When it comes to Illinois, a number of things spring to mind, such as the 44th President, the Windy City, Al Capone and Walt Disney. But in a state that occupies an enviable central spot of the US, offering excellent access to all parts of the country, what are MSPs thinking about? And what do they find are the most significant impacts on their business as they operate in the Prairie State?
From compliance to taxes to serious snow, we talk to MSPs in Illinois to find out what their everyday life is like and hear about the key factors they think about day in, day out.
Illinois, and Chicago in particular, is home to a large number of regulated industries, including the healthcare and financial sectors, meaning plenty of compliance work for local MSPs. Hernan Silva, VP of operations and cybersecurity at Northfield, IL-based MSP CIO Landing and member of MSP peer group The 20, notes that with this comes an abundance of security business, given that it is so much easier to sell in to regulated industries "because they have no choice".
"They have more need because of all the security threats that are going on, and they also understand they have to spend to have the system up and running all the time. They see the value of paying a high price to have our service," he said.
According to Will Foret, president at Lincolnwood, IL-based Spot Migration and member of MSP peer group The 20, healthcare makes up approximately 12 to 15 percent of Chicago's total GDP, offering plenty of opportunity for MSPs in the city and beyond looking to grow their security practice.
Alongside this, global regulations like GDPR mean that compliance is becoming more commonplace across all customer bases, he said. Add to this impending data security regulations being enacted at the state level, such as the California Consumer Protection Act (CCPA), and you get a state where already heavily regulated industries will gradually become even more regulated, giving MSPs in Illinois a wealth of potential customers to tap into.
"The opportunity is there and it's because of laws like GDPR and [CCPA] that could completely kill a small business," Foret said. "And within Illinois we're a very blue state, so we're usually one of the first few to implement those types of law. So it's only a matter of time - I expect in the next five years for us to have very similar [data privacy] laws and eventually it's going to be federal. So from a compliance perspective… [this means] opportunity coming and showing customers how we can create a competitive edge for them using security."
Illinois also offers a potential whole new industry of clients after the state this year enacted legislation making recreational cannabis legal for adults to use and sell within the state. This, Foret notes, is set to create a brand new industry offering MSPs a wealth of potential customers both directly and indirectly.
"This is a brand new industry for Illinois, so there's going to be a boom. And it's an industry that will be taking customers' data. Plus, any company that's doing business with these new players will have to fall into the security components required to do that securely," he told CPI.
"Think about the omnibus rule with HIPAA, where if you're doing business with the medical industry, then you yourself have to be compliant with the regulation. This industry is going to be similar to that."
Regulations and taxes
Illinois is not shy of regulations, according to MSPs in the region. Commentators highlight the state's heavily unionized labor market, as well as its political affiliations, as reasons for this. Foret describes state employment laws as being "very employee centric", meaning MSPs often find themselves treading very carefully during the hiring process.
"The laws change quite often, from PTO to how we pay certain things out. And because of this there's a little bit of a fear factor as to who we hire because of how sided it is on the employee side. Even if lawsuits that are ultimately brought don't have validity, it's a lot of time and money you can end up spending on defending a lawsuit."
Other regulatory impacts on an MSP's business in Illinois are a direct result of the union influence, according to James Velco, CIO and president at Chicago, IL-based TechNoir. He notes that Illinois is second only to New York when it comes to having such stringent requirements around operating in union buildings, for example.
"If you have a union building, you have to have union labor when working in that building and so that increases your cost," he told CPI. "I think the only other city that has the same similar type of requirements for doing certain things like cabling is New York, and it's all because of the unions."
And when it comes to taxes, Illinois is a "highly taxed state", says Velco, and this obviously has an impact on MSPs and any businesses operating there. According to Silva, Illinois' sales tax is one of the highest in the country, leading businesses to consider whether it's the right place for them to operate in.
"Other states have much lower sales taxes when here we have one of the highest in the nation," Silva pointed out. "There have been a lot of businesses leaving Illinois, and the taxes definitely play a part in that. We know businesses that have moved to Texas and to Las Vegas where they have no taxes or much lower taxes."
Indeed Spot Migration is itself considering incorporating in Delaware, where its tax liabilities would be considerably lower, Foret told CPI. "Liabilities around taxes would definitely reduce and it would allow us to be more competitive," he said.
When it comes to being an MSP in Illinois, the state faces one of the key issues that MSPs across the country are dealing with - recruitment. In fact, according to Silva, Illinois is suffering more than most in this regard.
"I've spoken with different recruiters and they say that the hardest state to find talent right now is Illinois," he told CPI.
Velco is also experiencing the challenge of finding good tech talent in Illinois. The low unemployment rate nationwide isn't helping, he notes. Foret agrees. He describes having job adverts "out there for months at a time" and receiving in the region of 600 resumes before finding a suitable candidate for interview.
Another challenge when it comes to finding talent is transport, Foret notes. Given an MSP's remit of getting to client sites on a regular basis, Spot Migration needs relevant employees to have their own vehicles, something "a good portion of the population doesn't have".
"So we can't even use those people. Or we can't even cater to those people for employment because it just wouldn't work," he said.
As to why tech recruitment is such a challenge in Illinois, Foret says the region is becoming "Silicon Valley, 2.0" with a huge tech hub developing.
"A lot of the talent is being picked up there. There's a lot of enterprises in downtown Chicago and a lot of enterprises that have moved to Chicago and they are picking up all the talent and they're paying higher amounts of money than MSPs - anywhere between 30 to 50 percent difference in pay."
Ways in which Illinois' MSPs are trying to tackle the recruitment challenge include offering internships to students at some of the local universities, using outsourced recruitment companies and advertising across the board from ZipRecruiter to Craigslist, word-of-mouth referral, and even old-fashioned poaching. Still, it remains one of the biggest challenges in the state
"This is just a huge factor right now," Foret said.
When it comes to Illinois, everyone knows how cold it gets in the winter. And when this cold translates into snow - sometimes a foot in a single day - for MSPs this can have a significant impact on business, especially when roads and public transport get shut down as a result. Getting into the office can be challenging to the point of impossible, which obviously means getting to client sites simply can't happen.
"Last year it got colder than Siberia here. Trains weren't running, it was impossible to get into the office and then you have a client who needs you urgently, but it's physically impossible to get there. We've had clients who had a frozen pipe burst and take out some of their equipment, but there's literally nothing you can do and the client just has to wait it out," Velco explained.
Foret notes that the wind chill can get as low as negative 40 degrees at least one or two days of the year, during which heavy snow means no one is able to get anywhere - into the office or to client sites. It also impacts power lines, which mean additional work for staff once they're able to visit client sites, as equipment needs to be given the once over after such outages.
"This causes a lot of chaos. It can sometimes be days before your street is cleared of snow, so we often have employees having to work from home on these days. Obviously this impacts business as there is a lot of mobility that has to happen from an IT perspective. One way we manage this is by having a lot of the things we do being cloud based; we don't host anything."
For Silva, the weather has a further impact on business. The freezing temperatures mean certain industries slow down over the coldest months of the year. He notes that in January and February, there's little activity from his real estate clients because of the weather, leading to lost business from them and other clients.
"The real estate market kind of shuts down during these months. And there are a lot of other businesses that shut down as well, reduces personnel or slows down. We have real estate clients that are affiliated with other companies - mortgage companies, moving companies, anything that is related to the real estate market. It goes into ‘sleep mode'. They keep working, but some of them might only be using 50 percent of their personnel, so it's a lot of up and down."
While the weather may be tough at times in Illinois, its location is a hit with MSPs. Being somewhat centrally located means getting to customers in other locations is generally easier and certainly less time-consuming than it is for peers in other locations having to travel from east to west or north to south, for example.
"Our location is really good. I've thought about moving the business, because I think the weather sucks and the taxes are too high in Illinois, but the location is just so good," Velco told CPI.
Silva agrees, noting that the proximity to Indiana and Wisconsin are also huge benefits for Illinois' MSPs. "If you're in Chicago, you're only a couple hours away from each of those states, which enables us to do business there as well."
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