Wednesday, January 25, 2012

How to Add Cloud Services to Your MSP Business

In our last post, we talked about how the cloud is changing the MSP landscape and how the Cloud Solutions Provider (CSP) has emerged as a new and improved version of todays Managed Services Provider.  We think, over time, this evolution is inevitable for all MSP’s.  While it may take many months or even years to unfold, ultimately the CSP will dominate the service provider landscape just as the cloud will dominate the IT landscape. If that’s true, then the question becomes:  How will the MSP add cloud services to their current business model?
It’s a complicated question and like most complex problems, there are many ways to solve it. Lets break it down in two ways – let’s consider the major categories of hosted cloud services available along with the different deployment models for bringing them to market. For service categories, we see six major trends driving companies from the SMB to the large enterprise toward the cloud. They are:  pay-as-you-go virtual infrastructure (IaaS), hosted applications (SaaS), cloud-based collaboration services (Google apps and Office 365), mobility solutions (for tablets, smart phones or netbooks), availability and security services (from virus protection to data backup and recovery) and last, but not least, a support model that manages the end-user experience.  These six service categories are represented in the illustration below:
Now let’s look at the deployment options.  If you are an MSP delivering managed services for premise-based devices and their users, you basically have three approaches available for evolving your business into a CSP model.  They are all variations on the “make versus buy” theme.  One approach is to build your own data center and operate a facility that offers virtual IT infrastructure and provides hosted services in one or all of the six categories described above. This is the most expensive route to take and the longest path to profitability. However, it does have the advantage that you control all costs and eliminate the middleman that goes along with reselling a white-labeled hosted service.  That being said, in the age where low cost services are readily available from major players like Amazon, Rackspace, Microsoft, Google and others, this path is rarely taken except by large, established and well-financed MSPs.  
The second approach for adding cloud services to an MSP business is to assemble your cloud solutions by selecting best-in-class services hosted by 3rd party providers and wrapping your own added value services around then. This model is sometimes described by using words like “broker”, “aggregator” or “integrator” and there are different levels of value the MSP can provide when performing one of these roles.  We like the simple concept that 3rd party hosted services are like the engine of a car while your managed services provide the frame and body of the vehicle combined with your help in driving that vehicle in the right direction.  In other words, you turn cloud services and technologies into cloud solutions that create customer value. 
The third approach is to outsource the entire cloud services delivery and support function to an existing Cloud Solutions Provider and become their customer acquisition engine. This approach may make sense for companies that are not full-service MSPs, like VARs and Interconnects for example. If you are new to recurring revenue, have few resources available to manage service delivery and support and want an instant cloud solution to offer, then consider reselling an existing full service offering from an established provider.
We think many MSPs will opt for the second approach – assembling a solution based on 3rd party hosted services and wrapping managed services around them. Like any strategic initiative this evolution will take some thought and preparation to get it right. In fact, we recommend building an ecosystem of partners who offer services that are carefully selected based on well-defined criteria for creating high value solutions your target customers will buy. Then you can price and package your integrated solutions based on customer value and not as a commodity service. We have been doing a fair amount of project work for clients in this area and will be sharing some insights on how to do this in future blog posts. Stay tuned.
Next:  How to build your own cloud solutions ecosystem 

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