Why Fast-Growing MSP Thrive Is Betting Big On The South

‘We think Florida is a huge opportunity and Thrive plans on growing our presence down in that market as well as working our way up the coast towards where we‘re currently mostly situated, which is (Washington) D.C. to Boston,’ says Rob Stephenson, CEO of Thrive.

With five acquisitions in the last year, and more to come in 2022, MSP Thrive is seeing steady growth in terms of revenue and employee count. The hottest market, according to CEO Rob Stephenson, is in the southern part of the U.S., particularly Florida, as he said many northern enterprises are taking advantage of the favorable tax environment there. Cities like Miami, Fort Lauderdale and Tampa are ripe with opportunity, Stephenson said, and he wants a piece of the pie.

“You’re seeing more scale and more openings,” he said of the economic opportunities in Florida. “That pro-business climate and a less-restrictive tax environment are leading to a lot of these changes.”

In January, Foxborough, Mass.-based Thrive — a member of CRN’s 2022 MSP500 and Elite 150

acquired InCare Technologies, an Alabama-based MSP, to expand its footprint into to the south. Earlier this month, the firm acquired Preemo in Miami.

Stephenson (pictured above) spoke with CRN about why he believes the southern states are such a hot market, his M&A strategy and what every MSP should be doing to secure their environments.

Your latest acquisition was Miami-based MSP Preemo. What attracted you to that company?

There’s a lot of money moving from the Northeast to Florida and Miami is one of the hottest markets in the country. The team themselves at Preemo are a phenomenal group of technicians that are very client service focused. They have a lot of technical capabilities. Their clients raved about them. They do a lot of work in legal and private equity and the only thing that stopped them from being a very large company is capital. We feel the combination of their skill sets and knowledge of the local market and our capital and our automated platform will allow us to scale up very, very quickly in Florida.

That’s where we’re making a big bet as a company. We think Florida is a huge opportunity and Thrive plans on growing our presence down in that market as well as working our way up the coast towards where we’re currently mostly situated, which is (Washington) D.C. to Boston.

How does this acquisition further Thrive’s strategic goals in 2022?

Our strategic goals are to grow about 10 percent organically and 10 percent inorganically. So 10 percent will be through acquisition, 10 percent would be growing our clients and our revenue, which is exactly what we did last year. Roughly about 20 percent of our growth was between acquisitions and organic growth. We feel like that‘s a nice sustained growth model. We’re not looking to grow 30, 40, 50 percent, but we’re not looking to shrink. It fits a model from our perspective. We have a lot of very large clients in New York City that have announced that they‘re moving and opening up offices in South Florida: West Palm Beach, Fort Lauderdale, Miami. So by getting into that market and having local technicians that work with Thrive servicing their accounts there doesn’t open the door for other competitors to get in and work their way into their accounts up in New York.

I think we‘re seeing a shift of money in the marketplace, but we’re here to continually support our clients and their growth and their expansion plans and this acquisition fits perfectly.

Is Florida the hot new market?

I think we’ve seen pretty restrictive policies since the pandemic such as high tax rates. Look at it in terms of where economic development can take place. A lot of private equity venture capital companies that we support, these big markets, probably aren‘t picking up and moving their whole operation there but they’ve accommodated workers working remotely. If people have a choice to work in Saskatchewan or Florida they’re typically choosing Florida at a higher rate.

Thrive has completed about six acquisitions in the last 15 months. What is your M&A strategy and why do you think that market is so hot right now?

I think in general M&A for the MSP industry makes sense if it’s consolidation. Private equity has moved into this market for a number of reasons. One, it’s a very sticky service, managed services. IT has become very, very complex, particularly since the pandemic, between cybersecurity risks, escalating rates that companies are struggling with keeping up, digital transformation, automation, remote workforce. It‘s really accelerated small and midsize businesses to look at MSPs. And then companies like Thrive that really work with some larger SMBs and midmarket companies, we’re able to partner with existing IT teams and larger enterprises to help them with some of the complex, fast-moving issues that maybe before were stuck between doing it internally or going to a very small SP. I think the complexity, the stickiness and the space has been strategically important for why private equity is moving in.

But also they look to where they can put their money to work. They’ve raised massive amounts of capital and interest rates are very low so they want to put money to work.

In the past, [investments] have been in the data center business, the telecom business…but those are quickly dwindling. They’re all taking a lot of that spend away from where they would traditionally invest and they look at the MSPs. There’s not a lot of CapEx involved, they don’t have to spend a lot of capital to acquire customers and ther are very sticky long-term services contracts. It allows you to grow these complexities in the marketplace and add more and more layered services. So as private equity comes into a space, consolidation naturally appears. It’s really helping for the whole maturation of the MSP industry in general.

What is the biggest challenge MSPs are currently facing right now and why?

Labor, labor, labor and labor. Because IT has moved a bit quickly, and because there‘s so much demand, it’s been a challenge. Thankfully we tripled the size of our internal recruiting staff. I believe we hired over 100 employees last year. We currently have about 30 or 40 open positions and I believe I’ve seen 14 new hires in the last few weeks alone. We‘re growing at a very rapid rate and we’ve been able to do it because we have a lot of technologies. We have our own 24/7 security operations center, we have our own private cloud and our own public cloud managed practice. Technologists would get excited about coming to Thrive and knowing that they don‘t have to jump from a small MSP to a different technology company to follow their dreams. We sort of have all the services built within our company.

We launched something called Operation Rising Tide about six months ago to bring in a lot of entry-level employees and every year they move up the ladder and begin moving into different positions. In a small company you have to do five or six or seven different things, but as you get larger we can allow them to concentrate on their passions or areas where they want to be. We‘ve also built Thrive University which is aligning with a lot of colleges, tech schools and universities to build programs for students who are graduating. We’re giving them career paths, bringing them in and training them up. But it’s a challenge when you‘re trying to grow. There’s no shortage of demand from other companies for technology talent. The Amazons and Microsofts are gobbling up a lot of people and that leads everyone else fighting for them.

How many employees do you have on staff right now and where would you want that number to be by the end of the year?

We have about 585 and will be at about 630 in another 30 days as we’re almost done acquiring another company. By the end of the year with a couple other acquisitions we should be approaching that 800 to 900 employee count.

What evolving trends are you seeing in the market right now?

Cybersecurity is probably No. 1. If we do in-depth tracking of how our sales reps get new appointments, I believe over 70 percent of our new appointments are all driven around cybersecurity. That‘s the largest part of it. We still see probably 10 to 20 percent is cloud, whether it’s public or private. The other area that‘s growing quickly is digital transformation. It’s a very broad term but the way we look at it is using automation and software to harness the power into making more efficiencies for company’ workforces. If we wanted to hire 100 people right now, it‘s pretty hard to do. But what we can do is automate a lot of things and make our existing employees more efficient. So maybe we can hire 50, but we can create 10 percent more efficiencies. That still gets you there one way or the other.

When it comes to security, what should MSPs be doing to further protect themselves and their own customers?

The number one thing that they should be doing is meeting with all of their large vendors and asking to see their SOC 2 reports and their pentests to make sure that they‘re running Qualys vulnerability scans and remediation scans to look for all possible vulnerabilities within their environment. They should be contracting with outside parties that do pentests on their own environment. And they should also be encouraging their clients to build their security posture or a full security program agency.

Not every MSP has the in-house capabilities to do this but there are vendors out there that are acquiring cybersecurity companies and there are partners that they can partner with. But [MSPs] need to make sure that if they‘re not providing the services natively to their clients that they partner with the right companies or look to get acquired by somebody like Thrive they can do it all. They really need to make sure that the tools have been checked, double check, triple check, hardened and don’t have any known vulnerabilities.

What do you need from vendors that you’re not getting today?

We’re big Mimecast partners. We build a lot of these programs in-house but we don’t make the software. We try to look for best of breed software that works best for our clients. We typically have two products in every bundle but endpoint detection and response or next generation antivirus is arguably the most important thing that MSPs can be adding to their clients. Then running a SIM on 24/7 eyes-on-glass service that goes and looks at all the firewall logs and makes sure that there was nothing sitting in there taking care of the network. I think those are probably the two most important things.

In terms of the pandemic, if things go back to normal, or a new normal, how will MSPs have to shift to still meet their customer’s needs?

I’m a firm believer that most markets are going to be hybrid. I think [working in the office] is going to be a hard requirement, and that’s good for MSPs and bad for MSPs. It’s good because it‘s going to provide a lot of revenue opportunities and growth opportunities for their clients. They need to be able to build out technology strategies that not only support on-prem office environments but also work anywhere. Those are more services they can sell. But it also creates a level of complexities and a level of exposure that if they’re not putting out the best practices, if they‘re not running the right security programs, if they don’t build the right bandwidth, clients could outgrow them very quickly because the hybrid environment has complex demands. We’re in the application availability business. Our clients could be in Asia or could be sitting in an office in New York City or Washington, D.C. or London and we need to make sure that those applications are available, that they‘re working fast and efficiently for the client and they’re secure and protected. That‘s really where the world has shifted. Almost everything in the pandemic can be done with technology.