The 2 Big Plays That Made Virtual IT Group CEO Daniel Garcia A Titan In The Industry: M&A and Automation

Virtual IT Group Is The Second-Fastest Growing MSP In Australia Thanks To CEO Daniel Garcia And His Ability To Lean Into Automation, Saving His Company Time And Giving Valuable Growth Opportunities To Employees

Note: This article is taken from a live interview and has been edited for clarity and length.

Virtual IT Group CEO Daniel Garcia is enjoying the explosive growth his company is seeing in Australia, but in true Titan form, he isn’t sitting back on his laurels. In fact, the success is only fueling his desire to become a $1 billion company with future expansion overseas.

Robin Robins, founder of MSP Success Magazine and Big Red Media, spoke with Daniel to understand how he’s leaning into automation and M&A to help blaze the trail to his goals. Automation, he says, doesn’t just make workers more productive, it also opens up time and space for workers to develop new skills and grow through the company. A valuable asset for retaining top talent in one of the toughest labor markets the world has ever seen.

Robin Robins: Virtual IT Group has six locations in Australia, stands at $88 million and is growing year-over-year, easily – where’s that growth coming from and what do you see as the biggest challenges?

Daniel Garcia: We’ve been around for nine years now and we’ve enjoyed success through both organic growth and services that we deliver, but also through acquisitions of other MSPs. We’ve done really well in integrating those businesses and seeing the upside of when M&A goes right.

Robin: What’s the goal? What’s the end game? How big do you think you’re going to get?

Daniel: We have those conversations internally a lot, and the goalpost keeps on moving. We’re still having fun, we’re still having a lot of success, but we will keep striving forward. There’s no reason why we can’t be a $1 billion MSP. Right now, we’re still in Australia and we’ve got plenty of territories we want to cover off on, and then we’ll start to set our eyes on what being overseas looks like and where we can start to take this MSP.

Robin: Are you the fastest-growing MSP then in Australia?

Daniel: From a percentage perspective, I think we ranked eighth in Australia, but from a raw growth gross number, I think we were second-fastest. We try to not just include M&A activity; we want to see that organic growth coming through. We want to feel like we have plenty of opportunities to grow our existing customers and grow with them as they grow.

Robin: How are you dealing with current MSP challenges like labor shortages and rate hikes? And how are you overcoming them?

Daniel: The challenges around attracting and keeping top talent is global. It’s not just the United States. As we’ve acquired organizations, we’ve been fortunate to obtain some amazing talent and very fortunate that we’ve been able to retain them. We’ve also invested heavily in automation. That’s where we made some big bets early on. We wanted to make sure our MSP was taking advantage of automation and not being completely dependent on individuals. We wanted to automate as much of the service-desk work as possible. That has been a huge success for us over the last four years.

Robin: When you say automation, are you talking about AI or are you talking about something else?

Daniel: What we’ve created is basically an AI engine that classifies the tickets as they’re coming through. We then have a library, or an RPA platform, that has 60 workflow automations, which is made up of about 600 different automation packages that basically streamline all of the service-desk work. Virtual IT Group was the creator of that and then spun a separate organization off. We’re seeing 30%, 40%, 50% of our service-desk work completed via automation and this platform on a week-to-week basis. And that creates huge leverage, especially for our size. It makes a huge difference when a lot of that work is being automated.

Robin: What about price increase and inflation? Have you raised prices or are you continuing to raise prices?

Daniel: We try to avoid doing that to our clients. When our vendors increase prices, we try to absorb as much as we can, but sometimes we need to pass some of that on. Have I seen churn because of it? Not really. I think our customers, our partners have been pretty good at accepting that and understanding what is happening in the marketplace. And we do a very good job of explaining that. My advice to MSPs is just to be transparent, have that conversation with your customers, and if you need to raise prices then do it, because if you don’t do it, your business will suffer. And if your business starts to suffer, your clients are going to suffer anyway.

Robin: We talked about some of your opportunities in AI and beyond – what other opportunities are out there?

Daniel: We made some bets early on with security. I think we’ve been a little bit reluctant sometimes to enforce security standards, but I think that right now there are so many cyber security events happening that it is a risk to our business if we are not enforcing security standards to our customers. So, we will no longer accept customers that are not doing the minimal security practices, because it just costs us so much money when there is an event. So, we need to make sure we invest in the right people to be able to deliver those practices to a certain standard. And that’s a huge opportunity, as customers become more aware and are forced to take up those standards. There are huge revenue opportunities in that particular aspect.

Automation for MSPs is another. I don’t see organizations being able to compete with MSPs who have that automation built into their business. If a company is saving 30%, 40% of their time through automation, how are you going to be able to compete if you’re not doing it too? You know, labor shortages are going to continue to be there. And there are more and more demands, like security, that aren’t going away. The demands on the MSP are increasing. We are more than just the IT guy. We are seen as a true business partner, and we need to act that way. You need to have the capacity to be able to deal with that.

Robin: For your MSP using the automation and saving those costs for clients, how are you using that from a marketing standpoint and sales standpoint?

Daniel: We had those discussions internally. Do we try to compete on price because our cost to serve is lower? Do we make our offering cheaper and maintain similar margins to what everybody else is doing? We decided against that. And the reason why we decided against that? Just because we can do it cheaper than everybody else doesn’t mean we should be cheaper. We’re providing a much better experience to our customers. We’re delivering a better outcome to our customers, faster.

Robin:What other advice do you have for MSPs in the $1 million to $3 million range?

Daniel: Automation is going to make a huge difference to your business. We’ve talked about security a lot, and that is not going away anywhere. So, I would look at what sort of security practices you can build out. M&A is obviously a big topic of conversation. If an MSP isn’t looking to buy, they’re looking to sell. Whether you’re doing acquisitions or not, I think the same practices apply. You need to be looking at your customer base and your product propensity across those customers. You need to be looking at what the cost to serve is and what are the ways you can automate, bring those costs down. Those are practices you need to do every single day. Having your finger on the pulse of the organization, knowing it inside and out, is extremely important, and good people are hard to find to do that as you scale. And if you have good people, do your utmost to keep them.

ABOUT THE AUTHOR

MSP Success Magazine

MSP Success Magazine

MSP Success Magazine is a print and digital publication dedicated to helping the CEOs and owners of managed IT services businesses build strong, profitable, growth-oriented businesses. Written and published by Robin Robins, founder of Technology Marketing Toolkit, this magazine is uniquely focused on the topics of marketing, client-acquisition, sales, profitability, leadership and personal development.

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