSP relationship in. Transferability is not a feature in the new model.

And so that slows down some sales growth that makes some decisions very interesting as we enter into executing this. So if I have a customer and I'm selling them 20 licenses, and then six months from now, they decide they don't like me anymore and they want to fire me, right? So they're kind of stuck with me at least for the next six months for those licenses. Either that or I'm going to have to pay and lose the money. Correct.

So you have to have an ironclad agreement with your customer and a willingness to work through that. Yeah, I think that's huge because I know that there's plenty of MSPs out there that don't have that ironclad MSA with their customers. Not only that, but often, even when we do have an ironclad MSA, almost every partner we've talked to about this goes, we don't want to enforce that MSA on a normal customer because if you're not happy with my support, I'm not going to force you to live with my support for six months if you're unhappy. Let's pick a 30 to 60 day out moment. Let's work through anything that's remaining and let's give you a simple transition to your next partner.

That's how the MSP industry works. Hey, you guys have moved on. We're sad to see you go. Maybe we did something wrong. Maybe we didn't.

Maybe it's variables we can't control. You got a new partner. Let's make that happen because what goes around comes around, right? We have this MSP mindset of your customers come and go. Make it a smooth transition and that will pay off in the end.

Almost everybody I talk to says, yeah, 30 to 60 days. I'll let most customers out of most agreements. This is now an outlier. I can't let you out. Now, maybe I can say, yeah, go ahead and move your MSP services because you're unhappy, but you're going to continue to pay me for these licenses and you're going to let your new provider stay.

And you're going to let your new provider start charging you for these until this time is over. There is one variable on these commitments, though, which is you can layer them in many layers. So I could do 20 licenses of business premium through Pax 8. That's on a one-year commit. I could do another 20 licenses through Invermicro that's on a different one-year commit.

I could do another 20 licenses that are on a credit card on a one-year commit. I could layer on some monthly licenses in the same SKU. So there are ways that these can be massaged, but you have to really think through what is the license and what is the commitment and how does that work together? And it's going to make for some very complicated transition moments. You know, hey, a customer comes to you.

Hey, I'm ready to be here. I want you to be my new MSP. Great. We got to go look at your portal and figure out all the variables here and build a roadmap for how we transition these off your previous provider because it's on us to not also put previous providers in a bad spot as well. A couple of questions I have on that, if you don't mind, is so you were talking about buying 20 licenses here and 20 there.

Is that a pool of licenses? So as the MSP, I could buy that. And if my customer then walks away and says, I'm going to go to another MSP, those are not transferable. So I cannot then say these belong to me and I can sell them to whoever I want. And that's a discussion point of if you're going to demand that I pay for a product, I need to be able to sell that product to other people.

It's just not a feature right now of the program, which is unfortunate. Piggybacking off one of Nathan's points, there's the change of MSP and the change of channel and the change of relationships there is one thing, but what we're also hearing from partners is a lot of times an MSP is growing because their customers is growing through acquisition. And so this affects M&A transactions at the customer level of, hey, my customer bought one of their competitors. We need to pull them into our environment. Well, now I have this drag in the system of being able to transfer that in.

And not only does that create some building complexity and relationship complexity, but it has the potential of creating some level of security complexity as well. So it's just something to think about. Another question on this then is, are you seeing MSPs kind of stopping selling Microsoft or saying to the customers they need to go direct to Microsoft? Because that would be one of the things at this point, if I was an MSP again, when I had my MSP business way back when we had a similar problem with hardware, right? And I stopped selling hardware and I just said, you go direct to Amazon or wherever you buy the hardware, I'll configure it for you.

But it's your responsibility. Are you seeing that a lot of kind of MSPs going, okay, Mr. Customer, I'm not selling you 365 licenses anymore. It's on you. I think especially on the smaller MSP side, that's going to be a common response because here's the outcome of this.

I've got my average customer has three to five 365 SKUs. If I didn't buy those 12 month commits at the same time, they all get separate termination dates. So I may have half a dozen 12 month commits that have to be managed separately per customer times 50, 60 customers. You're talking a lot of effort to keep track of these annual commitments because you've got to once a year ago, make sure those licenses are chewed up and, you know, make sure people really want another year of commitment. It's a ton of administrative overhead.

So between the risk for the MSP and the administrative overhead, I am hearing a really strong sentiment, especially from the smaller MSPs that I don't make that much money on CSP. Go put your credit card number on there and I'm out. And I think that's going to be a very common thing. And kind of one of the unfortunate side effects of NCE is I think it's going to really take some of the value and momentum out of that partner program that got built over the last few years. I think the bigger MSPs like us, it's too big of a revenue stream and a value add for us to just walk away from it.

So we'll do the work to understand it and embrace it. And that's why we've pushed so hard on Microsoft. And like the previous conversation we just had about transferability was one of the big conversation points with Microsoft, that they're trying to understand what is that need and how do we address it, whether it's partner to partner or M&A. Maybe they'll change some things over the coming year to try and address those needs and those concerns. Maybe not.

I don't know. But we tried to explain it to them. But I think only the bigger MSPs are going to be willing to put the work in to deal with the complexities of NCE because there's enough revenue there for it. I have a couple of questions on what you were just talking about, Nathan. The first one was the administrative burden.

Right? And you were talking about if you sell five licenses, you know, at five different points, then you've got five different renewal dates that you need to monitor. I've heard from others that if I buy 10 licenses or I've got 10 licenses on an annual commitment, and then three months later I pick up two more licenses, if I try to put that into my PSA contract, my contract is going to prorate it. But in reality, is that going to get prorated? Does the termination date stay the same for that customer?

Or do I really have to track each individual license renewal date? Yeah. Let me be clear about that because it's a great question. If I have 20 business premium on a 12 month commit and three months in, I want to bump that to 25 business premium, those will all co-term within that one family. So I can add licenses and keep my termination dates.

Usually they'll be prorated for the rest of the month and get added. And, you know, your CSP can kind of help you with that. But, you know, that works a lot like what we have now. Hey, I added it middle of the month. I have through the end of the month.

And then they just start building as part of that. Where that gets complicated is three months into my business premium journey. I decided to add business voice, you know, audio, you know, a team's plan onto that, a team's voice plan that will have its own termination date at this point. So it's not necessarily individual licenses. It's licensed families will have their own, you know, subscriptions.

You know, we've got terminology here, but individual subscriptions have their own termination date, which is not impacted by increments. And I, there is some discussion that Microsoft understands the pain of this. And this is a believe efforting to create the ability to co-term. So if I have to add something partway through, I can ride on another subscriptions termination date. And so I can get stuff lined up.

And my impression is that that is a feature that eventually will be available because they understand that complexity. But as of this date, as of right now, that's not true. There's an add on onto that too, which is add-ons are typically just something we easily bolt onto things like business voice or PSTN conferencing, things like that. Those are not all available on the monthly program yet. So you might have a monthly customer choose to pay the 20% premium and go month to month on business premium, but then they might choose an add-on that's only available annually.

It gets a little complicated. We think that they're going to solve that. There's indications that they're going to open up more SKUs for the month to month, which will give a little bit more flexibility for those types of transactions. But yeah, they solved a lot of that March 1st. They added, there was about 62 SKUs that didn't have month to month options at the end of February.

I'm sorry, at the end of January, February 1st, they added, I think, 55 of those into monthly. So they fixed a lot of them, but there are still a few gotchas and, you know, you'll want to work with your distributor to kind of figure out what those are. So kind of coming back to kind of what Ryan was asking about the PSA. So what I'm hearing is if you're staying within the same family, so if you're buying business premiums, then they all co-term at the same time. So you could set that up as a yearly contract or a monthly contract or whatever, and all the tasks, and they'll just, it'll just run as any other contract.

But when you're buying the different add-ons or the different SKUs, at that point, you're going to need to have different contracts set up. And I'd be interested to know, you guys say you're using all the tasks. So how are you guys currently doing that? Or how are you planning to do that in all the tasks? I think that'll help a lot of our listeners as well.

Yeah. We originally took that approach, which is, if there's a 12 month commit, we need to map that to a contract. That way we get notified of contracts and we can see that what ends up happening though, is you end up with, like Nathan was saying before, four or five, seven contracts in PSA. Now you have unintended consequences of complexity. It's harder to show your customer, you know, snapshot of licensing and things like that.

And so I think what, after we analyzed it, we determined, nope, we're going to leave our software subscriptions in a contract, probably lumped in with all the other conscriptions, security and backup and all these things, and use other mechanisms to trigger that renewal conversation and to trigger the visibility on those termination and renewal dates. So there's tying that into Autotask ESA, there's workflow rules that could be applied to that. There's, if you're working through a tier one distributor, like we do with PAX 8, there's email notifications that can then get ingested, parsed, create a PSA ticket, create a task, whatever you need to do to meet your workflow needs. So we've kind of approached that. Let's keep the complexity as low as we can, and just make sure we put in the right feedback mechanisms to trigger the right actions.

Yeah, that makes a lot of sense. I think, and that's one of the things I said to Ray, and I think on the last podcast that we did a couple of weeks ago, it was exactly that. I think, do your contracts as per normal, and then find for all the other little skews, kind of find other mechanisms to do that. And one of them is, especially if you were going to sell voice or something as a one-off upfront yearly cost, you could do that as a, just a product, right? So you could just sell it as a charge or a product and just say, I'm going to bill you a one-off fee for this once a year.

And then, you know, maybe turn that into a configuration item and then kind of have, okay, now I'm going to have this configuration item remind me of, of that particular product expiring at whatever date. So there's ways around those things. You don't necessarily have to have contracts for every single one of those little add-ons that you have. You could still keep the, you know, the one product family within the contract, and then just have, you know, products, or as you say, have a, you know, have an email coming in from Pax8 and ingest that through the, you know, email processor and create a ticket to remind you to go and renew something. So, yeah, there's multiple ways to do this and it's, it's better than I thought it would be.

You know, I was sort of, we were having this conversation originally about like, oh my gosh, they're going to have these, these MSPs are going to have thousands and thousands of contracts every time they have to, every time they have to buy another, another license. But it seems like we can kind of keep going the way we sort of are with, with contracts and just find other ways to do, you know, all the other add-ons. And if the billing's going to matter, then, you know, Pax8's already kind of shown us some of the reporting they can do. We know how that works. We have confidence of that.

You know, if you have a different distributor, I'd go, you know, bug them for what reporting they can show you. I know there's some third-party MSP management, CSP management platforms out there that I've heard like some people use. I know that life is a lot more difficult if you are a direct tier one partner. I know a few MSPs that are direct and it's very painful. And I think they're the ones that are going to struggle.

Most of them are going to have to, you know, really up their automation game or build out, you know, go buy one of those third-party tools to help them manage it. Cause it's, it's a lot of complexity to be a tier one right now with this NCE transition. So I think their world's more complicated. I have a couple of questions. So one thing that I heard from other MSPs and my next, my second question isn't about the MSPs, it's about your customers.

But the first one is I've heard some MSPs talk about when you know, wanting to tell their customers, just go direct, go buy direct. Right. And then others say, well, if I do that, I'm going to lose my gold status. So what is your understanding with your Microsoft gold status? Does it really, is it so closely tied to the number of licenses you sell?

There's a couple of layers on this. And I actually had this conversation with a team at Microsoft yesterday, and there's some layers and there's some uncertainty on this front. The first layer I would, I would say is why do you want gold status? Gold status is main benefit is incentives. You get paid more incentives.

If you're not selling any CSP, Microsoft basically doesn't pay incentives on anything other than NCE going forward. So if you want those incentives, you need to be selling NCE to keep those incentives, which is the entire reason you spend five grand a year, whatever it is to be a gold partner. The second reason a lot of people are gold partners is for those, you know, those in-house use licenses, right? Those, those licenses they give you, that's a huge value for us, right? Whatever competency you have, you get all those internal use rights licenses and you run your business on those.

That's a big piece. So that, that has to be factored in and that may justify the five grand. But if you're not selling NCE, I think you really should do the math and understand if it makes sense to really make gold partner as this thing that you have to maintain, you know, it's a marketing thing people really like, but I, you know, that that's the equation there. Gold partner status is primarily tied to the number of licenses that you have a relationship to, whether that's advisor or delegated admin or indirect reseller. I asked Microsoft for a list of how partner status and incentives are paid.

And it's, it's not clear. And there's another couple of variables that make it more complicated, which is Microsoft is going to be moving away from delegated admin rights to granular delegated admin rights over the coming year. They want to help us partners have less exposure to damage our customers. So they want us to kind of lock down our permissions through partner center, and that's going to be a push. So that change.

And then there's lots of challenges with like Azure, for example, you can make incentives and get credit from Microsoft by being the indirect reseller for Azure, but you can also make those same. You can make some of those credits and incentives through partner admin link, which is a way of selling telling Microsoft, it may not be reselling this, but I'm doing admin work. I think it's an equation that doesn't have a clear answer. My impression is that currently you sent everybody to credit cards, but you still kept yourself on there with like delegated admin rights role. You'll get credit for the seats used, but you're not going to make any incentives.

So you should be able to keep your gold status from a number of seats attached to your name, but I'm not sure what it's worth other than that gold status in and of itself. I think there's an interesting piece there too, that you both of you have brought up or all three of us or all four of us have brought up, which is this knee jerk reaction of wealth. If you're a smaller partner or maybe part of the, just want to deal with the complexity of this, there's going to be a retreat. Just have this customer buy this stuff directly. And there's a couple of points there.

One, I think one key benefit of NCE is that the pricing is the same, no matter how you buy it. If a customer buys it direct, MSRP is the same as if they bought it through a partner, it's all the same. So there's, that plays into that original misconception around price increases. If you go direct, you're going to get the price increase just as much, right? And then you're going to have the same licensing rules.

When I hear, I understand if you have a smaller partner or a partner with lower operational maturity, you might have to give up that control. But I think that one of the things that partners need to keep in mind is that you're not going to escape that workload because if what you decide to do is say, fine, you go buy it direct with your credit card. If you're a successful MSP, your customer still expects you to manage that relationship, manage those licenses. You're still going to end up doing the work. You've just retreated from the revenue and profits and benefits that you're going to get from doing it because you're going to be saddled with the work anyway.

You might as well get something out of it. Now there's a break. There's a break point there where it's like, well, it's going to cost me too much to build the systems and the process and put the people in place to do it. I get that. But I would caution partners of having the knee jerk reaction of, I'm just going to make them a customer's problem.

And that problem is not going away. It's still going to be the partner's problem. Although in saying that, and I had the same thing with hardware, is you would then charge a separate consulting fee for that. So if you want me to help you, I'm going to tell you to go buy 365 licenses yourself. If you need any help with those, that's outside of the contract.

So I will then charge you a consulting fee to fix those problems. But I think a lot of partners are hesitant to have those types of pricing conversations and additional billing conversations with their customers as it is. And they have a tendency to say, well, I'll just take care of that for you. So yeah, if you don't sell hardware, you're still managing that hardware process. We sell the hardware and we charge that fee and we get revenue and profitability out of both.

But more importantly, what we do is we keep our hands around the process, around the life cycle and around the relationship better that way. It's just, I know that's gets a little esoteric there, but that's the way I view it. So, that leads me right into my next question, which was about the customer. First of all, how are you approaching your customer with all of this information and how are they receiving it? Okay.

So it's a heck of a workload. It's a heck of a project. So we spun up an entire project management engagement to run this, which is what you have to do as an MSP. If you have more than a handful of customers, you treat it like a massive company wide project. There's some preparation that has to be done.

You have to, because of the new licensing rules, you're going to need to update your agreements with your customer with at least an addendum. So that needs to be ready. You need to do some license cleanup and be ready to have an accurate conversation around licenses, license quantities, and license types. We have a lot of debt and technical mess in a lot of these customer environments, right? We forgot to remove the license here, there, that all has to be nice, tight, and cleaned up.

I have to create quotes for every one of those customers. And then once I have all my pieces and parts put together, now I have to go schedule a conversation. I'm probably going to send an email to that customer first saying, here's some facts. Here's some, here's what our plan is. I'd like to schedule a meeting with you, go through that meeting, give them the explain the impact.

You're going to provide them that estimate, that sort of thing. You're probably gonna have to have a followup touch to say, once you've decided, yes, the licensing model you want to pursue, you're going to have to sign that addendum, execute that agreement, update PSA, all of that. But to focus more on that customer conversation, we, I think you need to put some, some good communications together and keep it as simple as possible. The reality is most of the complexity of NCE is at the partner level for the customers. It's really just make a decision on whether you, what level of monthly and annual licenses you want.

That's really the only complexity involved for them is some minor budgeting. Most customers that we've interacted with have been like, ah, well that stinks, but okay. You're recommending I do this. Yeah, that sounds good. Let's tweak this and that and I'm ready to go.

Just get it off my plate. That's generally been the reaction and it hasn't created the churn that we thought it would. We have pretty good customer retention through it. It's not a massive problem. It's just another hurdle to jump over.

Well, I can't imagine why you would lose a customer over this because they're only going to have the same problem with the next person they hire anyway. Right? So it doesn't even make sense to sever a relationship because you're passing along the news of a price increase. Well, there's not just a price increase. It's the, it's the commitment and there's a lot of fear and uncertainty and doubt and the FUD equation that's being used right now to scare people into changing.

Along those lines, if you were saying about, you know, they, they got no choice, right? They're going to have to either stick with you or. So have you seen any customers that have said, well, actually we don't want to use Microsoft products at all. Now we're going to switch to Google or we're going to switch to, to one of these other ones because of this price increase. No, no, I think, I think you'll see some, some subtle impacts like, wow, this confirms that we're going to go with zoom instead of teams.

I think you'll see it on the ancillary products, you know, zoom slack, you know, box, maybe some of those things where if somebody was waffling, this might be what they wanted to say. All right, this settles my decision or we're going to do that migration, but not really. I mean, most people are settled on their tool set and the pain of migrating is too great to, to do that. I will say that one risk that comes with this though, is I think for partners who don't get ahead of this, have not been communicating about price increases and commitments coming. I do think there is a risk to lose your customers where somebody might come in and say, Hey, by the way, Hey, if your partner is not educated, here's all the changes that are coming.

We can help you with it. You know, we'll throw a discount to, we'll throw a 5% discount for a year. There's lots of equations. There are some, you know, discounts Microsoft has built in for getting people moved to NC early. And, you know, some of those things people may leverage to, you know, to snag some customers.

There will be some, especially in the mid market partners who go, Hey, my, my CSP that's supposed to tell me everything did not get me ahead of this, did not tell me price increases were coming, did not tell me terms were going to change. I'm not happy. And that's my, that's my chance to go talk to this guy who got ahead of it for me. So I think partners that are sticking their head in the sand are missing that opportunity to be the voice that informs their customers. So for somebody who has not done anything yet.

And I know that you said that your distribution house is PACS-8. What are the steps that they need to do? Is there a clear path when they log into their PACS-8 portal, you know, like click here to sign this annual, you know, or choose this, or have you been through that process? And is it simple or is it, or do you have to get on the phone with your PACS-8 wingman person as they call themselves and, you know, and get them to walk you through it? I think that one of the first steps is to reach out to them and ask them for help because I think we're a pretty savvy partner.

We're pretty advanced. We do pretty well and we still need a lot of handholding. Once you start looking at, well, I got to cancel the old subscription and create a new one. So reaching out and asking for help is key. There's some really good education resources that I think go a long ways.

T-minus 365 is a website and YouTube channel. That frankly is the best NCE documentation you can find. Go watch his videos. Nick is awesome. He really helps you understand, breaks down NCE from like four different perspectives.

I think he has four NCE videos. It's kind of a, what's the program? How does it impact you? How does it impact your PSA? What should you do in a legal agreement?

What does that transition look like? So I think using his resources there are a great place to start so you can understand it and have a better set of questions for your partner when you work with them. I can also, I'm looking for there's a URL that Microsoft has that has all the, has all the NCE data. And I'll go find that and I'll make sure we mentioned that before we're done with this call. We'll make sure that it gets in the show notes.

Yeah, definitely. We'll put that in there. Okay. So we're where we are right now. So there's certain partners like myself who are, you know, I'm a, I'm a consultant.

I've got a few Microsoft 365 licenses. I've done absolutely nothing. What do I need to do? And I, I'm actually purchasing directly from, from Microsoft. So do I get a warning?

Do I get an email? Do I need to contact Microsoft? Does it just happen? Do you want to kind of talk me through that as well? That's a great question.

My impression is that if you don't do anything, your prices are going to go up in March. So you're going to get billed more. If you're not paying attention, you're just going to lose your margin because you're going to be billing on your end for the lower number. So I think that's the first big change is that you're going to get billed more starting March. And so there goes your margins.

If you're not ahead of it for the price increase. Now that's not NCE. That's just the price increase. What you'll see in March is any new transactions you build out, you're going to have to do an NCE. You won't be able to transact in the old licenses.

So, Hey, I got to add a new SKU. I want to add a new customer. You're going to have to embrace NCE for those new subscriptions. I'm not clear what the experience will look like in June. I don't know if those automatically converts to, you know, to some sort of annual subscription or if they convert to the 20% higher, my guess is that what happens is you probably just start paying.

They stay month to month and you start paying a 20% premium on every license. So that's a great question. I don't have a great answer for it, but that would be my guess as to what you're going to see. If you just leave it alone until June, you're just going to be completely upside down on any licenses you're selling. And any changes you want to make after June will require you to turn that license to the proper SKU that we should ask that question, Dan, and some of the people we work with.

I think that brings up an interesting point too. I kind of want to pull it back into the PSA conversation a little bit, which is you were saying, what else do I need to prepare for? Well, you need to prepare your, your PSA. So if we look at what the available options, we've got a couple of things. We've got the existing and most partners would have the existing 365 licenses as part of their service catalog.

Now you're going to have to triplicate and maybe quadruple those SKUs depending on the path that you chose. So for us, we have chosen to focus in on annual commitments, paid monthly and the monthly licenses where appropriate. So what that means is I've got the existing SKUs. I have all the monthly SKUs that I have to build in PSA and I have the annual paid monthly SKUs. If I end up with a customer that says I want to pay annual all up front, that's a fourth set of SKUs, but maybe I only create that just as needed.

Unless that's your dominant model, then you want to create a for all of them and just create some there. But that means naming standards at the service level. So being able to call out what the product is, but also what the term is and what the billing model is. So you might have a Microsoft 365 12 month slash monthly, you know, or something like that. You might come up with an consistent nomenclature so that anybody in your team and most importantly, if you line item your invoices, all of your invoices will be very readable.

Like what am I, what am I paying for here? Oh, this one says monthly only. Okay. This one's annual paid monthly. So there's some complexity there that needs to be built out in PSA.

And that also needs to be probably reflected in whatever quoting platform you're using, if you're not using PSA to do your quoting. So now we've got, we use data. We leverage Datto Commerce for this to do it because it was able to put in an addendum and a price table with those SKUs automatically coming from Autotask PSA service catalog. We were able to rapidly create those and track who had agreed to them or not. The fact that Datto Commerce has the kind of e-sign capabilities, it ended up being the perfect moment for that product from a Swiss Army knife perspective.

I've got licenses. I've got agreements. I've got a signing platform. I can look in there and see whether it's been sent, whether it's been completed, whether it's been viewed, all those things. So if you're an Autotask partner and you haven't looked at Datto Commerce, this might be a great moment to do that, to accomplish this complex workflow.

That's how we were able to do it very quickly. And actually it's something that's interesting that you said, Daniel, about changes that need to happen in the PSA. So, you know, on any of the services that come in, you can have an invoice description against each one of those services. Right. So this might be a good opportunity to kind of change some of those descriptions.

So when they appear on the invoice, it's then going to say so rather than having it, you know, on the, on the service name, you might want to put that on the, on the description that says, okay, this is monthly, this is quarterly. So there might be some of those invoice templates might need to change a little bit if you're not displaying the invoice description field or something on there. So that's a good point about the other things that you need to be thinking about of how these get into the PSA. But I guess it's also going to be sinking in with the likes of Pax8 and other services are available too, but the likes of Pax8, that already are sinking stuff in, I guess, the naming convention and all that kind of stuff is just going to flow through from Pax8 anyway and update the services. You have control of that, but yeah, I think that brings up an interesting point that I'll let Nathan kind of riff on, which is now that we're, we're talking about making annual commitments when we add things in for a customer, who's allowed to do that?

It does change that equation where kind of that, what are your internal controls? You know, we're, we're a 35 person MSP. There's a lot of people who traditionally can make license changes, probably a dozen people across the company. You know, we wouldn't let, you know, tier ones, for example, iterate a license count, but now, you know, somebody decides to add 20 seats of a new SKU. That's a, that's a commitment in Dan's name.

I added 20 Microsoft 365 V5s to this customer. A week later, we realized that's a mistake. That's a thousand dollar a month mistake that Dan is on the hook for. That's a $12,000 mistake. So we're kind of working with working to build and we don't have this fully fleshed out.

You know, what is the process? If somebody needs to add a license, you know, who's allowed to do that? Do we have an approval workflow? You know, and I think where we're we've settled is that for a lot of our customers that seem to move up and down in licenses regularly, you find a good minimum and you put those on 12 month commits. And then as licenses come and go, you, you have them pay the premium on some of those, those more popular SKUs for a 20% overage and do some monthly SKUs.

And then maybe quarterly you do a right size. Ah, okay. You had consistently had five more than your original commitment. Let's bump you up by five and get rid of these monthlies for now. And I think that's probably where we'll settle on a lot of our more active customers is have some, some base number and then some flexible number and they're going to pay a little bit of premium for that flexibility, but it probably is better in the long run, but that's a workflow.

That's a process that has to be built. There's an approval flow there. And then there's some, you know, controls over who has access to manage licenses and you know, the portal where you manage that, that all has to be fleshed out as well so that you're not making those mistakes. Right now, Microsoft gives you 72 hours to catch mistakes. So if that's made on a Friday morning, you know, somebody puts the wrong SKU on something you got till Monday morning to figure that out.

Right. And so you have to pay attention. You have to be careful. Hopefully Microsoft makes it a little bit bigger window. I think that's a pretty reasonable change.

And I wouldn't be surprised if that happens, but you know, for now, you better be on top of it with those, those purchases. So I think it's going to also pulling back to the PSA discussion, it's going to drive adoption of additional PSA features, which I think partners are slow to adopt. One is change management. This might be a great opportunity to embrace some of the change management within PSA and get it, get that flow going through a customer or the, the point of contact it's going to authorize those things. I also think that there's not quite as much workflow automation in the partner base than what a lot of, there could be a lot more efficiency if more partners embrace workflow automation.

And I think this is a great example. Hey, I've got a ticket request for this type of a license ad. Okay. Well then they can now kick off this workflow, kick off this approval process, kick off a notification to the account manager that they need to be aware that there's a threshold has been reached or exceeded that requires that the account manager get involved and make sure that there's a customer authorization on it. Just, there's a couple of different things there.

And it also ties into onboarding and offboarding of employees at the, at the client end. That's what a lot of MSPs do for, especially if you have larger fast moving customers, there's a lot of employee churn, you have to come up with a rule set on, you know, used to be, well, I just buy a license and for that new employee. And then whoever had the old license, I converted to a shared mailbox and delete their license. Well, that's, that workflow doesn't work anymore. So how are we going to do that?

Does that mean we maintain for a customer over a certain size, a buffer of licenses, maybe annual licenses. So they don't hit that 20% premium. Do we still leverage the 20% premium monthly licenses? Like Nathan was saying, where we just use that as our variable. There's a couple of different ways to, to attack it, but it, I think it comes back to, can you automate?

And more importantly, can you achieve accuracy and precision by leveraging those advanced PSA features? Great point. And, and that's a, you know, that's one of the things I think we try and talk about a lot on this podcast is about kind of leveraging and using the other areas of, of PSA. And Ryan, that's actually a good point that Daniel brought up. I think on one of the next episodes, we should actually talk about change management and talk about how that whole thing works in the PSA.

Cause we've, you know, we've, we've not talked about specifically change management and the whole ITIL, you know, methodology and all that kind of stuff in the PSA. So I think that would be a great topic for us to talk about on a, on another. I think so too. Even as Dan was talking about this, my, my brain was going like, well, what if we turned this product into a required procurement and then require approval before it gets to the purchase order phase, you know? So I'm just kind of working through in my brain, how, how it would flow, but I really want to be respectful of, of your time today, Dan and Nathan, because, oh my goodness, this was amazing information.

And thank you so much for, for your time. And I, is there anything else you want the MSPs of the world to know about this? I think I'll reiterate something Dan said, which is most of this complexity is on the MSP side. If you want to be successful with this, boil this down, think of it from a customer perspective for them. It's, Hey, prices are going up in March.

Microsoft's going to need a commitment out of you. Keep it simple. If you bring in all the complexity we talked about on this call to their side, you're going to have some challenges. So I think, I think that's a key point. It's a lot.

It's overwhelming. It's frustrating. You know, there's, you got to go through the stages of grief on what NCE is going to do to your CSP program, but don't bring that to your customer, bring them the simplicity. And I think it'll really help you with those transitions. It's that, it's that old conversation of don't, you know, don't sell your customer, you know, a super duper server with a quad core Xeon processor and 6 million gigs of RAM.

And cause they, that means absolutely nothing to the customer, right? They want a black box in the corner that does something. And it's that exact conversation, right? Don't kind of throw all the complexities, just simple, you know, prices are going up. I got a year commit.

Let's do it. Right. So I'm here. Yeah. I think, I think that one of the takeaways that, you know, if there's a bright side to all of this change, which it's hard to see when you first are starting to process it, there's like, there's stages of grief you have to go through, but when you come out on the other side of it, there are some bright points.

One is it's going to drive some operational maturity in your practice. You're going to have to embrace your tool set a little deeper. You're going to have to have some internal discussions about your commitments, your partnerships, your workflow internally. And I think it also has a positive benefit of shifting the conversation to a business conversation and a business enablement workflow with your customer. As MSPs, we focus on technical topics and solving problems and this and that.

This is an opportunity to have a longer term discussion about your customer, their business, how do they intend to grow? What's their staffing plan over the next 12 months? You can have a deeper discussion that's not just about technology. So I think that's a positive outcome of all this plexity and challenging new set of rules that we're dealing with. Absolutely, absolutely.

And I mean, you know, as Ryan said, I think, you know, I want to be respectful of your guys' time. I know we've gone way over an hour talking already, and I can talk to you guys all day about this, and I'm sure our listeners could listen all day to you guys, because, you know, you guys got a lot of good ideas, a lot of insight. So really, really appreciate your time. And if anyone wanted to reach out to you guys and wanted to talk some more, I'm sure you'd be happy to talk to them. What was the best way for somebody to reach out to you guys?

Absolutely, a couple of things. One, we do have some resources on our blog, kind of explain some of the basics, and there's some videos there. Certainly reach out to us via LinkedIn, and I'll make sure we post our LinkedIn profile links. That's probably the easiest way. Emails tend to get lost in the flow of the busy season that we're in.

And your website is machinelogic.com? It is. And before we let you go, one last question. Tell us how you came up with your name. Okay, that's interesting.

So, Machine Logic is at the heart of most computing platforms, and it's the language and assembly language of passing logic statements between components at a zeros-in-one level of programming and of hardware control. So that's kind of where the name came from, but really where the heart of it is is it's the machine meant to be the technology, and the logic meaning to be the people component, the human component. And so it's bringing the two of those together. That was the theory behind the name, and it kind of ties into the architecture of what we now manage every day, technology and humans. Cool.

I love geeky names in companies. I love it when people kind of geek out when they have a company name. That's awesome. Thank you. So I think, you know, that was such a great conversation and really, really appreciate your guys' time.

And, you know, if anyone else, any of our listeners want to reach out to us, you can do that through psaimpact.net, or you can reach out to myself and Rayanne via LinkedIn, Facebook. We're all over the place. So, Rayanne, all that's really left for me to say now is your PSA is the key to your MSP success. So go out and make an impact on your world today. Thanks, Chris.

Thanks, Dan and Nathan. We really appreciate it. Thanks, Dan and Nathan. Thanks, guys. Thank you very much.

Thank you for joining us today on PSA Impact. We hope you've learned something and that you'll join us next time when we answer new questions posed by our listeners.