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Is the Managed Service Provider (MSP) Business Outdated?

Over the last few weeks I was fortunate to meet a large number of Managed Service providers (MSP’s) at two separate industry events in Toronto. At both these events, focused at MSP’s, and through all my conversations, one thing that resonated throughout was the dire state in which Managed Service providers are currently conducting business. I am sharing my thoughts to help make sense of what the industry is going through and how the inability to adapt can lead to the slow death of an otherwise highly successful industry.

Every year it costs North American businesses over $26 billion in downtime. Given the state of the economy and unstable economic times, over 46% firms have cut IT expenses last year. Moreover, reducing costs seems to be the priority pf over 56% business in North America in the coming year. With statistics like these it becomes imperative to look at options that will drive results for businesses and what role do Managed Service providers play?

MSP’s Today

Managed Service Providers have traditionally driven a majority of their revenues from services. Yes, reselling solutions and products and upgrades has been key in making that happen, but had it not been for the hardware and software deployments, MSP’s would have not had as much success as they had.  According to MSP Alliance, a MSP focused industry alliance, the estimated managed services revenue generated by cloud and MSPs in North America during 2014 was over $154 billion while an average MSP generated above $3.9 million per year. This number however does not reflect every MSP.

THE FIGHT BETWEEN LEGACY & CLOUD

MSP’s today are at the cross roads of On Premise vs Cloud. Until now, the MSP business model has worked great so far and many MSP’s have grown tremendously. For the majority however, it is a matter of staying on top of the game. To be able to continue to provide an exemplary service to the customers so that they can continue to reap rewards from that relationship.

At a completely different perspective, Cloud is becoming the new norm for IT. According to IDC , public IT cloud services spending will be more than $107 billion in 2017. Cloud, although new is the new choice that hundreds of businesses are making today. Not just large enterprises, but also Small Businesses are moving to the cloud as newer technologies and platforms unleash a wave of productivity related solutions in the market. Managed Service Providers who now have a Cloud play are at least battling a different problem. The challenge with MSP’s with investments in Infrastructure is to fill that infrastructure with their customer infrastructure and second to offer more value than the company next door. MSP’s are now also challenged with the problem of being able to provide automation on services that they provide to their customers, granularity in billing and of course agility, better customer response time and so on.

PROVISIONING AUTOMATION & BILLING GRANULARITY IN THE CLOUD

A typical managed Service provider today is certified on various platforms, one being Microsoft Azure, or say Amazon Web Services. Let’s take the example of Azure Driven MSP’s. As a Microsoft Driven MSP customers are being driven to join the Azure revolution, add on Office 365 and a bunch of other complimentary solutions that add productivity, collaboration and other benefits. A severe challenge for all MSP’s offering Azure & AWS to customers is the ability to break the charge statement down and help customer get granularity in their billing process. Converting the single charge statement from cloud providers into separate charge statements for individual customers is a challenge. Another challenge is for MSP’s to be able to offer automation around provisioning. Presently almost all MSP’s have a manual work process of being able to say spin a new VM or configuring new infrastructure for a customer. Automating this process would be revolutionary, and many options to do this are available in the market today. These are some of the biggest hurdles in helping customers get on the Cloud.

WHAT SHOULD MSP’S DO?

The Managed Service Business is not a new model, however technologies that MSP’s need to work with to get best results are new. Cloud is transforming the way end users are using IT and MSP’s are working on being able to help unlock more value for end users with Cloud. Definitely the adoption of new technologies is key in being able to unlock this value. Managed Service Providers today need to place the highest priority into learning about automating their business in order to place the highest value into value generating activities and initiatives. Embracing the new is the only path for MSP’s that will lead to a business stronger than before.

Check out the Solgenia Powua solution that offers an incredible opportunity for MSP’s to automate the process of deploying and managing the Cloud for your customers. Enable recurring revenue, reduce costs through automation and grow your MSP business through the Cloud.

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