In the most recent post, I described both the challenges and the opportunities that are facing Managed Services Providers (MSPs) looking to expand their portfolios to include information security offerings.
To quickly summarize: It’s a whole new world for MSPs, many of whom are seeing their entire business model being turned upside-down by the fast growth of cloud computing and the “as-a-service” trend.
While offering cloud-based information security technology and services presents a big opportunity for revenue growth and competitive advantage, MSPs face a host of challenges and potential revenue risks, not the least of which is managing the way licensing models are presented.
Licensing is hardly the only consideration for MSPs as they morph into providers of cloud-based services which include security. In fact, it’s just one factor—albeit an important one—to think about.
As an MSP, you need to take a good look at your entire business—everything from your technology offerings to your employee skill sets, to your network infrastructure, to your sales and marketing operations—to see if you are indeed ready to compete in a business environment that is becoming increasingly focused on cloud.
?For example, how easy or difficult will it be to transition your technology portfolio to a service-based model? What happens to your pricing plans, and what kinds of revenue risks might that introduce?
?In terms of human resources, do you need to hire more people whom are experts with cloud - or at least familiar with the concept of cloud-based services?
?How will your sales and marketing efforts need to be changed in order to support the new direction, and how can you leverage “non-traditional” channels such as social media to get the word out about your new offerings?
?And if you’re thinking about offering security technology such as antivirus for cloud, since public cloud usage fees are as fine-grained as hourly, how will you align your offering with this, including billing and invoicing?
These are just a few of the many questions you will need to address in order to successfully make the move from pure MSP to MSP with an emphasis on cloud expertise.
For many types of businesses and government entities, the move to cloud and a service-based delivery model represents significant change. Things like applications, storage capacity and platforms can now be acquired in a completely different way, with different payment and governance models.
But for MSPs, the dramatic change in the IT landscape is even more profound because it essentially affects your entire operation. You are moving from managing a customer-owned infrastructure to a public cloud infrastructure.
To get a sense of how much public cloud is having an impact on the industry, here are some of the sessions that were offered by the MSP Alliance (also known as the International Association of Cloud and Managed Service Providers) at its MSPWorld Spring 2014 conference in March: Sales and Use Tax in the Cloud: What Every MSP Needs to Know; How to Adapt Your Managed Services Sales Tactics to a New Buying Generation; and Best Practices in Comp Plans to Drive Managed Service and Cloud Sales.
Smart MSPs are recognizing that their small and mid-sized business customers, and perhaps even their large enterprise clients, are following the mantra that Citrix has called DOS, or ‘Don’t Own Stuff’.
Much as MSPs need to avoid revenue risk, organizations are looking to avoid capital budget risk. They don’t want to buy new, expensive equipment that does nothing but depreciate in value over time while they pay an MSP to manage it. Instead, they will look for an MSP that can provide the full stack as-a-service.
This also follows the Amazon mantra of transforming very large capital spending in the data center into more predictable operational spending.
The common theme here is that organizations of all sizes want to avoid capital cost risks, MSPs want to avoid the same as well as revenue risk imposed by long-term licensing that breaks their pay-as-you-go model. To offload the risk means going to a services model.
When you think about it, despite all the change, this is really nothing new for MSPs, whose whole reason for existing is to provide services. It’s just that their role is changing into “cloud service broker,” and the model for delivering services has transformed in significant ways—which happen to be much more efficient for everyone involved.