Why SMBs Will Soon Spend More on AI Than Security: What It Means for MSPs

Jimmy Hatzell (00:06): an initial revenue opportunity of rolling out AI tooling and access to models and whatever that is. And then there's a long term. much larger revenue opportunity on being the go-to company that manages the intelligence and AI spend for an organization. Make sure they're spending in the right places, doing the right things, and optimizing the right processes or re-architecting processes entirely. So the latter is the big opportunity and not everyone sees that right now.

Andrew Moore (00:25): Right. All right, welcome to the How to MSP podcast. am your host, Andrew Moore. And today we have a very special guest. This is Jimmy Hatzell with Hatz AI and I'm excited to have him on the show. Thanks for joining me today, sir. How are you?

Jimmy Hatzell (00:53): I'm doing great, thanks for having me man, this is awesome, very excited to be on.

Andrew Moore (00:57): Cool, nice. So where does the podcast find you today? Where are you physically at so everyone knows where you're at?

Jimmy Hatzell (01:04): Live from New York. No, we're actually not live, but it's not Saturday. At the time of this recording, it's Monday morning at like 9 a.m. So I don't know if you tell people that, but that's where we are.

Andrew Moore (01:06): You In fairness, yeah, it is. No, it's fair. the funny thing is you've become such a busy person. They were like, we can fit you in Monday morning. And I was like, when? And they were like, nine o'clock Eastern. I was like, oh, OK. Sounds great. I'll get up and I'll do a podcast at eight o'clock Central. That sounds fantastic. Though it's awesome. I appreciate you being here.

Jimmy Hatzell (01:34): No, I thank you for doing that. I'm gonna be honest, I looked at it too and I was like, why do we schedule this? Okay, you know what? Let's just get out. I'm excited to talk to Andrew.

Andrew Moore (01:44): Screw it. Just do it. So no, I'm glad that you're on. So why don't you tell everybody a little bit about you and your journey and what you're doing today. Just kind of give us a little bit of background on why the channel should care about your opinions and where you came from to get here.

Jimmy Hatzell (02:03): Yeah, sure. So again, Jimmy Hatzell, CEO, co-founder of Hatz.ai. I've been working in the MSP channel for the majority of my career. The background in cybersecurity, worked in IT. You know, and I've worked at a couple of cyber companies in various roles. And a couple of years ago, I was looking at sort of where things were going with AI. you know, like, there's really three things. that I was pretty confident and bullish on back then, and this is like 2023. The first is that there's gonna be more demand for AI tomorrow than there is today, and that'll be true for very long time. The second is people will need more help with AI tomorrow than they do today, and that'll be true for a very long time. And the third is that MSPs could bridge that gap and monetize that, create value, et cetera. And so we set HATS AI up to enable MSPs, put them in that business, help them distribute, manage, sell everything around AI, which is a pretty open-ended business to start. And Andrew, you've been... You've been a confidant to me over the years, especially early on. I definitely called you with many ideas. You can see how things have drifted over time. the easiest way to think about it is we think of how small businesses will use AI, what's valuable to them, and how can we productize that so MSPs can manage and sell that, provide value and services on top of that. So we have an open-ended business model. What that looks like today we can get into. But that's what we do. And I guess that's why you should listen. I don't know. Maybe turn it off.

Andrew Moore (03:56): No, no, no, I love that. And it's great because me personally, and I remember when we first started having these conversations years ago about what you were doing, I almost had a very myopic view of like, this should be good for the MSP. Like this is a product MSP should be buying. And I think you rightly saw that there was an opportunity to sell through to the MSP customers. which at the time I hadn't even gone that far. was like, well, this is just something that we need to be doing to automate things within our own MSP. I almost saw it like a, like a roost or a Pia type solution. was like, okay. So we're going to use AI to do this. And you know, Jimmy and his team are going to build something for that. And I was at first, I was like, wait, how are you going to sell this? to MSPs and then I started to see what you guys were doing with it. was like, oh, OK, like that's that's wise. Like you guys made a really good. I don't know that I'm going to call it a pivot. I don't know how it landed in your roadmap, but I think it was a really interesting place for you guys to go and obviously very prescient that you were able to get that product out when you did. I think it really has borne a change in the industry as a whole. People are talking about it, which is great. Where you want to be personally, I think.

Jimmy Hatzell (05:04): Yeah, you know, it's been fun and to be honest, we've been a bit ahead of where things are for the most part and in some cases behind, right? Like so there's this duality to it where we see where things are going and we make bets on that. But like early on, right? Like I had a small engineering team. Now we have a huge engineering team, right? And we're able to ship quickly and keep up. And, you know, new feature would come out on like JetGBT or something. And the next day people would be like, well, why don't you guys have that? And it's like, we're working on it.

Andrew Moore (05:34): All

Jimmy Hatzell (05:34): it. You now those

Andrew Moore (05:35): right.

Jimmy Hatzell (05:35): cycles are a lot smaller and and you know we can like the new features have sort of like there's not as many now I guess or people are still trying to intake you know how to use AI in its maximum capabilities where it was at like six nine months ago. So we're always thinking of the future always building ahead but we're meeting people where they're at too.

Andrew Moore (06:01): Yeah. Well, and so what I've been to a couple of conferences, just in the last six months and, it, what people are talking about today is at the MSP conference in the channel. They are not what they were talking about. 12 months ago, right? So 12 months ago, you would go to a conference and there was people were saying, Hey, maybe we should be thinking about AI. And then they were talking about security and you know, all the governance and you know, automation and all the other stuff. And then it's, you know, this year it's been, Hey, let's talk about the shift to AI and how it, how it matters to the channel, how it matters to how we sell to our clients, what are our clients asking us? So let's talk a little bit about how fast this is happening.

Jimmy Hatzell (06:19): Yeah.

Andrew Moore (06:44): and why it's happening so fast. Like what is happening outside of what you're seeing with your company and the models like Anthropic and you know what we're seeing with OpenAI and with Google and all of them as they're building these models. Why is this happening so fast and why is this different than anything that's happened in the past like say virtualization or cloud compute or whatever that looks like. Like what are you seeing?

Jimmy Hatzell (06:44): Yeah. Yeah. Yeah, I mean, like, I have a very, Unique view on this because I was there for security right like I was meeting with MSPs 2016 like hey, we should you know, we're gonna offer sock services, you know people are like, well, what do mean? We have any virus we have know, web root installed or whatever like You know, it's like no you need more than that You know You need to offer security as a service and sort of all that and watch that happen over like say five six year period of maturity I've seen this go through that same period of maturity in a matter maybe a year. Right? So it's like 6x faster. So like there's two sort of macro things that are happening. The cost of intelligence is going to zero. So what does that mean? Well, you you get these, you've got an iPhone, you get like the summary, the AI summary, right, on your phone, right, where it's just a local model sort of doing that. It's like, okay, right? It's like... Hey, your group text, your family's going off and like they're trying to plan Easter or whatever, know, Fourth of July planning, right? Yeah. Yeah, but then the cost of the top most frontier, highest capable intelligence is up and to the right through the roof, right? Where these models are getting more expensive and more capable at the same time.

Andrew Moore (08:19): And then it'll like summarize it and tell you what's going on in your chat. Yeah.

Jimmy Hatzell (08:40): So you have this weird duality where like, you know, I need to go and, and as my email gets cheaper and cheaper and cheaper, as more open source models come out, as lower parameter models that are a lot more capable are released at a lower cost. But then the most expensive models are just getting the most capable ones that can run for sometimes like an hour or two hours, sort of unmonitored, are just crazy expensive. So what does that mean? Well, it means that we can now rethink a lot of business processes and rethink the way that we do them when you have cost of intelligence going down, approaching zero. So you can have some imagination. We didn't have this magic box that you could ask almost any question to a couple years ago, and it answers pretty quickly. But then at the same time, if people are using Frontier Highest Capable Intelligence, the costs are going to go crazy. So I'm telling you right now, we're a year, maybe two out from the majority of SMBs spending more money on AI than security.

Andrew Moore (09:50): So let's put a pin in that for a quick second because if it's happening that fast though, when you're talking about people spending money like SMB spending money on it, do you mean that it's already injected into, know, like let's just say I'm making this up, like the version of QuickBooks they're using, there's QuickBooks and then there's QuickBooks with AI, right? So they're spending a little bit extra on that. Are you talking about that kind of stuff? Are you talking about they're using some model within their business? exclusively, they're using like a containerized version of cloud or they're using some sort of, you know, enterprise version of co-pilot. Like, what does that mean to you? Like, when you say that they're spending money on this, what like what are they spending money on?

Jimmy Hatzell (10:31): So they're not using an enterprise version of anything. They're using personal chat GPT accounts that are unmonitored, not issued by IT, and people are doing it. And everyone, not everyone, I shouldn't say everyone. That's not realistic. But many people are just sticking their head in the sand like, well. You know, I don't think they're ready to use AI and it's like no like people are using it They're just doing it on their personal phone like if everyone started using their gmail to email everyone their personal account like everybody be freaking out right but then and they'd be like we need to get you know, approve blah blah blah blah like, you know and and Yeah, so so like it's It's changing very quickly. So you're talking about the systems of record, the QuickBooks of the world, your PSAs of the world, your CRMs of the world. They're all getting AI added features. And yes, like people are spending more on that. People are doing the upgrades to get the extra license, to get access to it, all that kind of stuff. But these systems of record are all becoming more more queryable. So if you look at like where Salesforce is going, they're going with this agent 360 where they're sort of like, Hey, in the future, maybe we won't have a UI. We'll just have like the best connectors ever to people's data. That is going to trickle down through a lot of these systems of record. I'm sure lots of people will create great add-on AI features and they'll be useful. You know in my business, we use Slack, we use Notion, they have AI features. But... where it gets really useful is when you can pull them in in an enterprise context management sort of situation into your AI agent of choice. in my case, I use hats, but it might be Claude, it might be GBT, whatever. But these connectors are getting better and better. And even in the past, so just to break things down for you, in IT Nation in November, People, kept coming up to me and saying, hey, how can we build an integration with you? Can you set up a meeting with my team? Can you blah, blah, blah, blah, blah, blah? And every single one I said, no. You need to build an HTTP compatible MCP server and I can connect it. And then they're like, well, what's that? Right? Yeah.

Andrew Moore (12:55): I was like, break that down for the audience. Like explain, explain yourself.

Jimmy Hatzell (12:59): Yeah, right? So that is like an API, but it's a standard protocol. It's instructions for how an AI can safely and securely interact with your data and your system, where you can just say, hey, I have this MCP server. It has authentication. Users can log in. They can use an API key, whatever. Any AI system can connect to it. And we've defined a set of security controls, guardrails, et cetera, on that. Like that has been moving and we made a big bet on that as a company over a year ago really. And it's been through various iterations, right? Like the first versions of it you had to run on local machines and like that's not scalable, right? That's like not secure, right? Like injecting environment variable files and so, but this protocol has matured over time and you know, fast forward four months later you're seeing. right? Halo PSA has released an official MCP server. Scalepad has released an official MCP server. Lion Guard has released official MCP server. Enable has released an official MCP server. And then there's dozens of third parties that all they do is take sort of these APIs for these vendors and then remake them into MCP tools, which is great, right? So this sort of connecting your AI to the data problem is a short term problem that's getting work through. And you're seeing the same thing with SMB tools, but they actually, in many cases, are moving faster, right? Because a lot of the... vendors that we know and love and rely on in MSP world have made lots of acquisitions, have very complicated API services, weren't necessarily set up to integrate with AI. it takes a little bit longer and it's a little harder in many cases to get a PSA with a thousand API endpoints connected to AI versus like monday.com or something that an SMB might use where it's like, we have all this stuff.

Andrew Moore (15:03): Bye.

Jimmy Hatzell (15:08): it. So like you're seeing that acceleration where we internally did 30 integrations in 31 days last August and you know that was a big push for us. It took a lot of engineering power. A month ago In one week, we added 26 integrations in one week. Now, we didn't drip them all out immediately. We put a lot of them feature flagged and reached out to users to test them before we released them GA and we've been putting them out. we'll be adding sort of 100, 200 data connections a month in a couple months from now, or in a given month. I guess what I'm getting at is that connection to your third party data in a secure and relevant way is a short-term problem. when that happens, people start, you know, the possibilities start multiplying and you can really, you know, like my, like our business lives on, on notion and, and in the code base and in linear, and my AI talks to linear in our code base and notion all the time, right? Like that's where I point it. And I say, go update this, go manage this, blah, blah, blah, blah. So I think when I say that people will be spending more on AI than security in the near future, I do mean in some cases, like these add-on solutions for products, but in many cases, like pulling those products and data into the core sort of interface that they interact with their AI or where their agents live, I guess I should say.

Andrew Moore (17:02): No, that's incredibly helpful to go kind of deep dive into some of that because I think there's new language that has like new vernacular that has to be brought out into the channel about what we're doing because it is a new technology. But I think that part of what I'm seeing is there's almost like this disconnect in the fact that this technology is all new and it's got all these different parameters and things that it needs to work with and and what people are seeing as it's practically applied because of what you said how fast it's coming out but how familiar it feels in the way that you interact with it because it uses like a like a common voice in a lot of ways right like what people are used to are these chat you know functions where you can have this conversation with it so it doesn't feel as scary right as hey, I need to take all of my data and move it into this cloud infrastructure and you're like, what is Azure like? How do my you know what is containerization like? How do I put my data here versus like I have a storage folder on this server locally in my office, right? Which I understand because I see it. So I think it's really helpful to start laying that out for folks because there's a lot that goes into being.

Jimmy Hatzell (18:06): yeah

Andrew Moore (18:23): an MSP and having to know about all this stuff so that you can have a meaningful conversation, not only with your clients, but at some point your own internal team, because we're going to have to support this as MSPs, right? Like we're going to actually like have to answer questions about what an MC MCP server is and how do you connect to data and why you can't connect that to that yet. But like maybe one day it's coming or how do we work around that? So I think it's super helpful. So I do want to jump into You know, the different types, you talked about the different models. You talked about your model. You talked about, know, you know, there's Gemini, there's, you know, Claude, there's so, you know, what are you making suggestions? What are you suggesting to folks outside of, you know, use use hats, right? You know, we're we're we're doing what we're doing. But when a company is trying to an MSP is trying to have a conversation with their client about what models to use, where are you guys at with that? Like, because it felt like

Jimmy Hatzell (18:57): Yep. Yep.

Andrew Moore (19:20): You know, open AIs model with chat, he was chat GPT was the de facto for a while. Now it feels like anthropics clod is leapfrog that you've got Gemini kind of moving up and down the ladder a little bit here and there. You've got open cloth. You don't want to have something on the open Internet. Like you've got all these different options. Like what are you telling people about like these models? How do you how do you help them understand what they are and why they should use a particular one or multiple ones?

Jimmy Hatzell (19:44): So my favorite model changes all the time. Leapfrogs all the time, Claude, OpenAI, Gemini, it's usually a rotation through those three. And also for different things, right? For image generation, I love Nano Banana.

Andrew Moore (19:53): Right.

Jimmy Hatzell (20:05): Right from from Gemini right and then apparently GPT image gen 2 which just came out is pretty good I haven't even used it yet like

Andrew Moore (20:05): Yeah. I haven't used it either, but I use Gemini's Nano Banana and it's sick, like the stuff it can do. Yeah.

Jimmy Hatzell (20:17): Yeah. So what's happening though is OpenAI, at the time that we're having this conversation, OpenAI has doubled their price for models twice in a month. So when you go from GBT 5.2, they skipped 5.3. 5.3 was only a coding model. 5.4 and 5.5, the price is... ticked up quickly. You look at Claude, Sonnet, then Opus, and then Mythos, which is the unreleased as we're having this conversation model. The pricing is going up and up and up and up. Also these models, where they used to be able to maybe call a tool or two and do a search or something like that. Now they're running for very long periods of time using lots and lots and lots of tools. And everything's starting to get clamped down, right? So the prosumer market where people were buying personal licenses and using them for business use, they... the usage on these from the model providers directly was very generous, right? You wouldn't hit rate limits and that kind of stuff. That's sort of ending enterprise agreements for the most parts, don't have unlimited usage, they usually require paying API prices, all that kind of stuff. So what we found is it's become very, very important to route tasks to different models and the age of I use the same model for everything has sort of ended, unless you're just fine, paying lots of money because things get expensive. internally, my engineers spend around $1,500 a month per person on AI, per engineer. And we get the cheapest prices because we're direct to these model providers and all that. we're an AI company. We're doing lots of engineering tasks. Of course, we use and spend a lot of money on AI. But just to give you an idea of where things are going, So we decided in January of this year that it was extremely important for our company to be able to focus on control and optimization of models. we actually have model routers that are newly released and very, very important, where we take open source models, best of breed models. Fast models image models all that and we combine them into a single sort of box where you're you just hit this type of router and we have Right now we have like light sort of credit saver mode, right? Performance which is just like everyday and turbo which is like, you know, I need the highest intelligence I don't care what it costs, right? And so by doing model routing We have been able to reduce costs in many cases by about 75 % because We found that in SMB a lot of users of our platform the complexity required for many tasks you don't need the best-of-breed models for. Like yes, it's required for certain decisions or certain parts of a conversation or certain things, but for the most part if you can route to models that are more efficient cost-wise but can perform the same at a given task, hey check my emails and tell me what's going on. Like you can give me the top 10 models you're going to get nearly identical results, right? And then we've also looked at the cadence of a request, right? A request, I'm calling it a request, but the technical term would be an agentic loop. So you type something into HATS and our harness says, okay, we're going to go reach out to the AI model, and the AI model is going to tell us to go use some tools. HATS is going to go use all those tools, they're going to give that back to the AI model, we're going to guide the AI model to do this other thing, we're going to compress this, we're going to manage that, blah, blah, blah. So there's like a hundred things happening under the hood on like your one chat conversation many times So we found out if we can take parts of that conversation Or that agentic loop that are high cost right because they use lots of tools but but Do not require high capabilities we can dramatically reduce costs. So for example when you use hats if you're doing web research a web research agent, a sub-agent will kick off. So let's say you're using Claude, Opus, or something like that. It'll actually kick off a research sub-agent that'll do all of the searching, all of that kind of stuff, gathering the information, and summarize that back up to Opus with a Haiku, which is like 100 times cheaper, right? So like... In that case, we can reduce the cost of that query by 80%. So how we got onto this conversation is where do you see things going? What models should you suggest? Now, where we're moving to over the next few months is around intelligence routing. So it's really looking at a problem and saying, OK, how much intelligence do you need for this? Can we match it to? something that we already have and how can we do this for the most efficient sort of price or cost associated with that. And that's exactly where we're going in the direction where we're going and how we sort of like moved the company. So even like we're working on releasing our own models that are very good at picking tools and routing models and things like that. So that's where I see things going. Well, and so like, cause that's been a thing where

Andrew Moore (26:08): Right. Well, and so like, because that's been a thing where been talking to folks out in the channel and one of the things that they've been, I've been talking to folks out in the channel and one of the things that they've been asking is how do we pick something that we feel comfortable that we can support for our clients, right? So when we go out and we start to have conversations with our clients,

Jimmy Hatzell (26:18): talking

Andrew Moore (26:42): They're like, great. My clients are like, I really would love to get rid of shadow IT in my environment. I would love to secure my data, make sure that it's being used in an appropriate way that somebody in one part of my company can't see my accounting data, right? All that sort of stuff. So then they've been asking like, so what do I choose? Do I start saying that we're going to be an anthropic provider? Am I going to, I'm like, As I sit back and I'm like, that's actually a really good question that I don't have an answer to. So when I talk to Jimmy, I will ask, right? So like how do you cause when we we've had these conversations with them as peas and the common conversation that we have, and I'm an operations person is. Okay, that's great. But what happens when my service desk gets a ticket for that? And if every single one of my clients is using some sort of a different version of an AI tool, how do I, how do I support that? And then the immediate thought is from an old school mentality, which is, well, we need to pick up a specific vendor that we're going to work with, such as, you know, we did with firewalls like Meraki or Fortinet or Sonic wall or whatever. So what are you telling people? What's the, what's the way that, that MSPs can create some sort of standardization and what they support and how they deploy these models into their client environment so they don't get stuck not being able to support this or they're having to support everything which makes it untenable and difficult.

Jimmy Hatzell (28:08): Yeah, mean, look, that's what we set our business up on, to be a curator of really everything, an aggregator. we don't standardize on a single platform. We have access to all the models. We get access on the day they're released in most cases. Obviously, I would tell them to partner with me, because that's what I do. But like, know, yeah.

Andrew Moore (28:30): Well, that's, what I want to know because we've had that conversation. I'm like, I was like, my understanding is, that Jimmy's team and his product aggregate these, these models together and give you a single interface in order to help you create, you know, agentic workflows and things like that. So like, why don't we talk a little bit about how that works within your product and like why you think that's the winning solution versus like, I'm going to be a Claude, you know, you know, a Claude partner, or I'm going to be a, you know, an open AI partner.

Jimmy Hatzell (28:55): Yeah, mean, go ahead. know, like I'm all for people using AI in general. And like I have seen people who like their client signed a year long contract with OpenAI teams. And now they're like, but we want to use Claude because everybody's using that now. Right. So it's like the sort of like constant jumping of who's the best is like makes this very difficult and also make it very confusing for clients because the last one thing on Monday and then on Tuesday, they'll be like, I want this other thing. So like I think like Certainly access is a big piece of it, right? Like how do I in my organization get approved access to Claude models, to open AI models, to Gemini models, to open source models, right? How do I do that? How do I ensure that they're hosted in the US or wherever they need to be, that they're logged for compliance, that there's a zero data retention with the inference providers, right? So that's like one piece of it. The next is like control about through an organization. So how do you control users and usage? So for example you could use Claude's lowest price models for a month all day for every conversation and you won't hit their sort of limits or spend traps and our platform earn theirs. You switch to their most expensive model, you'll hit it very quickly, Like sort of like running through it. And these models are being released at mid month, right? In the middle of like, it's not like there's a procurement cycle. It's not like, hey, we're going to evaluate this and then turn it on. It's like, this is available today. to everyone and it's the the pricing fundamentals of it have completely shifted where now it's actually right 50 times more expensive so how do you manage that spend and governance and what like do you want to lock users out when they hit limits do you need to set different limits for different roles do you need different dials for flexibilities right so like All of those sort of like unsexy problems are where we really shine and the direction we're going. Yes, we also help with the management of everything too. So like when you set up your hats, you're really setting up like your AI storefront for, to really, you know, for lack of a more mature description, right? What models do we want to available, right? How do we, what plans do we make available? What are our different user roles? What are they allowed to do? What agents have we already built? that we're gonna push into our client tenants, what workflows, et cetera. So like there's a lot of that and if you're an MSP who specializes in like a couple different verticals being able to create agents or workflows that work with those specific tools or that industry really well and push them into different clients, right? Like we really shine with that but over the next quarter or half, know Six months where we're really focusing is from the management control, right? What if you need audit logs and you need to ship them to a Microsoft Pureview or something like that, or you need to show that you can check in on. hedge fund traders to make sure that they can back up trades. What about that? What about access to tools? This department should have access to these tools. This department should have access to these tools. What about sharing credentials? Some integrations require service roles. ConnectWise is a great example of this. Their API is designed in more of a service role, not like a user role persona. create that user and share it among different people. How do you do that? So like we haven't solved all of these problems yet and like we're in various stages of them, but that's like the type of thing that we're working on. And even going as far to setting up account teams. So how do we notify the VCIO or the account manager for Acme Inc. To go reach out to the customer because this customer just sent up a bunch of agentic workflows on schedules that are going to cost a lot of money and they might not even know that they just did that right and and putting MSPs in that Situation where they can be the thought leader where they can be proactive Not just drive people to the most expensive bottles and and try to get them to spend more every month, right? Like we're trying to guide people through this journey, right?

Andrew Moore (33:41): Right. Yeah, well, and it's changing every day. And I think the biggest thing that I'm hearing from MSPs is where do I even start to have these conversations? Like to your point, there's a lot of people that are burying their head. And I don't think it's because they're Luddites or anything. I think they're really focused on, hey, like I don't even, I don't want to look stupid. Like, so it's better to not have the conversation than.

Jimmy Hatzell (34:00): Yeah. Yeah.

Andrew Moore (34:07): to walk in front of the client and have them ask me a bunch of questions I can't answer. And so this is an approach I've been taking with folks that I've been coaching and working with. And I want to hear if you think this is the right approach. I said, listen, before you start landing on, like, you definitely should be figuring out what models are out there, what works for you, what you think you want to support. I told them, I was like, go look at, you know, hats. Like, there's places in the channel that you should be looking. Talk to PAXA, talk to whoever, right? Like, figure it out. I was like, however. I was like, They're already, this stuff is in their environment, right? People are already using it, data's probably already leaking out. I said, why don't we just start with what you're already good at, at you should be, which is to, from your background, which is let's start with security. Right. Let's just start, let's have a conversation and you can sit down in front of your client and say, listen, I can scan your environment because I have RMM tools. I can see what's installed in the computers. A lot of the times I have access to your firewall logs or I've got a DNS filter on your, on your laptops. can tell you if people are going to these different, you know, chat GPT and know, Claude sites, I can tell you what's going on there. Right. And then we can talk about maybe an electronic use policy. Like, like, do you have that written down that says, you know, you guys as employees are not allowed to go do this and then just start setting some guidelines.

Jimmy Hatzell (34:51): Yep.

Andrew Moore (35:21): Right? Like just start having that conversation so you sound like you know what you're talking about while you're in the background trying to figure all the other stuff out. Because if you can start having those conversations, you'll start getting input from your clients about what they're actually doing with AI and what they want to do with it. And I think that'll help you start to get information in order to start making better decisions about how you want to support it with your user base.

Jimmy Hatzell (35:28): you

Andrew Moore (35:45): Do you think that's a good approach or do you go about it a different way when it comes to how you're teaching MSPs to engage with their clients?

Jimmy Hatzell (35:53): Yeah, I mean look, MSPs are very comfortable with the security conversation. You can go in your Cisco umbrella, you can go in your DNS filter, you can go in your threat locker, whatever it is, and you can pull these reports of what people are actually using and doing today and have a conversation about Shadow AI. We see partners doing this regularly, we see partners incorporating this into their QBR process or the equivalent of a QBR process, whatever they're doing, and then moving that into we need to get something governed and an approved tool in place in AI policy and we need to have a conversation on what data we're allowed to and not allowed to put in AI. I don't think, I think that that is a great place to be right now. I think in the medium to longer term, being able to have a conversation from a business value perspective as AI, like what's happening is people are hiring slower. because of AI's capabilities. So the budgets for AI are sort of changing because it's like, well, if we can do a lot of this with AI, maybe we only need to hire five people instead of seven people, which sort of changes the dynamics of things. So if you're an MSP who can help manage that and roll that out and have that business conversation really work through the process, there's a lot of money to be made. This isn't just tool spend that's happening. So I think that over the longer, a message that works now is crawl walk run. Let's just get you started using AI in your business as an approved tool. Let's get it, let's get some. easy win use cases that people can do and let's push this pie in the sky sort of like an agent manages everything out a couple months until everyone's familiar, trained up and using AI. And that is a message that resonates, it works well and it's practical because a lot of businesses will either want to do nothing or they'll have one person in their organization who wants to jump to like... we need to do blah blah blah blah. It's the equivalent of someone saying, hey, I need security, I need a pen test. And you're like, let's get some endpoint protection in place and get some email security and update your devices and enable MFA. then maybe we could do an audit and then maybe we could do a pen test. So yes, I think security is the perfect place to start. But quickly moving into a business conversation will unlock a

Andrew Moore (38:06): right why yeah

Jimmy Hatzell (38:29): a lot of opportunity to create value for your customers, is dollars.

Andrew Moore (38:36): And so there's two things I do want to touch on real quick. One is I did not even think about until you just said it. It was kind of like an epiphany. So we talked about how people are slower to hire, right? And that's true. And you look at an example that you just provided is if I could, you know, two, let's just say two X the productivity of one of my developers by spending $1,500 a month, like that seems like a no brainer to me, right? Instead of hiring two developers, I just spend 1500 bucks more, whatever that is, 10, 15, 20%, like whatever your, your costs are on a developer, right? As an example from the MSP model over the last

Jimmy Hatzell (38:48): Yep.

Andrew Moore (39:13): 10 years, everybody shifted to per user pricing. So if we're not hiring as many people as a country, right, and we're supporting these small businesses, obviously we're going to have to figure out a way that if we're used to getting $150, $200, $300 per person per month as an MSP as we're selling, what Where does that take us? Right? Because now we're going to start seeing like, like, we, are we creating new packages? Are we having to do add ons with this product? Like, are we going to completely fundamentally shift the way that we bill for our services? Like, what are you hearing in the channel? Like what's going on? Or if people, people haven't come to that realization yet, where are we at there? Have you thought about that yet? Yeah.

Jimmy Hatzell (39:36): yeah. Oh no, it breaks a lot of things. It breaks a lot of things. And a lot of people's reaction to it breaking things is like, okay, well then it's not gonna work and like, let's move on. Which is like, I, like, uh.

Andrew Moore (40:06): Well, like, like, they're like, what do mean? can't bill by the hour. Like that's stupid. Let's just not go there. You know, like it changed once. It could change again, right?

Jimmy Hatzell (40:12): Yeah, no. Yeah, no, look, if you believe that people are going to hire less people in their company and SMBs are gonna stay leaner or scale with less people than they would have in an alternate reality where there's no AI, and also spend more money on AI in the near future, then... You're right. It is a contradicting thought to I'm going to set my entire business up of bill per user per seat. Right. So how can the where is that revenue made up. Where is the opportunity and the opportunities in helping managing and selling that. So like like there's like approaching the situation of I don't want to do that because if my if my customers are more efficient with AI they're going to hire less people and then you know I'm to make less money. short-term is a short-sighted way to think about it. like you know it's about getting started right now. I did the the the the answer no matter what is like we need to build the internal muscles to support this, have a skew for this, offer services for this, etc. But you're right it it like if those things are true it does. break some long fought MSP traditions, which is almost going backwards, right? Because MSP went from like break fix, you know, sort of like, let's move into like advisory services. We sell business process. We sell solutions to, standardize everything, get your lowest operating costs possible with a standardized stack per seat and be able to scale to almost moving back to like business process. Like let's go through this. Right. And that's where people with big, These CIO practices are really shining with this stuff, or advisory services. A lot of MSPs, like who are our partners, they're getting a lot of their AI revenue and deal sourcing through their advisory services because it is an there's an initial revenue opportunity of rolling out AI tooling and access to models and whatever that is. And then there's a long term. much larger revenue opportunity on being the go-to company that manages the intelligence and AI spend for an organization. Make sure they're spending in the right places, doing the right things, and optimizing the right processes or re-architecting processes entirely. So the latter is the big opportunity and not everyone sees that right now.

Andrew Moore (42:48): Right. No, and I think that that's the shift that I'm gonna wind up having to really focus with my coaching clients on, which is, my opinion has always been the success that I've seen in MSPs where I've worked or managed or built, or the ones that I've coached with, they have strong account management teams. Like, and whatever you want to call them, like it's not typically a sales based account manager, right? Where it's more of that consultative technical account manager, VCIO, whatever you want to call it, right? Where you move from, you know, five, seven, $10 million where you're in that range that no man's land. If you can shift responsibilities off the owner or the primary operator to smart folks that can have intelligent conversations with your clients about their business, right? And use the technology to help them. Those MSPs scale faster. They scale more profitably, right? better spot. And so I'm finding that if those folks aren't in position to have conversations with their clients about AI, start talking about processes, like how that works, what those business outcomes are, then they're this whole like, hey, let me show up and like try to sell you something and hey, look, I'm looking at the stack and you don't have, you know, web filtering in place. So I'm going to go ahead and, you know, you know, approach this white space conversation differently. Clients right now are like, look, I appreciate the fact that you think that I need some extra security, but, know, I've got three people over here that I noticed they're using, you know, different websites to upload my personal or my business data in to, you know, start generating PowerPoints and stuff. First of all, I'm not happy that they're doing that, but also I'm not mad at the fact that these PowerPoint presentations and, you know, these, you know, proposals that we're putting out are happening 10 times faster and they look twice as professional as anything we've ever distributed. So.

Jimmy Hatzell (44:34): Yeah.

Andrew Moore (44:40): I think that the account like having trained account managers and outcomes like having that middle layer of consultative employee within the MSP is going to be absolutely critical to the ones that are going to survive this because the ones that are just selling commodity technology services, they're going to really struggle. Like I don't see how they get past this over the next couple of years, but I don't know if maybe I'm just being I don't know, hyperbolic about the whole thing and just like, this is like a terrible situation for MSPs who aren't ready for it. I don't know, man. I don't know what you're seeing, but I think it's scary for MSPs that don't have a good account managers at this point.

Jimmy Hatzell (45:08): you Yeah, mean, look, like you know more about the MSP business. I see a lot, right? And I see adoption trends and I have an unfair view because we have a thousand partners that I get to work with and see. But you're in it every day. Like, you know much more about how this will play out with, you know, conversations with the customers and all of that. But, you know, I tend to agree with you. Like, we're going through a huge shift in business as a whole.

Andrew Moore (45:28): Right.

Jimmy Hatzell (45:46): not just the MSP industry, but every single industry because of AI and things are gonna change fast. And if you're not ready or nimble enough to move, like you could seriously get hurt. And the core of your business could sort of like change seemingly overnight if you're not ready for it. If you're been in it and training and already a year into this journey, you're like, that wasn't overnight. Like I've been watching that happen, right? But what it'll look like is, you know. start getting harder, right? People start leaving, employees start going down, employee accounts start going down, growth slows because you can't hire new customers, or can't find new customers. That's sort of those signs sort of like happening.

Andrew Moore (46:33): So real quick before we get into the questions here at the end, do want to ask you a couple of real, really quick things. what, what really, I think we've talked about what excites you about AI, but I want you to know, I want to know.

Jimmy Hatzell (46:35): Yeah.

Andrew Moore (46:46): What freaks you out a little bit? Like what is on the horizon where, mean, is it lack of investment in data centers where you've got communities that are kind of pushing back against this sort of thing now? it, you know, limitation of the ability of us to get and retain chips so that we can actually build these systems? it the shit's going to get really smart and we're like going to wind up having overlords? Like what?

Jimmy Hatzell (47:03): Yeah.

Andrew Moore (47:12): concerns you about where AI is going a little bit, just that you're keeping your pulse on it, you're watching it, like presciently.

Jimmy Hatzell (47:18): Yeah, mean, the constraints are the constraints and it just affects price. it's fundamental economics. There's not enough chips, there's enough data centers, things are going to get more expensive. Like that's that. What really concerns me, like I can deal with that, right? Like it talks, but like I can deal with it and manage it. What really concerns me is the human element. So I've seen it for a while because we've been so on the bleeding edge and been working with software engineers. where AI has primarily been focused on innovating. Where when someone who has worked very hard for very long time developed a certain set of skills that used to take years to acquire, and then someone with much less experience aided with AI can get to the same outcome in the same amount of time or a shorter period of time. People don't think about the human element of what that does to people's identity. So AI, 2026 is the year of AI automating the white collar worker. where AI is getting crazy good at making presentations, looking through documents, Excel, all this stuff, sort of like this business process where you can go and upload a spreadsheet and ask for your marketing numbers or whatever, your synthesis, and it's pretty good, right? You definitely need humans to look over it and review it, but now someone who's a lot more junior can get to a lot of these senior places a lot quicker, and if you're not there to train and coach and help your valued employees, they can feel some type of way. Because someone who has all the experience but isn't willing to learn AI versus someone who has way less experience but is willing to really push the boundaries of AI, the latter could end up a lot more productive than the former, which really messes with people's heads. So I'm very concerned about what's going to happen with the workforce.

Andrew Moore (49:27): Yeah, I can imagine that, especially within the United States, so much of people's identity is tied to their career, right? And the idea that you could spend a lifetime learning something and suddenly somebody else could be really good at it really quickly. think. The side to that right now that I'm finding solace in with what I do on a day-to-day basis is I still feel like at this point, and maybe it'll change, human in the loop is critical. And there's times where I'm like, give me this information, and it spits it out. And I'm like, if I were not fluent in what I do, I would look at that and go, that looks correct. The minute I look at it, I'm like,

Jimmy Hatzell (49:56): Absolutely. Hmm

Andrew Moore (50:09): what is that? Like that doesn't look like what is that? Like fix that.

Jimmy Hatzell (50:10): Yeah

Andrew Moore (50:13): Like that is a weird when they're like, yeah, we inferred this or you know, I, I took the data and just thought maybe that would be something you would want to see. And I'm like, it's not, that's not what I asked for. Like, like that's, that's not great. So I think that there's still a, I think there's still a place for people who are experienced and understand their business. Again, come back to this consulting thing. Like if you're consultative and thoughtful and you understand a certain industry in a certain way, I think AI can be a huge tool to augment you. But I think if you use it as a replacement to that knowledge, that I think you're going to be in a dangerous situation where you're getting data and information back that looks fairly accurate. But if you're making business decisions off of it, you could be in a world of hurt. You could you can make some really bad decisions.

Jimmy Hatzell (50:56): 100 % agree. And I think that that is becoming less and less as these systems get better. But the people who just don't use them at all, those are the ones that are really going to get. A person with experience who knows AI enough to know the limitations and has a feel and a sense for it, and like, wait, it couldn't do that a month ago. Now it can do that, right?

Andrew Moore (51:12): Yes.

Jimmy Hatzell (51:23): Like that's where you need to be as a professional worker to stay ahead. And I think a lot of people won't even do anything and they're going to be in for a rude awakening.

Andrew Moore (51:35): Before we get to the questions last question for you on this is what's super exciting for you right now? Like what do you what do you like without giving away something that maybe you guys are working on or maybe you want to hint at something like what are you just like? Holy shit by the end of this year like this is gonna be hot like where where are you getting jazz when you get up in the morning and come into the office like what's going on?

Jimmy Hatzell (51:54): Yeah, we're building basically a multi-agent swarm that an MSP can come in and connect their... data like their PSA or their customer list or uploaded or whatever they want. And all these agents go out and start researching the companies, start pulling in whatever relevant data they can have, suggest surveys to send out, that kind of stuff, and do the hard work preparing for AI meetings where you can, you know, I mean, obviously you have control over it over an MSP, but we, think by the end of this quarter, maybe middle of next, you'll be able to click a button and a couple minutes later in AI will come back and say, ACME Corp, here are their top five ways we think they can use AI. I've actually drafted up proof of concept demos for that. Here are the right people you should talk to. Here are the things that they probably care about. And here's some information that you have as an MSP that nobody else has, either from ticketing history or DNS or whatever, that can help you navigate that conversation. Click here to draft an email. Click here to generate a presentation. So that's what I'll market on and it's like very fun because this is a hard thing for MSP's, right? Being able to articulate this stuff, being able to communicate it. So we want to make it super easy from a go-to-market perspective, but also in AI knowledge perspective.

Andrew Moore (53:26): It really is. That's hot stuff. So, alright, let's hop into our five questions here. So, my first question is, what's the best business book you've ever read? Like, tell everybody out there the book that changed your life when you read it. Like, you got one?

Jimmy Hatzell (53:38): There's lots of them. I think one of my favorites is Beyond the Cloud by Mark Benioff. I'm actually a Benioff Salesforce stan. I don't know if that makes you think less of me if you're listening to this, but I do really like that.

Andrew Moore (53:54): No one gets in trouble for Salesforce. Everybody's like, yeah, let's just do that. It's expensive, but it works. Why did you like that book so much? What did it do for you?

Jimmy Hatzell (53:57): Yeah, I don't know. mean Benioff is like one of the best marketers I've ever seen and at the time that I was reading that I was in a marketing role and you know he like invented Sass basically which was pretty cool. Did some cool things along the way and yeah you know like I just I thought the building of Salesforce, maybe not the Salesforce we see today, and I might not agree with Mark Benioff on everything, but he's just like, he's just an impressive person. yeah, it's a great book. It's very good.

Andrew Moore (54:48): Cool. All right, what's your favorite curse word? You're welcome to say it or not. It's up to you. I don't mind. I put that there's explicit language used on this show and I post on YouTube, so I don't.

Jimmy Hatzell (54:58): It's it feels weird saying my favorite curse word is fuck, but it absolutely is I drop f-bombs left to right

Andrew Moore (55:05): I use it like pepper on me. It's like I spice up my conversations with it. So yes, fuck is a good curse word. I don't mind that one at all. You can use it in so many different ways. It's so fantastic. There was a, we had a Gaston recently and he had a word that I actually couldn't, I was like, we can't use that. I was like, I was scandalized and I'm a sailor. was like, whoa.

Jimmy Hatzell (55:17): Okay. You

Andrew Moore (55:32): Yeah, so I was like, we're gonna go ahead and edit that. But was like, but thank you for coming prepared. So if you were on a desert island and you could have the music of one artist or band, like it's your band, they're in town, you're always going to see them, you'll go see them someplace wild. Like I'm a music guy, so I just like to ask this question. Like who is it? Who's your band? Who are you going to see?

Jimmy Hatzell (55:58): I mean, I have to say The Dead or Fish or something because they're just gonna keep iterating and jamming and you know, they can play the same 500 songs but they're gonna be a different way every time.

Andrew Moore (56:04): Thanks Yeah. Did you go see them at the Sphere with John Mayer when they were doing Dead in Company? Did you go there?

Jimmy Hatzell (56:16): No, I didn't. didn't. Yeah, I did get invited to see Phish at the Sphere last week when I was in Vegas, and I didn't do that either. I've basically stopped going to concerts almost entirely since I founded this company. I think I've been to two where I used to go to like 20 a year or so. It's been rough.

Andrew Moore (56:19): Come on! Tune. But you have to take care of you, Jimmy. You gotta go. Like a fish concert at the Sphere with Anastasia and everybody, that would have been so much fun. So that's a bummer. Yeah, I haven't been to the Sphere. I've seen it. I've walked around the outside of it a couple of times, but I've never been inside, but I heard it's sick. Really sick. There's apparently a rumor that Tool's gonna do a residency there. I'm with... Yeah, and my friends are going to see Metallica there, I think in February, which I think would be another throw down.

Jimmy Hatzell (56:38): I know, I know. Yeah. Yeah. there you go. Yeah. Tool in the sphere could get dark. I might like freak out if I'm...

Andrew Moore (57:08): A little bit like some of their like especially doing the visualizations and if people remember I'm dating myself but like back in the 90s and early 2000s they had some music videos that were real like weird and I mean they incorporate some of those visuals into what they're doing like that could get wild but that would be super cool to do. So you can change names you don't have to be.

Jimmy Hatzell (57:19): Yeah.

Andrew Moore (57:32): You don't have to name names you don't do, but if you had a business meeting, a sales call, an HR meeting, something that was like the worst, like the worst ever where you're just like, yeah, no, that was just weird. And it was awful. Like, is there one that comes to mind where you're just like, yeah, that probably never should have happened. That was, that was terrible.

Jimmy Hatzell (57:37): you well, I'm notorious for hating meetings my whole team knows that I hate meetings and like like hate meetings and Anytime there's a meeting about meetings. I like absolutely like lose my shit. I do it's like pretty bad

Andrew Moore (57:52): Yeah. We're going to get together and have this. I hate that. We used to do that. like, is this a meeting about a meeting? And they're like, and everybody would get real quiet. I'm like, come on, y'all. Like we could be better.

Jimmy Hatzell (58:13): So you want to schedule a meeting to talk about how we hate meetings about meetings?

Andrew Moore (58:17): Yeah, that's what we should do. We'll just put it on the calendar. That's a good one. OK, so last question is, if there's somebody that you would recommend you can make an intro to that I should have on this podcast, who is it? Who do people on the channel need to be talking to right now? Who's out there? Who's saying interesting things? Who needs to be heard?

Jimmy Hatzell (58:43): I don't know. Have you had Chris Day on? He's been reaching out to me, trying to get MSPAI, where's it going, back in the, him and I have recently connected and he's been all about AI and trying to really lead the ship there on how things are going there. Yeah, yeah, so, yeah.

Andrew Moore (59:02): Evangelize, down the boat. Yeah, yeah, yeah, I'll reach out to Chris. That'd be cool. We'll figure that out, right? That's a good opportunity. Cool. Well, dude, so we're gonna wrap it up, but I just, can't thank you enough for being on and taking time, because I know, as you said, you don't even have time to go to a concert, so you're a very busy man, and I appreciate you hanging out with me for the last hour and chatting it up, so thank you for everything, and I wish you guys the best, for sure.

Jimmy Hatzell (59:09): Yeah. Yeah, my pleasure. All right, thanks for having me on.

Andrew Moore (59:33): All right. Thanks, Jimmy.