Pliancy shuns MSP label, grows $30M business
The managed services business model may be an investor favorite at the moment, but Marcus Olson has avoided that term, emphasizing a consultative approach instead.
Dave Sobel is host of the podcast The Business of Tech and co-host of the podcast Killing IT. In addition, he wrote Virtualization: Defined. Sobel is a leading expert in the delivery of technology services, with broad experience in both technology and business.
In this video, Sobel interviews an industry executive who avoids the MSP label. Marcus Olson, founder of Pliancy, said his company takes a consultative approach with its capital management and life sciences clients. The Palo Alto, Calif.-based company follows a four-step process that begins with discovery and consultation, moves on to training and continues with ongoing support.
"I've always felt like consulting was the right play -- align yourself to companies that are looking for consulting," Olson said. "They want to leverage technology to further their businesses, solve challenges."
Editor's note: A transcript of this video follows below. Edits have been made for length and clarity.
Dave Sobel: Tell me a little bit about what you're doing now and how you got here.
Marcus Olson: It's a long story, so I'm going to try and consolidate as much as possible. I grew up in Minnesota, so I moved to California when I was about 22 through an acquisition of a startup I was working at. I just needed a job. It paid very well. I didn't understand why I was being paid so well to do, frankly, things that I felt were underneath me from a technical perspective. I learned later why they pay so well for consulting, which is the hazard pay, but, nonetheless, that's how I kind of got into consulting. And I worked for a small consulting firm that eventually evolved into an MSP, and that's where I spent about two years. As they kind of converted into an MSP, I kind of just felt like that wasn't the direction that I wanted to go and I felt it was a divergence from the needs of the clients. I felt it was a business model that was being created to solve the company's problems and not the client's problems. I left and then that's when I started Pliancy.
Sobel: I want to ask a little bit about Pliancy. How do you view the organization?
Olson: If you go to our website, if you read our job ads, you'll see we never use the term MSP. That's because I feel like there's a rebirth of consulting and, I'm going to be honest with you, I never left it. I've always felt like consulting was the right play -- align yourself to companies that are looking for consulting. They want to leverage technology to further their businesses, solve challenges.
As I saw the divergence of this MSP model, it felt like it was being relegated to help desk. While at the time there was a demand for that, being in Silicon Valley, and one of the few MSPs of our size that's kind of born and bred in Silicon Valley, I saw many years ahead of what [the] challenges were going to be. I felt like consulting was going to be needed. More technology coming to these small to medium businesses, these emerging startups. They needed technology to accomplish business goals, not technical challenges.
About four or five years ago, when SaaS kind of burst onto the scene, [it] became very clear that that's what was needed. You got all these departments fighting over SaaS. How do I connect that? How do we secure this? It was no longer about servers and closets and networking really -- that stuff really just became table stakes.
We kind of view ourselves as a consulting firm. We do bill hourly, for example, in 15-minute increments. On the other side of our business, we do have predictable models, which is how you use SaaS, how we secure it, how we deploy it, manage it, automate it. That's all very, very predictable to us. We've built [a] predictable product over there called our Pliancy Platform. That is the typical MRR (monthly recurring revenue), if you will, in this industry, combined with our hourly rate. And it doesn't matter when you call us or who you talk to. Whether you talk to me, you talk to a tier-three in our tech ops team or a consultant, it's the same rate, same thing. There're no after-hours minimums. That's just simplicity in pricing, so that's kind of what we are.
Sobel: I'm super intrigued by this. Is it an intentional choice you've never used MSP or is this something that you've switched from?
Olson: I think we are called that very frequently by our own clients and even some of our employees, but I always felt like the MSP term, as the race to the bottom began, I felt like there was this pushback from the clients that they were tired of MSPs. I would not say that MSPs, right now, are looked favorably upon by talent in the marketplace or clients.
I get that it's challenging. I'm not knocking MSPs. But that said, it's like, well, we don't want to be lumped into them. We've got a completely different approach. We're not your traditional MSP in our pricing, so why would we use that term? Instead, we just chose to use no term. We are not any sort of box. We are Pliancy and we have our Pliancy Platform and that's our approach.
Sobel: Got it. Give me a little bit of sense of the size, revenue, kind of numbers that you use to describe the business.
Olson: We are bootstrapped, so we don't have investors or anybody like that at the moment and that's intentional. We're 130 people, I believe, somewhere in that range. Our average growth year over year is around 70%. We've been hitting those numbers roughly four years or so, four or five years. To be fair, we used to be called TSG and we were your typical stodgy 3-letter boring consulting company. In 2015, we kind of took this idea of moving from private cloud, which a lot of companies do now or did do over the last couple of years. We said, 'We need to get out of private cloud. There's no runway there.'
That's when we started building SaaS orchestration platforms and going that route. We're about probably trailing 12 [months] somewhere around $30 million in revenue, maybe $32 [million], somewhere in that range.
Sobel: Got you. I want to dive in a little bit more: You do have contracts with your customers, right? There are components of it that are recurring and components that are consulting? Can you describe that for me, how those relationships work?
Olson: Listen, if you're going to go into the market and you're going to be different, then you really need to focus on lowering the barrier to entry. The idea that if you want to offer a different solution, then you need to share some of the risk with the person that's choosing you or signing up for you or using your services, because you've got to remember they're representing the company and their own job.
I've never done contracts. We've always been month to month. We have 98% retention of our clients. There are years that we go by with 100% retention.
Really, we've got great social proofing with some of the amazing companies that we work with that are very bold. And we have such a low barrier to entry. I think that's been a huge vessel for us to get the adoption that we have and the growth that we have -- especially with no sales team.
Sobel: So, no sales team -- talk to me about how acquisition works.
Olson: It's all word of mouth, right? No surprise. All MSPs are word of mouth or the majority of them are. We just simply feel like the best thing you can do for growth, and I'm sure many other MSPs feel the same way, which is, 'Listen, focus all of your effort, money on delivering results that are worth talking about. If you do that, that will drive your sales.' Rather than spend money on outbound sales teams and commissions and all of that, we just say, 'Let's just deliver a better experience and let that do the driving.'
Now, we do have two people in our sales team because there's obviously red lines, legal situations, updating. [They] meet and vet clients and figure out if they're a good fit.
We turn away about three quarters of people that come to us because they're looking for something that's more like a traditional MSP or, 'Can you just do this project,' or, 'Hey, we only have one office we need you to support.'
Great for many MSPs -- doesn't fit our model.
Sobel: Can you walk me through the bootstrapping then? How you go through the entire process to give me a sense of how that all came about?
Olson: I mean, obviously, we all know trunk slammer, whatever you want to call it. It takes about 99 bucks and some time on LegalZoom to start an MSP. I was no different, right? It's 2008 or something like that, and the crash had not yet begun. I just decided to leave the MSP I was at. This is how every professional services company starts, whether it's a law firm or whatever: You leave, you're the talent [and] clients go, 'Where are you going? We're going to follow you wherever you go.'
Now, for me, I wasn't planning to go to another MSP. I was just planning to go get one of those really cool jobs at a Silicon Valley startup. The idea that there'd be water slides and buses picking me up and -- I'm from the Midwest, oh man, talk about stories when I go back home. Instead, one of the clients I was working with back at the other MSP, he was like, 'Listen, I invest in people and not ideas. I just love the way you have been working with us. I love your approach to technology and how involved you get with our business to help us use technology. I think if you started a consulting firm, you would do exceptionally well.'
I was like, 'I know how hard these businesses are. Man, these are hard businesses to grow.' I just worked at one, but I felt like I didn't want to let him down. I felt like, ah man, well, if he believes in me, maybe I could do something different. Maybe I could make something big. So, I agreed and they were our first client.
I remember writing on a whiteboard saying, 'This is what I need to pay my bills. This is what I need to eat.' I was already stockpiling ramen for this adventure I was going on. I was living in a studio apartment with three people at the time. I remember it was by the end of that week, I had surpassed what I needed, and then some, with clients that had heard that I had gone out on my own and wanted to join the adventure.
That kind of happened, and then I immediately started deploying the ideas I had at the MSP that they didn't want to hear, right? They didn't want to displace their labor into automations or smart technology because that was their bread and butter. I said, 'No. If we put VMware in a data center and we start leasing this back out in a controlled manner, they don't need to buy $5,000 PowerEdge servers. They can pay a hundred dollars a month and have access to ours.'
I found that $200-a-month colo location, I put VMware 2.0 -- I think that was what was around at that time -- in it, and I spun up [a Microsoft Small Business Server (SBS)].
The next client that called me said, 'We want to get spun up. We're a new firm and we'd like to use you.' I said, 'Great. I got this solution, called TSG Cloud at the time, which is private cloud hosting. I can put you on that. By end of day today, you'll have SBS and email working and it'll be a hundred dollars an employee a month.'
Sobel: We're talking now in 2022. I'm going to assume you're not running a bunch of stuff in private cloud, that you're now leveraging all kinds of public cloud facilities and SaaS? Is that a fair assessment? What's the stack look like?
Olson: Most of our stuff is in GCP [Google Cloud Platform] and I'm talking way beyond my pay grade right now, now that we got engineers and developers. Most of that runs in GCP and most of it is delivered through Kubernetes containers and whatnot, microservices. That's kind of what runs our platform and our automations and everything. Then, I would say maybe 5% of our clients might have a server on site or another 10, 15% might have some AWS needs because they're life science. But for the most part, we're really looking for companies that are brand new, that don't have technical debt.
While other MSPs might be fighting over that 100-person client, oh man, that would be a great deal, we just see red flags of technical debt, which is like, 'Great, now we're going to have to deal with the fact that they've got a bunch of physical assets.' We generally only go after small clients that we believe in, that will grow and then, therefore, we can deploy our solutions and our approaches and our automations and produce predictable results for them as opposed to inheriting technical debt.
We also are built on top of Okta. I believe we were the first MSP to deploy Okta. They didn't have any multi-tenant. This was six years ago. We reached out to them. Okta, at the time, was like, 'You want to do what now? You want to take our APIs and you want to build on top of them a multi-tenanted version of Okta? Okay. Go for it.'
Same with Duo [Security, purchased by Cisco in 2018]. Duo didn't have a multi-tenant MSP program back then, so we worked with Duo when they were smaller, built a multi-tenanted version of that. That's kind of the unique offering that we have is that we're taking some of these enterprise products and solutions that are not accessible by most MSPs yet, and then bringing that accessibility to small emerging businesses.
About the author
Dave Sobel is host of the podcast The Business of Tech, co-host of the podcast Killing IT and authored the book Virtualization: Defined. Sobel is regarded as a leading expert in the delivery of technology services, with broad experience in both technology and business. He owned and operated an IT solution provider and MSP for more than a decade and has worked for vendors such as Level Platforms, GFI, LOGICnow and SolarWinds, leading community, event, marketing and product strategies, as well as M&A activities. Sobel has received multiple industry recognitions, including CRN Channel Chief, CRN UK A-List, Channel Futures Circle of Excellence winner, Channel Pro's 20/20 Visionaries and MSPmentor 250.