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By Dan Phillips

Cloud computing has fundamentally changed the way channel providers do business. It has introduced a whole new set of services for them to sell, on a subscription basis, to customers that are often feeling their way into an uncertain market.

The good news is that cloud growth is accelerating, and with some strategic moves, managed service providers (MSPs) are well-positioned to take advantage of this opportunity.

Today, the core of MSPs’ business in the cloud is reselling Amazon Web Services and Microsoft Azure as an infrastructure solution. But MSPs have to go one step further. In addition to reselling these platforms, they have to offer the ability to manage and remediate them. They must be able to make ongoing optimizations and recommendations and implement policy management to ensure best practices from a cost, performance, capacity and security perspective.

Today, more can be delivered as a managed service in the cloud than ever before in an on-premise data center environment. In addition to provisioning, managing, remediating, optimizing and reporting, partners can deliver added value services that were not previously required—or not possible to deliver—in a private data center.

You can provide a service that finds ongoing optimization opportunities, such as identifying unattached volumes you’re paying for but not using and automatically terminate them. You can identify instances that are underutilized and downsize or stop them. You can model cost and use over time and determine the optimal “reserved instance” purchase, or move those RIs once they’re purchased to where they can be best used on an ongoing basis.

Another new service many MSPs are offering is assistance and consulting around migrating from a private data center to the cloud. There are many opportunities to add value in services as customers move to the cloud. They just need the expertise.

The biggest opportunities lie in the following areas:

  • Resell AWS or Azure, offer customer billing and offer RI modeling to get your customer base started.
  • Build managed service offerings that continually find cost and performance optimizations, and apply governance and policies around cloud best practices regarding cost, use, performance and security.
  • MSPs will eventually get to a full 24/7 service model in which the end customer is totally hands-free. The MSP is the trusted provider and does all the provisioning, remediation management, optimization, policy management and governance of the cloud, along with service-level management to measure service delivery.

Crossing the Chasm

There are challenges ahead for MSPs that potentially could derail an otherwise successful program. The biggest challenge is domain expertise. Service providers must have certified solutions architects on staff and get people with the right level of experience. None of this will work otherwise.

A second challenge is how to package and price an offering. MSPs must identify what their service offerings will be.

A third challenge is enabling the sales force to be able to sell these subscription-based services.

Looking at the competitive landscape, the MSPs who’ve stepped ahead the quickest in the cloud space are the new players. Many on-premise MSPs are hyper-focused on on-premise infrastructure, which is where their expertise lies and where most of their effort is spent. They don’t have the bandwidth to go out and figure out this new approach required for cloud-based infrastructure.

Many new companies are popping up, for example Cloudreach and Datapipe, that weren’t traditional MSPs 10 to 15 years ago. This new breed of MSP has the luxury of having no legacy baggage.

But traditional MSPs can certainly make moves to cross the chasm. It’s a matter of realizing that while 90 percent of their business today may be on-premise, they shouldn’t spend 90 percent of their time on on-premise. They need to embrace the fact that the change is already well under way and adapt their business to delivering services around cloud computing environments. Otherwise, very soon, it will be too late.

Service providers and system integrators are going to be the dominant delivery vehicle for the cloud.

It’s more challenging to manage a cloud than an on-premise infrastructure, but the opportunity for companies to deliver the cloud as a managed service is going to be a huge area for growth. This will include infrastructure as a service (IaaS) resold with additional offerings, such as cost management, capacity planning, monitoring or performance management.

Additionally, high-margin managed services solutions like disaster recovery as a service or managed security services represent additional areas for partners to generate revenue. In three years, as you look at what percentage of people using IaaS are leveraging a managed service as part of that delivery, it will likely be more than 50 percent.

Dan Phillips is CEO and co-founder of CloudHealth Technologies, a provider of cloud optimization solutions.