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November 24, 2023
If you're a managed service provider, you know that the more value you bring to your clients, the more likely they are to continue working with you and to bring you more business.
The question for many MSPs, however, is how to increase value. If the managed services you're already offering are rock-solid, what can you do to make them even more impactful for customers?
Here's one solution: Helping customers with FinOps, or the practice of optimizing cloud spending. FinOps, a portmanteau of finance and DevOps, stresses communications and collaboration between business and engineering teams to get the most value from the cloud to drive efficient growth, according to the FinOps Foundation.
MSPs are in a unique position to help their clients understand their cloud cost trends and minimize unnecessary spending. Although cloud cost management isn't a typical MSP focus, those who capitalize on this opportunity can bring better service to their customers, without seriously increasing their own costs.
Keep reading for a dive into how your MSP business can embrace financial operations, even if you don't think of your company as a cloud cost-management specialist.
FinOps is the practice of optimizing cloud spending. Its goal is to help companies ensure they obtain the cloud resources they require in the most cost-effective way — an important priority given that the cloud is rife with hidden costs and byzantine pricing models.
According to the FinOps Foundation, a nonprofit that promotes cost-effective cloud management, there are six key pillars that businesses must embrace to achieve the optimal balance between what they pay for cloud infrastructure and the level of performance that their cloud provides to them:
Collaboration: Since many different individuals and departments within a business typically use the cloud, collaboration and communication between stakeholders is critical for cutting unnecessary cloud costs.
Ownership: Financial operations should be a collective effort in which every stakeholder feels a sense of ownership.
Reporting: Comprehensive and continuous reporting helps businesses track their finops success and measure the impact of cost management initiatives.
Centralized team: Ideally, businesses should maintain teams of dedicated finops specialists, who possess both the financial expertise and the technical understanding of cloud computing to reduce cloud costs effectively.
Value-driven decisions: Financial operations should focus on creating the greatest overall value by establishing the best balance between cloud cost and performance. It shouldn't cut costs at the expense of performance.
Capitalize on variable cost model: Cloud cost models are dynamic, with different price points based on factors like volume and discount opportunities. Businesses should use variable pricing to their advantage.
Businesses can succeed at financial operations without support from MSPs. However, the fact is that the typical organization is missing lots of opportunities to optimize its cloud spending, and MSPs are in a unique position to help. They can contribute in special ways to each of the FinOps pillars described above.
Collaboration: Because MSPs often help to deliver and manage cloud infrastructure, they're stakeholders in FinOps initiatives just as much as internal teams. For that reason, MSPs should be collaborating with developers, IT teams and any other groups within their customers' organizations who use the cloud. They should start conversations that help all stakeholders understand which cloud services they need and how they can best obtain them.
To collaborate as effectively as possible, MSPs may consider building conversations about FinOps into the standard reviews that they perform with customers. That way, FinOps collaboration becomes systematized as part of routine MSP customer relationship management operations.
Cost ownership: The fact that MSPs help provide and manage cloud infrastructure also means that they should be among the stakeholders who collectively "own" cloud costs for their customers. After all, MSPs may not directly pay their customers' cloud bills, but MSPs benefit when their customers optimize their cloud costs.
To that end, MSPs should do everything they can to help their customers succeed at FinOps. They should tag and document cloud resources they manage to help conquer cost control, for example. They should also embrace cloud cost management best practices to ensure that any cloud infrastructure they purchase on behalf of their customers is cost-optimized; for instance, choosing discounted infrastructure where feasible is critical, even for MSPs who aren't footing the infrastructure bill themselves.
Reporting: MSPs should comprehensively report on the cost of cloud infrastructure that they manage on behalf of their customers, too. The best way to do this is to deploy a central cost-tracking tool that can assess cloud spending across all customer accounts, then generate reports that map spending onto individual companies.
From there, MSPs can pass cost-reporting data to their clients, who can compare it alongside cost reports about other cloud infrastructure they deploy without the involvement of MSPs.
Centralized team: Although every business should have a FinOps team, the fact is that most don't. Typically, only large enterprises maintain dedicated FinOps staff.
MSPs, however, can effectively become the FinOps team for their clients. They can become centralized stakeholders who track cloud costs and look for cost-optimization opportunities.
This is a labor-intensive process, and it requires MSPs to bring true cloud cost management expertise to the table. But if you can deliver true financial operations services as an MSP, you're much closer to moving from being a mere service provider to being a trusted partner for your customers.
Value-driven decisions: Often, MSPs understand how to strike the right balance between cloud costs and performance better than their customers do. MSPs know their customers' IT past, present and future, and they also have deep technical expertise that isn't always abundant among companies' internal staff.
Drawing on that technical knowledge and awareness of customer needs, MSPs can help their clients make the best-informed cloud spending decisions. For example, they might point out when a customer is trying to cut cloud costs too aggressively and risks an unacceptable performance degradation as a result.
Capitalizing on variable cost models: MSPs who resell cloud infrastructure or services to multiple customers are in an excellent position to capitalize on variable cloud cost models because they can leverage their purchasing power to negotiate discounts with cloud providers.
For example, the amount of VM instances that a single business consumes may not be high enough to bring cloud providers to the pricing negotiation table. But if you're an MSP who has dozens of customers, each of which require VM resources, you're in a position to negotiate a cloud enterprise service agreement that comes with discounted pricing.
In turn, you can resell the cloud resources to your customers at a price that is lower than they could obtain by purchasing them directly, while maintaining a margin for yourself. It's the best of both worlds: Lower prices for your customers and more profitability for you.
On balance, I'm not saying MSPs should retool their entire businesses to make financial operations their sole priority. Offering FinOps guidance is just one of many ways MSPs can bring value to their customers.
However, because FinOps-related services haven't traditionally been a focus for MSPs — and because more than half of businesses now report concerns about cloud spending — FinOps presents a major opportunity that MSPs can capitalize on to make the leap from basic service providers to trusted partners and collaborators with their clients.
Read more about:MSPs
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