Something staggering happened last week.
Jack Dorsey, the current CEO of Block (previously Square), fired 4,000 people in one, very public and swift, fell swoop. Nearly half the company—GONE …
… and his stock price JUMPED 24% the next day.
Block wasn’t struggling. In fact, they generated over $10 BILLION in earnings last year. The business is strong. Gross profits were growing. Their market share? Expanding. So, why the drastic move, and why the positive response to something that is typically a sign of BIG trouble in a business?
To understand why, all you have to do is read Dorsey’s X post about the layoffs. He wrote:
“We’re already seeing that the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company, and that’s accelerating rapidly.”
If that’s not one big GIANT dead canary in the business coal mine, I don’t know what is.
Dorsey went on to say that those who are left will help “build this company with intelligence at the core of everything we do.” AI first—not as a fad, an accessory, or a replacement for Google search.
At the CORE.
He’s building a company with an “AI Brain,” and Wall Street applauded.
I’ve already had a number of conversations with MSPs who are seeing AI halt and reduce their clients’ managed services contracts. Marketing firms have been hit hard. The firm that had 50 people is now down to 10 since AI has made design, copy, and marketing asset creation instantaneous and cheap.
Law firms, CPAs, HR, and recruiting are all shifting from “bodies” to “systems,” and are no longer hiring 5 to 10 junior workers out of college to handle high-volume, repetitive manual work. Essentially, if you’re not a strategic worker and/or AI operator, you’re toast.
Here’s another odd but related one: A friend of mine who owns a successful auto repair shop said that he and many other shops are starting to see a big dip in revenue as collision avoidance systems have reduced accidents by 12% over the last 12 months, and accidents are estimated to drop even more as new vehicles adopt these safety systems.
He’s predicting that as cars become more like computers, with AI doing the driving, they will continue to reduce the number of accidents to the point where only a small number of repair shops will be needed. He’s decided to not invest in opening another location because of this.
Here’s where I see this impacting MSPs in the immediate future, even if you don’t get eaten by AI-first MSPs coming in and undercutting you on price, while simultaneously delivering a better service. You should prepare to see a dip in organic managed services growth as your customers opt for AI systems, over hiring more workers who need a PC.
Anthropic’s CEO estimates this will wipe out 10% to 20% of white-collar office workers within the next five years—reducing YOUR “per seat” managed services growth.
So, what are we going to do about this?
A few things:
Move #1: Own the AI conversation with your clients before someone else does.
Your clients are just like you: They’re constantly hearing about AI and how disruptive it is. They are being told that if THEY don’t adapt to AI, they’ll go out of business. Most of them (maybe also like you) are terrified and confused. Half of the people talking to them are saying AI will solve every problem in their business, and the other half are warning it’ll destroy civilization as we know it. Who do you believe?
Here’s the opportunity: Be the trusted guide who helps them navigate this. Not by selling AI for AI’s sake, but by becoming the strategic advisor holding the flashlight in the dark who helps them figure this out.
Move #2: Start building revenue streams that are NOT seat-dependent and are STRATEGIC in nature.
Recurring revenue tied to seat count is directly under attack. The MSPs I’m most bullish on right now are the ones diversifying into vCISO services, compliance and advanced cybersecurity services, and AI governance consulting—revenue that doesn’t shrink just because your client replaced three admins with a ChatGPT subscription.
Start thinking about what your clients need that isn’t contingent on head count. Then sell that.
Move #3: Start thinking about partnering with an AI development or consulting firm, or starting one of your own.
Don’t know how to start an AI consulting or development division? Then find someone to partner with. Work with them closely to bring your clients into the “AI-first” future. But whatever you do, don’t stick your head in the sand and ignore all of this, doing nothing.
Most people out there think this is scary. Candidly, if I were still running TMT, I would too, and I’d be hustling to be an AI-first marketing firm. EVERY tech revolution creates opportunity as well as change: the Industrial Revolution, the internet, cloud computing.
The same patterns are repeating. Only THIS time, the speed of change is dizzying.
You built your business based on solving tech problems for your clients. Don’t let complacency be the thing that takes it from you.
