Do MSPs Have A Leg Up On Making The Cloud Leap?

Yes and no, according to solution providers who have made the leap. "I think there's a lot of overlap between cloud and managed services," said Alam Gill, senior vice president of managed services at CSG International. "You're still managing the business processes in both cases, but the commercial model is different. For example, there is no enterprise software license sale or integration."

CSG, an $800-million-a-year systems integrator based in Englewood, Colo., has a sizable international managed services business that caters to many telecommunications firms and cable operators. Gill said that while CSG's managed services business is growing overseas in Europe, the Middle East and Africa, the company has shifted its core focus in the U.S. to cloud, specifically Software-as-a-Service.

For example, CSG now has cloud-based platforms for billing, content management, and messaging and communications. So what's the real difference between cloud platforms and SaaS and managed services for those areas? While you're still managing the applications, Gill said cloud eliminates the need for customers to purchase their own enterprise software license agreements.

"That's an expensive model," Gill said, "and because of that, there's pressure on that model. Businesses are looking to rid themselves of enterprise complexity altogether, not just the management aspect of it." That, he said, is leading more midmarket and enterprise businesses to outsource more of their IT operations to solution providers. But Gill also said cloud is becoming more of a strategic technology investment instead of just a cost-cutting measure.

"Typical managed services transactions are based largely on cost because customers want to outsource management to save money," Gill said. "But with cloud the conversation isn't just about reducing cost. It's about helping companies innovate and grow their businesses."

So there's another difference. If you're an MSP that's used to talking with clients about saving money, can you start talking with them about business transformation and innovation?

There also are compliance and regulation barriers. Paragrid, a cloud solution provider based in Cleveland that recently was acquired by private cloud provider Evolve IP, performs both on-premise and off-premise data center solutions. Why? Because some clients simply aren't allowed to keep data or applications in a private cloud.

"If there are compliance issues and the customer can't do off-premise [computing], then we build the data center on-site and manage it remotely," said Ryan Berg, president of Paragrid.

MSPs, therefore, need to become experts in their primary vertical industries and know not just the laws but also the company policies and regulations that govern data usage and protection.

Overall, cloud providers seem to agree that MSPs, given their experience with off-premise services and recurring revenue streams, have a leg up on making the jump to cloud services.

ElasticHosts, a U.K.-based Infrastructure-as-a-Service provider, last year launched its partner program in North America and has seen MSPs flock to it.

"We see some resellers joining our program that were traditional VARs, but the most successful partners so far seem to be those that are delivering managed services," said Richard Davies, CEO of ElasticHosts.

Gill said he believes there will be many more cloud services and solutions players in the future as more MSPs pivot to the cloud. And ultimately, he said, that competition will be good for the market.

"I think it's great that there will be more MSPs moving into the cloud space," Gill said. "There are, of course, larger vendors and cloud providers like the Amazons and Rackspaces of the world that have the enterprise infrastructure to support public clouds. But there's still a lot of room at the application layer for companies to play."

PUBLISHED DEC. 16, 2013