From Managed Services Provider to Cloud Services Provider?
When asked about a popular restaurant, Yogi Berra once uttered: “Nobody goes there anymore; it’s too crowded.” In some ways that’s the scenario facing the managed services market. Our ongoing MSPmentor 100 research suggests the best MSPs continue to grow rapidly. Anecdotal conversations with MSP software providers suggest sales are growing at a healthy pace this year. And more MSPs are entering the market. Now the twist: As more MSPs pop up it’s getting more difficult to stand out in the crowd. Hardly surprising, some MSPs are reworking their branding and company descriptions to emphasize cloud computing. But is that really a long-term strategy or a short-term gimmick? Here’s the update.
During the recent ConnectWise IT Nation conference in Orlando, Christian Johnston handed me his new business card. His company, DappleTech, helps solutions providers to “become an MSP Cloud Service Provider.” Which is it? MSP or CSP? Maybe both?
Meanwhile, Long View Systems, one of the industry’s best-known managed services providers, apparently is preparing a new corporate branding campaign. As part of the effort, Long View has started to describe itself as “a leading provider of IT Consulting, Cloud Services and Outsourcing Solutions.” Funny, no mention of managed services there.
Follow the Consumer Cloud
But perhaps that’s the point: For more than a decade, many MSPs and software companies have worked very hard to explain the value of managed services to end customers. Now, seemingly overnight, the cloud computing hype has caught on with end customers. Consumer ad campaigns from Microsoft and other big IT companies will further educate SMBs about cloud computing’s value. The result: Some MSPs are riding the hype wave and branding around cloud. As long as those MSPs deliver the cloud computing goods, it’s hard to argue with the branding moves.
So, will cloud computing crush the managed services market? Predictably, I’m biased and see managed services marching forward. As IPED veteran Ryan Morris mentioned in our comments area on October 15:
In an MSP engagement the terms shift from time+materials to SLA-based … but the essential service is the same: networks are monitored, databases are patched, servers are maintained. The fact that things can be done remotely is a productivity bonus, but not the essential component of the contract. The core agreement with customers is that an MSP will service their IT without being tied to the number of hours of service performed. Outcomes vs. Inputs.
In the move to cloud systems, the change is primarily at the underlying technology level (on-premise systems moving to virtual or off-premise deployments), while the contract for services to monitor / manage those deployments can remain the same. The essential point is that when “hosted” or “public” cloud deployments replace the on-premise infrastructure / resources, they do not eliminate the need to keep those resources up and running.
Morris, now running Morris Management Partners, went on to call managed services a business model, and cloud a technology model. I agree.
Close Cousins
No doubt, cloud computing and managed services are closely related. MSPs already have recurring revenue models in place so many cloud computing concepts are near and dear to MSPs. Not by coincidence, Ingram Micro North America has a single VP — Renee Bergeron — leading the distribution giant’s cloud computing and managed services efforts.
If you read a lot of the media coverage — including MSPmentor’s — some stories might make you wary of the cloud. But we need to remind ourselves that there are dozens of cloud options awaiting MSPs. Many of them surfaced earlier this week in the Ingram Micro Cloud marketplace. And during the IT Nation conference, quite a few MSPs described how they are rolling out VoIP, virtualization, online backup and security in the cloud.
So for many MSPs, the cloud is real. (<-- Spoiler alert: That link is a shameless plug.) But back to the headline: Will cloud computing overshadow managed services? In some ways yes. When CA Technologies acquired Nimsoft earlier this year, the official CA press release mentioned Nimsoft’s momentum with MSPs and the Nimsoft’s cloud strategy. But much of the high-tech media doesn’t pay attention to the MSP sector, so blog sites like TechCrunch and GigaOm played up the cloud computing angle.
Now, some MSPs are following a similar trend, adding cloud computing to their corporate branding efforts because basic remote monitoring and patch management aren’t so sexy anymore. And companies like Channel Cloud are calling on MSPs to become Cloud Integrators.
Still, anecdotal evidence suggests the MSP market remains healthy. In recent weeks, MSPmentor has heard from key executives at IBM, Microsoft and CA Technologies — each of which wants to more closely engage MSPs. Generally speaking, many of the folks at the IT Nation conference continue to describe their companies as managed services providers. And MSPmentor’s web traffic has grown roughly 60 percent year to date… suggesting growing interest in MSPs. Or is it growing interest in managed cloud services?
Frankly, I don’t care. Either way there’s a healthy dialog around managed services and cloud computing. We look forward to documenting new milestones in the months ahead.
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So Joe, when is the name change coming? CSPmentor?
Kevin: I can confidently say we will never abandon the MSPmentor brand, especially when all of our internal business indicators continue to grow. But… I think we’ll have a surprise for you on Dec. 7.
-jp
Joe,
ThinkGrid (a shameless plug of our own) has been signing up MSPs at an increasing rate over the past six months. There is a driver beyond cloud hype for the move and there are benefits in moving.
One driver is the reality of the economy. Nobody can find a customer with CapEx available for unexpected IT outlays. Another driver is the inability to scale due to on site visits/time. This is a killer to an MSP that wants to grow their business.
Our cloud offerings (hosted desktops, hosted servers, hosted Exchange, hosted VoIP, hosted backup, infrastructure as a service, etc.) allow the MSP to take the customer down to not much more than a router and a printer. Say goodbye to office visits and say goodbye to unpredictable billing.
The MSP is uniquely qualified to deliver the services too. There are almost always additional vertical applications that will require monitoring. The end user still wants to know there is a person in their time zone they can call if there are issues. This is the primary reason ThinkGrid doesn’t sell to end users directly.
In the US, ThinkGrid has moved to an exclusive white label arrangement with MSPs. The MSP provides the domain, the logo, etc. and their customers remain their customers. As a result, ThinkGrid has become something of a best kept secret in the industry.
Please excuse the self-serving nature of this response. Over the past three years of working with MSPs looking to increase monthly recurring revenue, we’ve hit the model that MSPs are looking for to complement, not abandon, their existing MSP practice. The CSP (I like that) and MSP are really a complementary business evolution.
Gregg: Keep us posted on ThinkGrid. From where I sit, only a tiny portion of solutions providers will position themselves as CSPs in the near-term. The reasons:
1. There are thousands of VARs nervous about cloud;
2. There are quite a few MSPs that are debating where to go in the cloud, and how to get there.
3. There are only a few VARs and MSPs that are truly going to transform into pure-play cloud service providers.
I’m not advocating any one model for readers… just be the best in the model you choose. The vast majority of the IT channel remains filled with VARs (hence, The VAR Guy). A segment has gone managed services. Another emerging segment is giving pure-play cloud a close look.
Stay tuned…
-jp
Joe,
As an MSP that has transitioned several of our clients to cloud services and now offers a channel only cloud services package, I definitely don’t see the MSP model going away anytime soon. Like Greg, we’ve seen and heard quite a bit about budgets being cut and CapEx being a huge concern. The flexibility of the cloud is a key strength. With a lot of businesses cutting back, the opportunities continue to grow for MSPs.
The key is integrating the right mix of cloud services into your current MSP offering. You’ve got to find the services that are right for your clients and the CSP that is right for your business. Cloud services can destroy your revenue or provide much needed recurring revenue for your MSP business.
The MSP’s relationship with the client and knowledge of their needs is what is key. Transitioning to cloud services isn’t as easy as just buying some services from a CSP. The transition to the cloud requires planning and evaluations. This is where we have found our partners excel. They are able to pick the right services, plan out the transition, and make it smooth for the client.
It’s going to be an exciting journey as MSPs and CSPs work together to deliver compelling new services that bring the benefits of better security, lower costs, and higher availability to their clients.
– Chris Michalec
Watercooler Suite
Great topic. I completely agree with comments from Gregg and Chris.
An interesting recent post from someone at Gartner who has spent considerable time studying the implications of transitioning from legacy managed services to cloud services. I think he is right on the money as well:
http://blogs.gartner.com/daryl_plummer/2010/11/08/cloudstreams-the-next-cloud-integration-challenge/
Joe: Only one note of caution – I wouldn’t describe MSPs as legacy managed services providers. A bunch of managed services are new and emerging. And they’re not all cloud… If you look at the opportunities awaiting MSPs, cloud is a subset of the broader discussion…
-jp
I absolutely agree with Joe on MSPs and the Cloud. Cloud is not a replacement for MSPs, it’s just another technology for MSPs to leverage in helping their customers use IT effectively.
While it reduces some of the traditional infrastructure management requirement, it adds an entirely new layer of complexity and issues including ongoing data integration, network performance, etc. New technology and new points of failure means new things to manage and new opportunity to deliver high value differentiated services to MSP customers.
Over the last 2 years Level Platforms has introduced SaaS monitoring for Hosted Exchange, SharePoint (with BPOS, Intermedia, GroupSpark, …), NetSuite and others. With these apps on the dashboard right along with local networks and devices our MSPs monitor, alert, report on SLA performance, etc. and with this information quickly solve problems to improve the end user IT experience with these applications. “My email is not working” does not go away the moment you introduce hosted Exchange!!
This post is mostly about IaaS, which is just emerging as a viable alternative. We will be adding IaaS monitoring and management to Managed Workplace in 2011 based on the same general principles.
Reselling cloud and maybe even hosting private clouds is all fine – just like selling servers and routers always was (and is). But it is essentially just another technology that will be quickly commoditized. The real money is in the service – ensuring IT works. That’s the job description of the MSP. And ours.
Peter
http://www.levelplatforms.com
I wear 2 hats, one as an MSP owner (AllConnected), and one as a partner in a cloud based business continuity provider (XiloCore) and particularly enjoyed reading this blog.
As I see it, there are many types of managed services:
* Managed Print Services
* Managed Desktops
* Managed Servers
* Managed Networks
* Managed Cloud Services (SaaS, IaaS, DRaaS)
* Managed VoIP Services
* Etc, Etc
I continue to see MSPs playing a very critical role in delivering IT as an overall Service to their customer, coaching them on how to use technology to improve and grow their business, providing them with a single place to call for support, and integrating it all together.
With each technology/service, MSPs should consider seriously how important it is make a recommendation, and manage it. Even if you’re not a VoIP provider, you should have a solution that you trust, can support, and can manage. Even if you’re not a cloud provider, you should have a solution that you trust, can support, and can manage.
If you don’t, they are going to look. If you don’t give them the answers, they are going to get answers elsewhere. Cloud isn’t THE answer, but it could be part of the answer. CSP? I’m not sure we need ANOTHER acronym. MSP still embraces what we do. We provide ‘managed services’, cloud being one of them. (However, I’m not sure that billing for a BPOS SKU# and collecting an agent fee qualifies as delivering a ‘Managed Service’).
Here’s a great incoming email from a client just last Friday – had to share… as you read – note that they are getting educated and are asking for advice from us because we’ve been talking about the cloud and discussing our positioning for months. Count them – TEN different technologies in this client’s ‘IDEAL’ cloud:
“My “ideal” IT network structure to make our life much much easier from a network standpoint and possibly cut costs as we will be expanding to hopefully 10 stores over the next 3 years.
Ideal Cloud – I would love a system where each location / factory included just has a good internet connection + switch/router. Phones and Computers plug into the local switch and can tie into a hosted Exchange or maybe even Google Apps account. Workstations don’t require any network configuration….plug them in and they can access our web tools with a simple Net connection. Burn my servers.
Phones – Independently hosted IP phone system. Possibly through Speakeasy or Paetec. T1 for voice coming into central system and then communicating to IP handsets at any location. Currently we have the Avaya equipment at HQ and it is on it’s last legs probably. Preferably we wouldn’t have to even bother with a VM system or Phone box at any site.
Email – Exchange seems fine, but wouldn’t mind switching to a hosted exchange and not requiring user – network logins at any workstation. Maybe the new Microsoft 360 online solution?
File Storage – Cloud based document sharing system would be fine. Something like an enterprise version of Dropbox would be ideal.”
Lots of work to do with this client 🙂
PS – Thanks for the great article Joe
– Alan
http://www.xilocore.com
http://www.allconnected.com
The reason Christian Johnson is no longer a MSP provider is because he got fired for incompetence.
He got a job from the cloud provider 6fusion after one week. So there’s that.
Just found out he only lasted a week at 6fusion. hah.
This is a great conversation. Cloud will be without question the next great area of discussion amongst the channel. Joe P and I had this conversation at IT Nation 2010 – I personally believe the cloud movement is or will be “MSP 2.0” – and I was there for 1.0.
I further agree with many of the perspectives being shared. “The cloud” comprises a series of technologies which allow for delivery of services in new an novel ways. Not new services per se — email is email, but delivered in a new way. Depending on what kind of service or technology you talk about, you have a different type of cloud… so I am not sure I like the term CSP for anyone who isn’t a cloud company (ie, at the source, not resell end). I believe, and have been saying this publicly for several years, that MSPs, VARs and the rest of the channel will have to build a portfolio of services that they mix and match to create customized services offerings to their clients. Cloud based services (IaaS, Saas, etc) will HAVE to be a part of the mix if you want to be competitive. That doesn’t necessarily make you a CSP, nor does it mean you will sell cloud to everyone. What have these services does is make you a well though out MSP who is well positioned to service a broad range of customers. I agree with Alan about adding acronyms not being beneficial, and I agree with Peter that you have to treat cloud just like all other services and package it, support it, and provide compelling value.
Rob
Concerned USer @10 and @11 – I’d like to remind you and all readers that personal attacks will not be tolerated in the MSPmentor comment area. And we do track IP addresses in case comments of questionable nature are posted. Please avoid the temptation to make personal attacks. And if you’re going to questions a person’s talent or professionalism, at least disclose your identity and contact information to readers.
Rob@12: Thanks for shifting the conversation back towards a legitimate discussion.
-jp
Just came across this old
Just came across this old article, go and see Christian Johnston at Neverfail, he has been there since December of 2010 and has helped us grow our MSP business into providing DRaaS, Workspaces DaaS, and a ton of other value as we have been working with him since early 2011 at Artisan Infrastructure now Neverfail..