Photo by NASAJPLCaltechT Pyle via Getty Images

(Photo by NASA/JPL-Caltech/T. Pyle via Getty Images)

The Future of MSPs in a Cloud-Centric World, Part 1

Larger cloud services providers gave a clue as to what will happen to MSPs in the future. The first step to changing the economics of your business model is to understand the concept of "channel eclipse." Here are the details.

As more SMBs migrate to cloud-based technologies, what value do MSPs provide to their clients? This is the question every service provider should be asking themselves.

Several years ago, I attended an industry conference at which leaders from Microsoft, Google, Rackspace and Avnet participated on a panel. Panelists from each company told the crowd of about 500 MSPs the following:

  • Eventually you will need to abandon the managed services model in favor of selling cloud services. In other words, leave it to the big cloud companies like us to invoice your clients.
  • To survive, you will need to transition your business model into a "consultancy." Your role will be to advise your clients which cloud services they should use.
  • Your revenue will come from data migrations and recurring "residuals" (5-20 percent per month they would pay MSPs for bringing them cloud services).

You can imagine how the 500 MSPs reacted to this information. Approximately 25 percent of the room walked out before the panel was over. After sitting through the entire earth-shattering panel, the remaining 75 percent of us walked out of the room shaking our heads, saying, "These companies are crazy. Our small business clients will never go for this and neither will we!” 

Today, Office 365 — which was called Business Productivity Online Standard Suite (BPOSS) back in the day — is enjoying massive adoption in the less than 50 employee category which represents ninety percent of its Office 365 customer base. And then there is Google Apps, which some say is doing better than Office 365 in the sub-50 employee demographic. Making matters worse for MSPs is the proliferation of SaaS applications, and solutions like Dropbox, which displaces the need for a file server for the average small business.

I have to admit there was some real foresight in their message. I've come to realize those panelists were foreshadowing a concept I now call "channel eclipse."

So, what does this channel eclipse mean for MSPs? MSPs must change the economics of their business. Want to know how to transform your business? Look out tomorrow for part two of this article.

For more information on how to transition your MSP to a more cloud-centric model, email [email protected].

How have you prepared for channel eclipse? Do you believe this phenomenon is forcing MSPs to adjust the economics of their businesses?

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