The Evolving Role of Solution Providers in the Age of the Cloud

There’s a lot concern these days about the profitability of managed service providers (MSPs). Like any product once a service becomes a discrete item that customers can purchase it becomes subject to the laws of diminishing returns.

Most MSPs in the last few years have learned this lesson in the last few years the hard way. They have watched as pricing for delivery of managed services has declined to the point where many of them are struggling to stay in business.

The real issue, however, may not be the MSP business, but rather how it’s being managed. That’s the contention of Brett Jaffe, principal of PointClickWork, a provider of an MSP platform that is based on a cloud computing service managed by OS33. Rather than hire expensive engineering talent to build a managed services offering, Jaffe says it’s much more profitable for solution providers to resell an MSP as a service. That way all they really have to invest in is customer service representatives that cost of fraction of what the engineering talent required to build managed services from the ground up.

In effect, partners of OS33 such as PointClickWork and LevelCloud are positioning themselves as Master MSPs. For resellers thinking of moving into the MSP space, Jaffe says reselling PointClickWork services provides a much easier way to get over the hump of transitioning to delivering IT as a service versus reselling products.

That approach, notes Jaffe, also makes it possible for the solution providers to concentrate on higher value IT services, while still providing for the basic IT services needs of their customer. In addition, Jaffe says it’s easier to scale a managed services practice by leveraging another company’s IT investment, versus having to fund those investments on their own.

Many MSPs have been more inclined to take advantage of open source technologies to build their own platforms for delivering managed services. But as it becomes increasingly difficult to hire people with open source skills at a time when pricing pressure on managed service is high, Jaffe says the better part of valor is not to invest in building low level IT services in a cloud computing age that makes those services readily available.

What Jaffe is really getting at is that the role of the solution providers is fundamentally changing. Instead of building solutions, organizations in the channel are finding themselves increasingly orchestrating services that are built by others. That may require investments in a range of new cloud computing technologies that integrate disparate cloud services, as opposed to investing in lower level IT infrastructure.

It’ll be up to each individual solution provider to figure out their own best path to the cloud. But it’s pretty clear that this is shaping up to another classic “build versus buy” debate. Of course, things in the channel are never quite as black and white. It may be that solution providers wind up doing both by opting to resell lower level managed services alongside higher margin managed services they build themselves. Regardless of the approach, the one thing that is for certain is that channel business models in the cloud are rapidly evolving.