The market is still a tad confused over just what makes an MSP different from a Cloud Service Provider (CSP).
The major distinction is that center word – management. Cloud services tend to be raw and the onus is still on IT to manage it all. What IT really wants, or at least what their bosses want, is for IT to become purely strategic and have outside providers do all the management grunt work.
The channel is seeing just this opening, and MSPs are redoubling their efforts, while at the same new companies are entering the space.
CompTIA is a non-profit organization serving the channel, and a big part of its service is fundamental research. In its recent Trends in Cloud Computing study, members are moving strongly into cloud services, with 6 in 10 saying they are implementing multiple cloud business models. And the same percentage of respondents now says their cloud businesses are mature. Even better, they tend to make more money on cloud services. This is the particular beauty of managed services -- where ongoing revenue is based on ongoing oversight.
The study, commissioned by commerce company Avangate, finds that now that the cloud is more mature and understood, IT is changing the way it buys. “More than one-quarter of firms are centralizing the procurement and management of SaaS cloud applications. Consequently, these firms are changing their sourcing strategy, looking to solution partners who can supply and centrally manage the entire end-to-end SaaS portfolio,” Forrester said.
To exploit this trend, cloud providers need to adapt. “To ensure the continued growth and long-term sustainability of the partner channel, ISVs must invest in new technology to ensure that partners are equipped to self-serve their own customers and build long-term relationships,” Forrester argued.
MSP follower Jon Tonti believes it would be a better world if MSPs ran most of IT. Tonti sees MSPs as more than ready to play an ever more important role. “In the relatively recent past, we have crossed the threshold where it is now “technically and economically feasible” for any organization to transfer all their technology needs to managed service providers (MSPs),” Tonti argues.
Tonti then wonders how it would be if MSP took over vast swaths of enterprise computing and reached out to MSP author and consultant Jon Parkinson of Parkwood Advisors for a few answers. Here is what Parkinson had to say.
“I did a consulting project for one of the big global tech firms looking at what the macro-economic impact on the industry would be if the majority of what is currently on-premises IT were provided as managed services. How many people does it take to run global IT if it is provided the same way as a phone service or electricity – a managed service – by some number of peer service providers and you don’t have all the people in-house you have today? What does the industry look like, how big does it have to be, and what skills do you have to have to make that work? The headline is that you only need about 40 percent as many people,” Parkinson argued.
As IT moves to the cloud and managed services, it will take fewer and fewer admins to handle the same number of users. Parkinson used the need to support 100 users as his point of reference.
“Today it might take 30 because the 100 users are in 10 different companies, tomorrow it will take 10 because it doesn’t matter where they are…basically you create a user-cloud, and yes, you have to build in privacy, security, and some multi-tenant type handling capabilities, but if you presume you can solve those problems, which we can or are close too, then you are a much more efficient user of human capital in technology, which is good because there isn’t enough of it,” he explained.
MSPs Must Mature to Keep Pace
It isn’t just easy sailing for MSPs in the cloud. They must prove their worth if they want to move away from the drudgery and uncertainty of break/fix to providing ongoing rich services.
Here again, CompTIA has expertise and advice. And it sees its most advanced members already making the move.
“The best in class are branching out,” said Jim Hamilton, vice president of member relations at CompTIA. “Services that are well established tend to have restricted margins and tend not to be as profitable,” he explained. “But people who go out and develop new technology solutions tend to be more profitable.”
In fact, Hamilton just didn’t surmise this to be true. The organization did research and found that “the best-in-class companies invested twice as much in new services compared with the average MSP.”
In its “Quick Start Guide to Managed Services” CompTIA offers advice on how MSPs can grow beyond break-fix where your revenue is dependent upon handling incidents and keeping things running rather than providing new value. One way to identify new opportunities is to listen to customers. “Use your IT help desk to spot trends. More than fixing customer problems, your IT
help desk can be your direct connection into your customers’ long-term business planning—revealing their wants and needs through casual conversations with your support personnel,” CompTIA argued. “Next, leverage your NOC (News - Alert) (network operations center) to track performance, reliability, and scalability trends within your customer settings.”
One CompTIA member is already living that advice.
“The origin of our offering is not from a product manager, it really comes from the customers themselves. To strengthen the dialog, EnabledSuccess launched a user group that meets several times a year via conference calls,” said Rene Theberge, national sales manager at EnabledSuccess Inc., an Ottawa MSP.
Survey Shows Growth
Everyone who researches the MSP space is predicting massive growth. MarketsandMarkets things sales will essentially double from $142 billion in 2013 to $256 billion in 2018.
And there is more and more services for IT to choose from. “Newer managed services that penetrate almost all the industry domains, along with aggressive pricing in services, are being offered. This results in increase in the overall revenues of the managed services market. It is observed that there is an increase in outsourcing of wireless, communications, mobility and other value added services, such as content and e-commerce facilities. With increasing technological advancements and the cost challenges associated with having the IT services in-house, the future seems optimistic enough for application services providers and managed services providers.”
The researchers believe that managed services and lower the cost of providing 30-40 percent.
INSIGHT Research thinks it knows why MSPs are so hot. Two main factors are driving MSPs growth. First, there is the worldwide recession which is just now easing in some quarters. At the same time, there is a more and more pressing need to implement advanced technologies to drive competitive advantage.
The Internet is also driving the need for services, as there are constantly new technologies and techniques to master. "A large percentage of business activity now depends on the internet for everything from electronic commerce to intranet applications to customer service," said Fran Caulfield, research director for INSIGHT. "These data applications are driving exponential traffic growth onto corporate networks, while increasing their complexity. Managed services allow corporations to handle this growth, while outsourcing the most complicated elements to the skilled service provider. Service providers also win, as they grow beyond basic transport services, increase margins and reduce churn."
Finally, managed services are the key to keeping enterprises competitive in lean staffing times.
“With the global and the US economy stagnant, and businesses not hiring, enterprise IT departments must still find a way to deploy those new applications. With limited IT staffing, the enterprise can focus on the developing the corporate application, while outsourcing the network design, installation, and management to a provider who has the “state of the art” tools and skills to do it right,” the report said. “New cloud-based applications can be deployed in weeks, allowing the enterprise to rapidly respond to their customer’s evolving needs.”
Text Box: 5 Secrets of Cloud Success
Tier 3 is a data center services company that helps its partners succeed in the cloud. Richard Seroter, senior product manager who also happens to be a Microsoft (News - Alert) MVP, trainer and autho,r has five pieces of advice for those looking to offer clients a top cloud experience.
For Seroter the question of cloud has already been answered, so “it’s no “if” but “when””.
Seroter sees three basic approaches. The first is used by those who don’t believe, as Seroter does, that the cloud question truly has been answered. These are the folks that “ignore the cloud and wait to see how the market changes”. This obviously isn’t optimum because you aren’t taking any advantage of the new paradigm. Also not optimum is to “go all in and plan for an entire IT/business transformation”.
The next bet is to “sample the cloud and look to satisfy strategic needs”, Seroter believes.
So how do I do cloud right?
Step 1. “Form a “tiger team” to achieve quick wins and pursue IT-as-a-Service”, Seroter believes.
This team starts with an executive sponsor, and includes business analysis, security and application architecture, and network engineering.
Step 2. Find a good provider. Here you want to look at application services, availability, compliance, disaster recovery, management, performance, pricing and SLAs, among others.
Step 3. “Find, partner with, learn from, and collaborate with shadow IT,” Seroter suggests. Key application advances that can come from this collaboration includes better productivity solutions, improved line of business tools, and better sharing of data, analysis and storage.
Step 4. Seroter also suggests that you learn and apply best practices, including making sure the entire structure is secure, and that you design apps specifically for the cloud. Also, choose the services that best fit, and take full advantage of automation.
Step 5. Finally in keeping with the idea of “sample the cloud and look to satisfy strategic needs”, look carefully at what apps make most sense to migrate.
Edited by Stefania Viscusi