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Does 'Cloud' Take The M Out Of MSP?

Does 'Cloud' Take The M Out Of MSP?

For most MSPs, cloud services have been such an obvious step that they've just got on with it, without too much fuss, and without too much attention from the outside world, which is busy talking about the big brands like Amazon, Google and Microsoft. This disproportionate media focus is an important and worrying sign for MSPs. It isn't a sign of how much better the big guys are doing things. It's a sign of how much of a threat they really are for all service providers, managed or otherwise.

The industry's finally waking up to the fact that Amazon has already established an almost unassailable position in cloud Infrastructure-as-a-Service. Its growth is driven by convenience and price, and the same forces are contributing to the success of Google and Microsoft (to name just two examples) in Platform- and Software-as-a-Service. This is, or should be, core MSP territory.

How do you avoid the race to the bottom?

With low cost, instant access to IaaS, PaaS and SaaS becoming the norm, the danger is that the shift to the cloud erodes not just your prices and margins, but the value of the M in MSP. The expertise you've created in your core domain - the value you've built painstakingly over the years - has been reduced to a simple cents-per-GHz equation.

So how do you mitigate that effect? How do you keep the value of your managed services business and defend your turf as your customers head to the cloud?

The 80/20 rule

The starting point is recognizing that for the hardware fundamentals - your servers, CPUs, disks and datacenters - we really are talking commodities. RAM is just RAM. Storage is just storage.

Your customers know this, or at least sense it. That's also why it's so tempting to move apps to one of the big cloud providers. Wherever you host your apps, the underlying infrastructure is basically the same, and it's only going to get flatter and more commoditized as time goes on.

What does that mean for MSPs? You have to accept that about 80 percent of your cloud service is just a commodity, and that is not where you should try to differentiate. To use an old cliché, it ain't what you've got, it's what you do with it that counts. It's the 20 percent you build on top.

On the face of it, that might seem difficult when your customers are buying into the convenience and price of the big-name cloud providers. Since resources scale on demand, it's less obvious why customers need help speccing their service. Provisioning is automated, so it's less obvious why you need to pay someone to set it up for you. Apps, platforms and operating systems exist as ready-to-deploy templates, or simply in a browser. Monitoring, metering, billing and alerts - they're right there in the control panel, even in a no-frills, twenty-bucks-a-month cloud.

Put the M back

So what can an MSP do to ensure their success as a cloud provider?
  • Make the 80 percent as easy as possible. Since it's difficult to differentiate with your cloud infrastructure, choose a cloud platform that gives you that base 80 percent as quickly, easily and cost-effectively as possible. Cloud platforms are commoditizing too, and basic features like self-provisioning, billing, metering and failover are not something you should be spending time and energy on. If you have a 12-month plan to develop cloud features you can get off-the-shelf, you need to rethink that plan.
  • Identify where that 20 percent really is. The real value of your managed cloud service lies in your specific expertise and service wrap. Focus on enabling your customers to migrate to the cloud on specific products, platforms and technologies; on specific issues like security and compliance; and - perhaps surprisingly - on how you make basic cloud features actually work for your clients.For example, functions like failover and autoscaling, which any cloud should handle at the infrastructure layer: how do they benefit the apps your clients are using? How do they translate into business value, beyond generic scalable/reliable marketing messages? Building out this sort of competency will help you realize the promise of  'the cloud' for your customers, and raise you far above the Walmart cloud providers.
  • Broaden your horizons. One of the biggest problems Amazon gives you is the range of products it can deliver to your customers. You can't afford to limit your cloud service to one flavor of virtualization, one set of apps or even just to private enterprise cloud.Your cloud should be a platform for multiple services, across everything from PaaS and SaaS to  storage and backup - and especially CDN. For cloud services to work the way your customers expect them to, you need an easy way to establish presence in countries and cities potentially all over the world. CDN broadens your horizons, adds huge value to customers (and their end users) and is a natural area for MSPs to expand into.
  • Federate! The other big problem companies like Amazon give you is the sheer scale they can deliver to your customers. Even a large MSP will struggle to provide the kind of agility you get from a cloud provider that can spin up a few hundred servers on demand. Federated cloud is not just another cloud gimmick: it's the only way you can achieve that kind of scale without serious capital investment.
I'll explore these strategies in more detail in future posts. In the meantime, I'd love to know what you think!

Kosten Metreweli is Chief Commercial Officer at OnApp.
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