In the spring of 2014, Jon Thomsen, the new CEO of Atmosera, a private equity-owned managed services provider (MSP), told the company’s board of directors that he wanted to go in a radical direction. For Atmosera, a channel partner amid major pivots, this would be its riskiest move.
Thomsen wanted not only to embrace the public cloud but, specifically, Microsoft Azure over wildly popular Amazon Web Services (AWS). Board members responded with skepticism and trepidation. Everyone else was going with AWS, they said. Shouldn’t Atmosera make the safe call too?
“That’s precisely why we should choose Microsoft,” Thomsen said. “We would be a beacon in a very large and empty ocean.”
Channel companies are having to make risky moves in an increasingly turbulent digital economy. Atmosera, for instance, took on hybrid cloud environments and shared-management agreements. It partnered with Microsoft and began wooing new types of customers, such as independent software vendors (ISVs) and line-of-business buyers (LOBs).
Atmosera’s big bet on Azure turned up aces in July 2016 after Microsoft pointed its sales and marketing juggernaut away from Office 365 and toward Azure. The move changed the narrative in the market, and Atmosera’s sales spiked the following year.
“We went into 2017 thinking we’d sell 30 percent of all new bookings as Azure,” Thomsen said. “It turned out to be 95 percent.”
MSPs stuck in the old ways will be pressed to make similar bets. At stake is nothing less than survival.
This is neither hyperbole nor alarmism. A whopping 40 percent of channel-company owners plan to retire in the next six years without a succession plan, while many channel companies lack the resources and leadership to make these bets. All tallied, tens of thousands will soon be out of business, while others will struggle on the margins, says Forrester analyst Jay McBain.
“There’s a big threat that 80 percent of the partners are going to be relegated to infrastructure and single-digit declining businesses for the next 20 years, which are managed services, hardware sales, and CIO and IT department-led initiatives,” McBain told Channel Futures.
Atmosera’s first bet: Embrace the hybrid cloud and create an offering for customers seeking to move to the public cloud, thus deploying applications where they’re best suited. Not easy for an MSP that made its bones managing private-cloud environments.
To do this, Atmosera needed to jump in bed with either Azure or AWS, and neither seemed like a trustworthy partner.
“I remember sitting on panels about AWS and Azure and whether they were friend or foe — and everyone was saying foe,” Thomsen said. “But you have to figure out a way to partner with them and offer those managed services on their platform and hopefully evolve.”
After convincing the board in 2014, Thomsen led Atmosera to become a managed Azure provider. Today, Atmosera is a top three Microsoft cloud solutions provider (CSP) in North America and top 20 globally.
Atmosera’s second bet: Sell services to ISVs and LOBs.
Four years ago, Thomsen decided Atmosera would court the ISV community.
“If we don’t, ISVs will be platforming elsewhere and building applications that will be served in a SaaS format to our traditional IT customers who will no longer need a private cloud,” he said.
Atmosera began offering underlying architecture that ISV applications could reside on. It helped re-architect applications to take advantage of the cloud and automatically deployed multi-stage dev tests. Last year, Atmosera released continuous integration and delivery as a service aimed at ISVs.
Today, Atmosera counts nearly 100 customers as ISVs. They’re spread out in 18 different industries, such as health care and finance. Thomsen says Atmosera is growing the number of ISV customers north of 20 percent a year.
ISVs constitute 50 percent of its customer base, with the other half traditional IT. With the latter, the company is starting to sell to line-of-business (LOB) leaders. Traditionally, Atmosera sold to the technology side, such as director of IT, CIO and CTO. But the LOB executive has risen in recent years to be the main shot-caller in the tech-buying journey.
“Especially with public cloud, the number of deals we did in 2017 were out of marketing and corporate e-commerce websites and were really driven by the business leaders,” Thomsen said. “In a lot of ways, it’s easier because they’re not in the weeds from a technical basis.”
Atmosera’s most recent bet: offering a shared management option. In the last six months, Thomsen has seen large customers ask Atmosera to take on only a piece of the management responsibility. These customers already have made investments in enterprise agreements, engineering talent, support desks or call centers and don’t want to pay for fully managed services.
“Usually, it’s all or nothing with outsourcing the management of your environment to a managed services provider or cloud solutions provider,” Thomsen says. “But we’re unique in that we’ll create a runbook and a shared responsibility matrix around a managed offering.”
To be clear, most of Atmosera’s business is for full management of a private, public or hybrid cloud environment. It’s not as if Atmosera has eschewed full management for shared management or private cloud for public cloud or IT for LOB. Rather, Thomsen understands that today’s digital economy calls for channel companies like Atmosera to place bets on different ways of doing business.
And, of course, the bigger the bets, the bigger the payoff.
“We’re now regularly dealing with a completely different caliber and class of customer — Fortune 1000, Fortune 500, Fortune 100,” Thomsen says. “The challenge is our ability to scale relative to the demand that we’re seeing.”