Are you part of an MSP peer group? In this installment of MSPtv, we sit down with Arlin and Pete Sorensen of HTG Peer Groups and talk about the growth and success of HTG through the years, as well as the growth and success of their members. Over the past 4 years, HTG has increased its membership by 20%. Additionally, HTG members experienced 40% growth in total revenue. Tune in now to learn more about HTG Peer Groups and how they've helped MSPs improve their business and their wellbeing through quarterly meetings!
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Scott: Hi, folks. I'm Scott Glidden with Continuum. I'd like to welcome you to MSPtv. We're very pleased today to have with us Arlin Sorensen and Pete Sorensen from HTG. How are you today, guys?
Pete: Well, thank you.
Arlin: Doing very well.
Scott: Good. It's been great. You've been here in the Boston office with us for a couple of days, our new office that we just moved into a month or so ago. Very pleased to have you visiting here.
Pete: Well thanks for having us. This is a beautiful, amazing office.
Scott: Yeah, we're just...
Arlin: Yeah, I heard a lot about the view. And when we got here Tuesday, I couldn't see anything outside. But today it's cleared up, and it really is a beautiful place.
Scott: Yeah. Thank you very much. Yeah, we're really excited to have our own space, our whole floor, and just really incorporate it into how we do our business. It's lovely. So, HTG is a Peer Group organization. Could you tell me a little bit about the organization?
Arlin: Yeah, HTG was started back in 2000 when I was running my own technology company. And we had geared up for Y2K back in '98 and '99 because all we heard about for a couple years was the pending opportunity that was going to be available to us as a technology provider. 2000 came and went, and Y2K missed Iowa completely. And in April, actually, at one of our management meetings, we were having a conversation about what happened and what we were going to do about it. And the conversation came up that we needed to talk to some other companies and see if we missed something along the way or Y2K really wasn't going to be what it was made out to be.
And so we called three other Iowa companies, asked if they'd come meet us in Des Moines for half a day and just compare notes. They all showed up. We got together. We talked about that. Found out that Y2K never happened for them either. And that was hugely valuable to us, but we also shared some other things together. And we found out we could learn a lot if we just would slow down, talk to some other folks, and share openly with each other.
Scott: That's great. Pete, what kinds of things do you see members of HTG drawing from each other?
Pete: Oh, gosh. Over the course of a meeting together, they really go deep. It's actually pretty amazing some of the things that they cover. Business-wise we cover a lot of the basics and we'll talk about how they're doing in their business, what their goals are for the coming quarter, how those goals relate to kind of their big picture of what their end goal is. And those are all great. We benchmark their financials and they share openly even at that level, but we go a lot deeper than that and we'll actually spend time over the course of a year talking through four plans that each of our members complete.
It's a business plan, a leadership plan, a life plan, and a legacy plan. And so through those discussions, they're not only going deep on their business, but they're starting to talk about their leadership and how are they leading their companies and their teams, how are they developing other leaders within their organizations, and what's working there and not, hiring, building a positive culture in their company, all those things. They get real and they share life.
And things are going on personally. We very strongly believe that if you're building a successful business but things at home are falling apart, we've failed and we haven't been helping you the right way. And so they bring those discussions in and they talk to each other about those personal things that are important, that everybody goes through. And then legacy, we talk a lot both about business and personal legacy.
Things like business continuity, disaster recovery, what you're building business for. Personal legacy, what is it that you want to be remembered for? What are you working toward in your life? All of those things are open game, open topics, and we have members that are talking about those every meeting.
Scott: That's great. It really is important, I think, to measure a company by those benchmarks as far as being successful, are much more realistic. And I agree completely that if there's a work-life balance there that's out of whack then you're not doing well.
Pete: That's right.
Scott: Yeah, and it's good to have a group to share it with, especially as you mentioned, in an open format, in a safe format to really go about. So, speaking of the company, so you've been around since 2000. How would you say the last four years of business have been for you?
Arlin: Well, it's been booming. HTG was really only started for our own benefit and our own IT company's benefit. And so there was never a plan to grow it to what it is today. But we started to grow a little bit in 2006. But since 2011, we have grown significantly. We've turned it into something, because the need is really great. When people get together and they begin to understand what good looks like, then they know they've got some work to do.
And that's one of the big benefits of HTG, is we benchmark how people are doing financially. We also benchmark how they're doing with their work-life balance. We benchmark how they're doing at home. We ask spouses to fill out a scorecard every quarter. We're looking at every area of their life and business. And when they begin to see that, "I'm not doing as well as some other people," those conversations begin to happen. "How are you getting such a high score from your wife?"
And, "How are you finding time to actually do the things that make work-life balance realistic?" So, it really helps us to recruit because we have real data that we can show people that will make a difference for them in their business and their personal life.
Scott: Yeah, and I couldn't agree with you more. It's the old adage that no one ever died wishing they had spent more time at work.
Scott: Right, for sure.
Scott: Yeah, but for HTG, you folks had a pretty successful and big milestone that you surpassed this last year, right?
Arlin: We did. We crossed the $1 billion in collective sales across our HTG membership. And it's not hardware, for sure. Less than 50%, about 44% of that number is hardware. Fifty-six percent of that is services, so it's a significant number in the managed services space because most of that service revenue is from managed services. So we've been chasing the billion dollar number for a while and our companies are growing and that number is continuing to grow. And we're excited to be chasing the next billion.
Scott: Absolutely, that's great. Congratulations. Now Pete, tell me a little bit about some of the numbers, maybe, that you've seen as far as your group goes over the last four years in terms of growth.
Pete: Sure, sure. As you look at the community itself, we've grown by about 20% as far as the membership goes. Most importantly, as we look at the members of HTG, our average, if you look from the last four years, 2011 to 2015, our members' revenue has grown by about 40%, total revenue. And that's beautiful. Their employee count has grown about the same rate. Their take-home, at the end of the day, EBD, has grown about 35%. So they've performed well. They're taking the advice and the best practices and the opportunities that they gain by sitting together with their peers, they're executing, and it's making a difference.
Scott: Excellent. Well you've...you were going to say?
Arlin: And I was just going to say that those numbers are faster than the industry as a whole. So we work with service leadership to get that benchmarking data. And when they compare HTG to the industry overall, HTG members are outperforming the industry.
Scott: Excellent. Yeah, it sound like a great formula and it's nice to have that support and really benchmark yourself and your peers as well in that discussion. What kinds of trends are you seeing in the industry within managed services? What's happening now and what do you see for the future?
Arlin: Go ahead.
Pete: So the two biggest things that our members are saying have got to be addressed in the near future are really cloud and security. They see those as probably the biggest needs that have really grown, especially here recently. They've grown quickly. Cloud's been around for a while, but it's really hitting and becoming a major focal point now.
Arlin: Yeah, and it's still very undefined, right? So the challenge today, with cloud and security, is what's the MSP's role going to be in those giant areas of business? And what do customers want to pay for? There's a lot of misconception with the end users about what's necessary. They think server's no longer in my closet and it's in the cloud, I don't really have to worry about it anymore, right? Microsoft or Amazon will back it up.
Arlin: Probably not. Somebody else will maintain it. Probably not. So there's a disconnect out there in the marketplace between what MSPs know they need to deliver and what customers' expectations are right now. So we've got a lot of work to do to clarify that around cloud. And it's even muddier around security.
Pete: Yeah, the standard security offering two years from now probably doesn't even exist today.
Scott: Probably not, right. Encryption, and everything else that's necessary, and the growth. The Internet of Things is just going to balloon astronomically. I read an article the other day. It was talking about children's toys that connect to the internet and how it's a hackable device into your home network and what have you. So yeah, there's a lot of keeping up to be done.
Pete: That's right.
Arlin: Absolutely. And mobility is really going to be another wild card that a lot of people have kind of been skating by on. We haven't had any real major issues as a result of mobility, but the number of devices out there continues to increase and it's just an accident waiting to happen.
Scott: Sure, absolutely. And I think the number I hear often is probably around 85% of small to mid-size businesses don't have any backup or disaster recovery plan in place. And that's unfortunate. That's a large part of our gross domestic product and employment and so forth, and so it's hard to keep track of. So you spent a few days here with us at Continuum. We've been partners for a number of years and stuff. How's the partnership with Continuum? How are we doing with you?
Pete: I tell you what, we are pleased as ever to have the opportunity to be here in your office and working with your team. I think there are a number of things we've worked on for the past several years. I think a number of great things that have come from our discussions this week as we've worked with your team, and a lot of good things that will be happening in the future.
Arlin: Yeah, there's no question that the relationship we have with Continuum is one of the deepest and strongest we have. And the nice thing is that there's a consistent effort on both sides to really continue to go deeper and deeper, for us to impact Continuum partners, and for your team to impact HTG members. And so we've got a shared vision around what we're trying to accomplish. That partner success is really the driver here. And together we can do that better than either of us can do it alone
Scott: Right. Yeah, and I think the fact that we're channel only, that heightens our awareness and our dedication to that kind of relationship as well.
Scott: You're working on something called a vendor fifth plan, I understand.
Pete: Yeah. Just this year, we've rolled out. We call it the fifth plan. I'm sure we'll come up with a different title for it soon. But it's a plan that's really designed to help partners interact with their vendors in a new way. So we've actually got several versions of it, but we're making that available to our entire community, vendors and members alike. And really, it's a framework that allows them to sit down at the table together to talk about the things that are important on both sides, and to develop a plan that they can both execute against and work together on for joint success. And just in the way Arlin mentioned, that by Continuum and HTG working together we can do so much more. We believe that's true across the board. When folks sit down at the table together and work together on shared goals, things can go so much farther than they ever could if you worked on it by yourself.
Pete: So this is a tool that's meant to enable that.
Scott: Excellent. Yeah, I know that a lot of our own product development comes directly from our partner import and it's invaluable. It really is, to be able to work together. We share a little bit in common too, Continuum and HTG, is that we really take seriously our philanthropic efforts. I understand you have a couple programs going on later this year, your Givers program and your Arlington mission.
Arlin: Yes. In our Q2 meeting in Dallas on Wednesday afternoon, we're going to be going to Mission Arlington and we're going to be taking a group of HTG members there to work for the afternoon. We've done that a couple of times previously, to go and serve as a community because we are definitely believers in the go giver mentality and in providing value to communities. The other thing that we have going on year round is our Hands That Give program where members are able to opt into a program that will provide response to any kind of natural disaster or personal crisis.
So if anyone has a situation where there's been a flood or a fire or tornado or earthquake or any of those natural things that it impacts their business, or they go through some kind of personal crisis in their business, a health issue, family issue, an employee that has a health issue that comes out of a specifically important role. That's what Hands That Give is designed to do. We've got a fund that's been set aside to provide monetary response. But HTG members raise their hand and say, "I'll go help."
Scott: Oh, great.
Arlin: And we've had a number of instances. We usually respond between 12 and 15 times a year to different situations that come up in the community where we're able to go help members recover. And it's one of the most fun things we get to do. It's one of the more impactful things. And we hear from members when they've been helped that had somebody not stepped up to help them, they would have struggled to survive.
Pete: If you look at the data from the Small Business Administration, the majority of businesses that face a crisis don't ever recover.
Scott: No, right.
Pete: And so the fact that our members are willing to step up and help each other through those is just a huge advantage to helping them get back on their feet.
Scott: Yeah, for sure. Yeah, and on behalf of the Continuum Veterans' Foundation, I'd like to extend our thank you publicly. You held an auction last year and raised $14,000 that you contributed to Hire Our Heroes USA, the organization that we support through the Veterans' Foundation.
Arlin: Yeah, and we're looking forward to doing it again this year. I had just heard this week that we're going to double that number.
Arlin: And really go after it.
Scott: That's great.
Arlin: We love to be involved in those kind of things and we're really grateful for the partnership.
Scott: Yeah, we are, too, on many levels. I want to thank you both for being here today and hope you come by and see us again in Boston sometime soon. I understand we'll see you at Navigate 2016 in the fall as well.
Scott: Good. Well thank you very much.
Pete: Thank you.
Arlin: Thank you.
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