3 Critical Success Factors for MSPs Moving to the Cloud

By Dave Zwicker

Its no wonder that many MSPs are wary of moving to the cloud; it’s fraught with complexity and risk.

Consider this: When MSPs consolidate expensive, underutilized, on-premises servers into a highly efficient and cost-effective public cloud service with a usage-based fee structure, their dependable recurring revenue stream from remote server management goes down and could go away. The same scenario exists for remotely managed desktops migrating to a hosted virtual desktop service, etc.  

Fortunately, if you are an MSP willing to adapt, theres an opportunity to thrive in the new cloud-based IT economy. To succeed, you must plan your cloud business transformation around three Critical Success Factors.

Critical Success Factor 1:  Build a Cloud Business Growth Plan

What is your cloud business model? Are you a broker or reseller of cloud services earning a commission on SaaS licenses and virtual resources?  Or are you a hoster with your own virtual data center and hosted services?  The most popular model for an MSP is to add business value to the cloud with customized solutions for specific market segments.

Choose your business model carefully and then create a financial model that allows you to set growth targets and project your revenue trajectory.  Be sure your financial model includes the average customer contract value as well as all sources of one-time and recurring revenue along with the expected rate of customer acquisition. How big will your business be in three to five years? What level of investment is required to drive revenue?  What blend of services is required to equal the value of an average deal?

Critical Success Factor 2:  Create High-Value Solution Bundles

Your cloud-based solutions must offer compelling business value for the customer while generating a profitable revenue stream for your firm. Bundle high-value professional and managed services with commodity cloud services.  Start by incorporating these high-demand cloud services into your portfolio:

Then add value by wrapping professional services around them. Some services are in the form of consulting projects while others are ongoing managed services that help customers maximize the value of the cloud. Examples include:

Determine your total cost of service delivery and set service fees that meet target margins while remaining competitive with the market. Remember, your cloud solutions must represent a meaningful cost savings compared to premises-based solutions.  

Critical Success Factor 3:  Build a Cloud Solutions Sales Engine

A scalable and efficient sales engine requires a level of automation and performance management to operate successfully. Learn to manage the process and apply the right metrics particularly those associated with the lead funnel and sales pipeline.

Most important, start with a clear understanding of the customer value of your solutions and the business outcomes they will create. Then hire, train and continuously assess the ability of your sales team to identify needs, solve business problems and communicate the value of these business outcomes.

Conquer these three critical success factors and you will successfully ride the wave of cloud computing.  Fail to adapt to this emerging market and you will find yourself swimming upstream.

Dave Zwicker is co-founder of

MSPexcellence
, a business consultancy for MSPs and CSPs offering a strategic advisory service (CSPadvisor) that combines sophisticated modeling tools and industry benchmark data with expert coaching services.
Twitter: @cspcommunity
LinkedIn:linkedin.com/in/davezwicker

MORE INFO

Learn more from MSP Excellence’s Dave Zwicker in the session, “3 Critical Success Factors for MSPs Moving to the Cloud,” at Cloud Partners, a Channel Partners event, Sept. 11-13, 2013, in Chicago.