IT and Business Insights for SMB Solution Providers

Cloud-based Managed Services Here to Stay

New research shows the desire to remain a trusted adviser is a top driver for MSPs to deliver more cloud-based managed services. By Colleen Frye

MSPS THAT AIM TO STAY RELEVANT with customer demands are moving to deliver more cloud-based managed services, according to a new report by IT research firm Enterprise Strategy Group (ESG) and Pax8, on behalf of cloud backup provider Asigra. The 2020 Managed Services Landscape report finds that the desire to remain a trusted adviser is the top driver for 63% of survey respondents, followed by a need to shift the business model to recurring revenue and the risk of not providing cloud services.

They’re not wrong. In related research, 2020 Technology Spending Intentions, ESG finds that 53% of IT decision makers consider on-premises and public cloud services equally when deciding to deploy new applications. No surprise, then, that 24 months from now, MSPs expect to have 44% of employees dedicated to delivering services via the cloud vs. 36% today.

Source: 2020 Managed Services Landscape, Enterprise Strategy Group and Pax8, Q4 2019 and Q1 2020

There are some challenges for MSPs adopting this delivery model, however, which ESG puts into two buckets: designing offerings and building sales skills. For larger channel pros (10 or more employees), the challenges around designing offerings include: determining the right pricing levels for different managed services (31%), poor margins on cloud-based managed services (21%), and developing and executing successful marketing campaigns (29%). Smaller channel pros report being even more challenged in these areas.

On the selling side, conversely, larger partners cite bigger challenges than small partners in adjusting business model and compensation plans to reflect an annuity model (20% vs. 11%), retraining sales teams to sell services (19% vs. 10%), and difficulty providing self-service ordering for customers (16% vs. 8%).

To meet these challenges, channel pros are making investments to upgrade processes and expand capabilities. This includes developing or adopting a cloud services delivery platform, implementing training and education around cloud business processes, and hiring personnel with cloud skills.

Finally, ESG offers a caveat: MSPs need a “security story” for everything they sell.

Image: iStock

About the Author

Colleen Frye's picture

Colleen Frye is ChannelPro's managing editor.

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