As the MSP landscape evolves, infrastructure strategy is a defining factor in client satisfaction, service delivery, and recurring revenue growth. The decision between cloud-first, hybrid, and on-premises strategies affects scalability, compliance, performance, and operational efficiency. This guide compares these approaches in depth, helping you decide which architecture best supports your clients’ needs and your MSP’s growth model.
Approach 1: Cloud-first Strategy
A cloud-first strategy prioritizes hosting infrastructure, applications, and data in cloud environments like Microsoft Azure, AWS, or Google Cloud. It has minimal to no reliance on on-prem hardware. MSPs using this model typically recommend services such as Microsoft 365, cloud-native backup, and cloud-based security stacks as the go-to default. It’s an agile, subscription-based approach that emphasizes scalability, mobility, and future-proofing.
Advantages
- Scalability and Flexibility: Cloud services allow businesses to scale resources on-demand, whether they need to onboard dozens of new users or reduce storage quickly during a downsizing phase. MSPs can offer flexible pricing models aligned with this dynamic scalability. This reduces risk and enhances the ability to pivot service offerings or respond to client growth with minimal delays.
- Lower Upfront Costs: Clients no longer need to invest tens of thousands of dollars in servers and infrastructure. Instead, pay a monthly operational expense (OpEx) that’s more manageable and predictable. For MSPs, this model encourages recurring revenue, reduces client resistance to upgrades, and accelerates sales cycles.
- Easier Remote Access: Employees can access systems and files from anywhere with an internet connection. No need for VPNs, expensive firewalls, or complex tunneling. This supports the remote/hybrid workforce trend and positions the MSP as a provider of modern, mobile-friendly solutions.
- Rapid Innovation Through Vendor Ecosystems: Public cloud providers continuously release new features, improvements, and security patches. This reduces the burden on MSPs to manually manage software and hardware lifecycles. It also allows MSPs to offer clients cutting-edge tools without extensive in-house R&D.
Challenges
- Reliance on Internet Connectivity: Cloud-first environments are only as reliable as the client’s internet connection. In regions with inconsistent connectivity, even small outages can halt business operations. MSPs need to plan for failover options, SD-WAN, or local redundancy to mitigate this risk.
- Client Confusion over Shared Responsibility: Many clients mistakenly believe that their cloud provider handles everything, including backups and security. MSPs must educate clients about the shared responsibility model, where they (and the MSP) are accountable for configuration, identity protection, and endpoint security.
- Long-term Cost Perceptions: While CapEx drops, OpEx can rise over time if cloud usage isn’t properly monitored. Clients may feel they’re “paying more” after a year or two. MSPs must manage usage, bundle services, and communicate ROI clearly to maintain confidence in the cloud-first strategy.
Approach 2: Hybrid Environments
A hybrid approach blends cloud-based services with on-premises infrastructure. This allows organizations to keep certain systems local while migrating others to the cloud. It offers flexibility for regulatory compliance, legacy systems, or performance-sensitive applications. It’s often used as a transitional model for organizations not yet ready to go fully cloud-native.
Advantages
- Balanced Flexibility and Control: Hybrid infrastructure allows clients to maintain control over certain workloads — like file servers or databases — while outsourcing email, backup, or DRaaS to the cloud. MSPs can offer a customized solution that balances control with agility.
- Improved Local Performance: Applications that require low latency — such as CAD software, medical imaging systems, or POS systems — often perform better when run on local servers. Hybrid models enable performance where it’s needed most, while offloading less critical workloads to the cloud.
- Better Compliance Adaptability: Industries like healthcare and finance often require certain data to be stored locally to meet compliance standards (e.g., HIPAA, FINRA). Hybrid environments allow MSPs to meet these requirements without sacrificing modernization entirely.
- Disaster Recovery Versatility: By keeping local infrastructure for real-time access and using the cloud for offsite backups or failover, MSPs can design layered continuity plans. This approach boosts resiliency without relying on a single system.
Challenges
- Increased Management Complexity: MSPs must monitor, patch, and secure both local and cloud environments, creating more moving parts. Without integrated tools and clear documentation, troubleshooting and coordination can become inefficient and error prone.
- Dual Cost Structures: Clients may balk at paying for both on-prem hardware and monthly cloud subscriptions. MSPs must be ready to justify the hybrid model with clear value propositions and long-term ROI narratives.
- Security and Configuration Gaps: Without proper integration, identity management, and endpoint control, hybrid models can create exploitable gaps. MSPs must ensure consistent policies across environments — especially for patching, access controls, and backup retention.
Approach 3: On-prem Infrastructure
All infrastructure, software, and data are hosted and managed locally within the client’s facility or private data center. MSPs may still provide remote monitoring and maintenance, but the systems are physically controlled and housed by the client.
Advantages
- Maximum Control and Customization: Clients have full autonomy over their systems, from security policies to maintenance windows. For highly regulated industries or organizations with niche applications, this level of control can be essential.
- No Monthly Cloud Subscription Fees: Clients pay once for hardware and software licenses, avoiding monthly cloud usage fees. For some, this capital expense is easier to budget than ongoing operational expenses.
- Performance for Local Workloads: Applications with high I/O requirements or sensitive to latency — like surveillance systems or file-intensive databases — can perform more reliably on local hardware. No external factors like bandwidth throttling affect uptime.
- Perceived Data Security: Some clients feel more secure knowing that their data is stored onsite, not in a third-party cloud. This “tangible control” can build trust with decision-makers who are skeptical of the cloud.
Challenges
- High Upfront Costs and Maintenance: Servers, switches, UPS systems, and software licenses represent a large initial investment. MSPs must also account for ongoing maintenance, replacements, and on-site labor.
- Disaster Recovery Limitations: On-prem environments are at higher risk for data loss from disasters like fire, flooding, or theft. Without offsite backups or DRaaS, clients are one incident away from a crisis.
- Harder to Support Remote Workforces: Remote access often requires VPNs, remote desktop gateways, or firewall reconfiguration. These introduce additional complexity and potential security vulnerabilities if not well managed.
- Longer Upgrade Cycles: On-prem hardware tends to age in place, and budget cycles can delay replacements. Clients may use outdated systems for years, leading to security and compatibility concerns.
Key Considerations for MSPs
- Client Industry and Compliance Requirements: Some industries mandate data residency, encryption standards, or local infrastructure. MSPs must understand regulations like HIPAA, PCI, or CJIS to ensure that clients remain compliant. This is especially true when recommending cloud services.
- Client Budget Model (CapEx vs. OpEx): Clients favoring predictable expenses may lean toward cloud solutions, while those with budget cycles or grant funding may prefer
on-prem CapEx purchases. MSPs should align their pricing model with client financial preferences. - Speed and Scale of Growth: High-growth clients benefit from cloud’s scalability. For those with stable operations and no expansion plans, on-prem may offer more control without complexity.
- Internal IT Maturity: Clients with skilled internal IT teams may prefer on-prem control. Smaller clients without tech staff may benefit from cloud simplicity and outsourced management.
Staffing Considerations for Your MSP
- Cloud First: Your team needs cloud certifications (Azure, AWS, M365), skills in identity management (Entra ID, MFA), and experience with scripting and automation. Ongoing training is a must to keep up with evolving platforms and security models.
- Hybrid: Staff must be well-versed in both traditional infrastructure and modern cloud platforms. Hybrid environments demand context switching, creative problem-solving, and strong process documentation to maintain consistency.
- On-prem: You’ll need strong troubleshooting skills, hardware expertise, and SOPs for hands-on maintenance. Field service readiness and tight change management procedures are essential to prevent downtime and data loss.
Transition Planning: Moving Between Models
- Start with Low-risk Services: If a client is moving to a cloud-first strategy, begin with Microsoft 365, email security, or backup replication. These transitions are less disruptive and show
fast wins. - Develop a Migration Roadmap: Set realistic timelines and clearly communicate every phase. Include training, testing, and rollback plans to ensure client confidence and smooth execution.
- Audit Infrastructure and Licensing: Clean up outdated licenses, unsupported apps, or hardware constraints before transitioning. This sets the stage for a more successful move.
- Bundle Value-added Services: Use cloud transitions as an opportunity to introduce security-as-a-service, compliance audits, or business continuity offerings — boosting MRR.
Conclusion
The right infrastructure model depends on a mix of factors: client expectations, vertical requirements, security posture, and growth goals. MSPs must offer consultative guidance backed by technical expertise and operational readiness.
For most MSPs, supporting all three models — cloud-first, on-prem, and hybrid strategies — is necessary. However, knowing when to recommend which can set you apart from the competition and build long-term trust with clients.
Next Steps
- Want more helpful guidance on selling security services? Check out our Running a Profitable MSP Answer Center
- Have a question for our experts? Send it to editors@channelpronetwork.com
ChannelPro has created this resource to help busy MSPs streamline their decision-making process. This resource offers a starting point for evaluating key business choices, saving time and providing clarity. While this resource is designed to guide you through important considerations, we encourage you to seek more references and professional advice to ensure fully informed decisions.
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