Some believe that MSPs truly arrived and prospered because large IT vendors began to sell more directly to customers and cut VARs out of the equation. The only answer was to add even more value in the form of services. Smart VARs took this approach and instead of dying out, flourished.
The cloud offers the same kind of make or break challenge. If MSPs ignore the cloud, they may be swallowed by it. If they embrace it with enthusiasm and intelligence, even greater riches may await.
Oppenheimer believes this is the case, and its research shows that selling cloud services can dramatically increase the value of an MSP.
In fact, reading these results will certainly not one pine for the old VAR days where a large portion of revenue was based. Here are the multiples of recurring revenues that Oppenheimer attached to various offerings. As you can see, the cloud can drastically increase the value of your operation.
Jim Lippie founded Clarity Channel Advisors to help MSPs make a profitable move to the cloud. Lippie shared his beliefs in an interview with MSPmentor. He describes part of his mission as evangelizing the cloud to MSPs that remain tentative. “They think of it as the enemy. They don’t embrace it,” Lippie said in the interview. “When they think of the cloud, they think Office 365, Google Apps, File Sync and Share.”
The problem with these apps is that in many cases they are sold directly to customers by the vendor, which also handles the branding.
The trick is figuring out how to add value in the form of services to augment these applications. “Ultimately, they need to define what their cloud strategy is. It can’t just be selling Google Apps or Office 365,” Lippie argued. “They have to focus on hosting their clients’ third-party business applications. Not every one of their clients will be a candidate for this, but most of them will be.”
Today most MSPs are in the early stages of moving to the cloud, with a little more than one-third of MSPs thinking seriously about these issues.
The IT Argument for MSP Cloud Solutions
MSPs can ease SMBs’ cloud journey and make the solutions more productive and secure once they get there. MSPs can help provision new services quickly, migrate data, and optimize these services for efficiency, reducing the OpEx burden. MSPs can also become expert in.
Other related services you can provide include:
- Consumption reporting to keep an economic handle on what you are using
- Cloud security
- Compliance consulting and adherence solutions
- Cloud performance analysis and optimization
- Infrastructure planning, design and implementation
- Advice on public vs. private vs. hybrid, and implementation and maintenance services
Once you have an array of services for a client, you can offer them new ones as they come on board.
How MSPs Can Build Their Own Clouds
There are many ways MSPs can offer cloud services without becoming a traditional cloud provider. Many vendors offers cloud services that MSPs resell and add value to. Kaseya, for instance, offers Kaseya Cloud Backup as well as AuthAnvil On-Demand for Identity and Access Management as a Service (IAMaaS).
You can also spin up your own cloud services by using Infrastructure as a Service (IaaS). IaaS is pretty straightforward, eliminating the need to have servers, storage and related network infrastructure on-premises. Instead, this is all hosted by a cloud provider and you essentially pay a rental fee.
In the beginning, these were raw services based on bare-metal servers and unconfigured storage. It was up to the customer to set the infrastructure up with operating systems, apps and the like.
Today, this is infrastructure comes more and more pre-configured for quicker setup. Amazon Web Services (AWS) helped invent IaaS and remains the market leader. Today, hundreds of solutions run on AWS.
With IaaS, you can create your own cloud solutions, sell them to SMB clients, and have much of the heavy lifting handled by the IaaS provider.
The Cloud is Hot
Most MSPs have their hands full managing clients’ on-premises infrastructure and and in some cases are still handling break/fix. But increasingly, forward-thinking MSPs are crafting cloud services and pitching them to customers as a way to modernize their infrastructure.
At the same time, MSPs are increasingly using the cloud to help run their own business and for service delivery. The 2112 Group, which covers service providers, is seeing both as a major shift.
“According to 2112’s 2016 Midyear Channel Performance Report, the average partner earns 43 percent of its revenue through the sale of hardware and software products,” said Lawrence M. Walsh, CEO and chief analyst of The 2112 Group. “Nearly four in 10 partners earn more than 50 percent of their gross revenue through managed and cloud services. And the balance is typically made up of professional and consultative services.”
In fact, the move to the cloud is so profound that it isn’t always viewed as a separate category from traditional managed services. “Partners aren’t necessarily differentiating between managed services revenue and cloud services revenue, as the two categories are quickly consolidating in the channel. Customers aren’t just looking for hosted infrastructure and cloud-based applications; they want third parties with the competencies and scalable resources to manage those things for them,” Walsh said.
And these cloud services are providing strong recurring revenue that has nothing to do with hardware and traditional software installations.
Channel advocacy organization CompTIA is likewise bullish. In one survey, CompTIA asked partners where they saw their growth coming from. A mere 22 percent pointed to on-premises products. Meanwhile, half of all respondents pointed to the cloud as the high growth area. Not only that, 49 percent said cloud services were more profitable. Even more compelling, 45 percent of those polled said customers were asking for cloud services and applications.
Be the Best Cloud MSP You Can Be
Here are a few tips to really make it in the cloud:
- Make sure you and your staff broaden their cloud expertise and knowledge of specific services.
- If you are in a vertical market, deepen your technical expertise in how the cloud applies to the market you serve.
- Explore vendor partners that can support your cloud efforts.
- Once you have found partners, or if you are using existing partners to move to the cloud, take advantage of their building business offerings. This could include support, branding, and training as well as sales and marketing assistance.
The cloud and cloud services and applications have revolutionized how IT is ‘done.’ Technological requirements and services that were once the needs of only large enterprises are now are becoming mainstream requirements for SMBs.
These changing market demands, combined with new completion and MSP business models, are squeezing operating margins and reducing the overall profitability of the business.
For more insight on what all MSPs need to do to thrive in this new environment, download the whitepaper, “Your Roadmap in an MSP 2.0 World.”