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Cloud Computing Era Could Mean MSP Extinction

“Managed Service Providers will be obsolete in the next five to ten years.” Those blunt words come from Saeer Butts, a senior software architect at one of those MSPs, Zaphyr Technologies, in Parsippany, N.J. The cloud will put MSPs out of business, Butts said. As customers move more of their infrastructure to hosted environments, monitoring […]

Written By: John Hazard

May 2, 2011

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“Managed Service Providers will be obsolete in the next five to ten years.”

Those blunt words come from Saeer Butts, a senior software architect at one of those MSPs, Zaphyr Technologies, in Parsippany, N.J.

The cloud will put MSPs out of business, Butts said. As customers move more of their infrastructure to hosted environments, monitoring and managing assets on location — the cornerstone of the MSP model — will become less necessary, said Butts and other MSPs. There is still a role for remote monitoring and management, but anyone who is doing that as the center-piece of their business will be out of business, said Heinan Landa, CEO of Optimal Networks, an IT services provider in Northern Virginia and the Metro Washington, D.C. Area.

“MSPs are very low on the bottom of the IT stack right now; it’s a complete commodity,” Landa said. “If that’s what you’re offering, you have to open your eyes. You need to look at your capabilities and analyze what else you might bring to the table that makes your IT service more valuable to the customer.”

MSPs hoping to avoid the junk-pile of IT services can take advantage of two trends, both of which Optimal and Zaphyr are already practicing:

Hybrid cloud environments, where some but not all of a customer’s applications are hosted
Cloud consulting, which should be a no brainer for VARs that have long practiced the “trusted advisor” role, Landa said.

Hybrid Cloud

Few businesses are ready to embrace the cloud completely and fewer still should want to, said Butts.

“There is a misconception about the cloud that says the Cloud is cheaper [than traditional IT],” he said. “The cloud is really about shifting risk. Instead of taking the risk of hosting and managing infrastructure, you move it from your own organization to that of the service provider. Anytime you hand over risk and responsibilities to someone else, you’re usually paying more money for it.” There are instances where cloud services might be cheaper, but those are few, and when most customers discover this they often take a step back from their cloud frenzy. They often decide to pick and choose the pieces that go in the cloud, and those that stay on-premise.

Add to the fact that cloud offerings might not be viable for every application or piece of the business, and you end up w/ hybrid cloud environments that will exist for years, Butts said.

“Very often we come back to them and say what part of your business do you want in the cloud and they often respond ‘what do I have?'” Butts said.

“Some one might say I want to get my Exchange Server hosted and out of here. There are inexpensive Exchange offerings from Microsoft and without the maintenance and licensing costs, so let’s put Exchange in the sky. We’ll administer the software and be the helpdesk and provide the Internet and desktop support. We’ll do the things we can do remotely and onsite, but we’re no longer the MSP service for that Exchange server.”

Additionally, they might have decided to put their CRM on Salesforce.com but other functions, like a database or their VOIP might stay inhouse.

MSPs will play a role in managing and monitoring the mixed environment and ensuring the two work together.

Cloud Computing Era Could Mean MSP Extinction

John Hazard

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