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Should Managed Service Providers Use the Cloud? It Depends

When deciding whether to use the cloud, MSPs should consider these pros and cons.

For managed service providers, or MSPs, the cloud is both a blessing and a curse. It’s a blessing because MSPs can use the cloud as the foundation for a whole new selection of managed service offerings that, in the past, were not practical to offer. It’s a curse because businesses that used to pay MSPs for managed services may instead choose to obtain them directly from cloud providers themselves, cutting out the MSP. Should MSPs offer managed services that are based on public cloud platforms? Or should they stay away from anything based in the cloud in order to minimize the risk that customers will fire them and move to a platform like AWS instead? This article offers perspective by discussing the pros and cons of using the cloud as an MSP.

How Can MSPs Use the Cloud?

MSPs specialize in providing IT services to businesses on an outsourced basis. Companies may hire MSPs to do everything from managing employee workstations, to setting up and monitoring networks, to backing up data and far beyond.

Historically, MSPs provided these services using their own hardware and software environments. If an MSP provided data backup, for example, the MSP would typically have to maintain a set of servers and storage media on which the backups were stored. Or, an MSP who managed workstations would have to set up and maintain the PCs and software that powered those workstations.

But with the cloud, it has become possible for MSPs essentially to outsource some of their infrastructure--and, in certain cases, software--requirements to cloud providers. Today, instead of managing physical infrastructure for storing backups, an MSP could simply store data backups in a public cloud service like AWS S3. Likewise, an MSP who manages workstations could use a cloud desktop service to deliver much of the software required for the workstations. (The MSP may still need to manage physical PCs, but cloud desktop services can greatly simplify the deployment and management of the operating system and applications running on each PC.)

Thus, the cloud presents opportunities for MSPs to simplify their operations while offering an expanded set of managed services to customers. In some cases, they can even offer services that simply wouldn’t be practical to deliver without the cloud. A small MSP might not want to maintain a data center to store data backups, for instance, but that ceases to become an issue when the MSP can use a public cloud instead.

Why MSPs Should Use the Cloud

To elaborate on the above, there are several reasons why MSPs might choose to use the cloud:

  • More managed services: The cloud makes it easier for MSPs to offer a broader selection of managed services they would otherwise be able to juggle.
  • Less overhead: The cloud can greatly reduce the size of the infrastructure that MSPs need to manage themselves in order to deliver services to clients.
  • Greater reliability: Public cloud providers have pretty good track records of delivering high availability and performance. MSPs who attempt to deliver services based on their own infrastructure may struggle to achieve the same levels of reliability.
  • Customer expectations: These days, everyone has heard of the cloud, and many customers see cloud as the way to go. By delivering managed services based in the cloud, MSPs can bolster their image as modern, forward-thinking service providers.

Given advantages like these, it’s not surprising to see a growing set of observers who encourage MSPs to use the cloud.

Why MSPs Should Not Use the Cloud

Like most IT trends, however, the cloud is not the right solution for every MSP out there. Before shifting to a cloud-centric MSP business model, it’s important to weigh the disadvantages of the cloud from an MSP’s perspective:

  • Cost: One of the biggest drawbacks of cloud-based managed services is cost. MSPs must ensure that they can charge customers enough to drive a profit after factoring in the cost of the cloud services themselves, as well as the time and effort required to manage those cloud services. If MSPs calculate costs incorrectly--or if the costs of cloud services change, as they do over time--they may end up losing money.
  • Branding and image: Another serious risk associated with cloud-based managed services is that customers may decide to purchase the same services directly from cloud providers. This risk is higher if cloud services can’t be rebranded or repackaged. Some types of cloud services, like storage, are relatively easy to abstract from customers. Others, like managed cloud desktops, typically are not.
  • Skill requirements: The cloud requires a special set of skills, like the ability to work with cloud IAM frameworks and optimize cloud computing costs. These tend to be different from the skill set of a typical MSP.

Getting the Most from Cloud-Based Managed Services

To avoid these pitfalls, MSPs should focus on offering cloud-based managed services that allow them to add meaningful value, rather than just reselling what cloud providers offer on their own. The harder it is for customers to deploy a cloud service themselves, the more MSPs can charge, and the lower the risk that clients will attempt to deploy the service on their own.

So, strategies like reselling SaaS applications, which customers can typically deploy on their own easily enough, may not be as wise as using cloud IaaS services to build custom managed service offerings.

Conclusion: To Use the Cloud or Not to Use the Cloud

There’s no simple answer as to whether MSPs should or should not use the cloud. For many MSPs, leveraging public cloud services to create their own managed service offerings makes good sense. But it’s crucial to weigh the cost and complexity challenges associated with the cloud, as well as to consider how likely clients are to use the cloud without the help of MSPs.

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