2012 Considerations for MSPs

Cloud wars begin – Although we’re still a few years away from seeing the true impact of these engagements, cloud wars will start with the big consumer cloud environments such as Google, Facebook, Microsoft and Salesforce.com. And, since these companies are bringing enterprise-grade services to government institutions as well as corporations of all sizes, the war will pull in the managed hosting and data center collocation providers too. We have seen statistics that show a hosting provider with 500 to 1,000 servers can be competitive with the likes of Amazon, Rackspace, or GoGrid (whose price advantage at that point is only about 10 to 15%). However, not everyone will be able to compete on price and economies of scale, making it imperative to identify niche markets where they can deliver new services. The stiff competition brought on by cloud will create alliances that will lead to more innovative cloud solutions and differentiated service offerings rather than traditional price wars.

Cloud defies the laws of economics – Cloud will behave as a “Giffen Good” in 2012, where people consume more of it as the price rises. IT budget cuts can be a major driver for cloud computing. With lower budgets, the ability to break down costs into smaller increments make cloud computing a more attractive prospect. As cloud service prices increase, it will take a larger portion of the already cut budget, which will mean there is less budget remaining, further driving the cost-cutting measures of cloud computing adoption. This is great news for MSPs, who should not feel compelled to cut prices as they add new value-added cloud services, especially since competing on price can be a losing proposition (see cloud wars above).

Security and disaster recovery plans become paramount – There will likely be a major security attack on a high-profile cloud provider in 2012 that will garner lots of headlines. The upside will be increased focus on security and disaster recovery by both providers and end users. MSPs making the transition to cloud services or already offer them need to place a priority on this now. For cloud adoption to increase, enterprise customers with critical business applications need to have faith that their service providers deliver secure, high-quality services as well as transparency into performance (and they are starting to ask more pointed questions in these areas as you may have experienced).

Acquisitions strategies go horizontal – Expect to see significant M&A activity in 2012 as large service providers look to expand their services portfolios, target markets, and geographic reach. Non-service providers will get into the act too in order to build their own clouds. Competitive pressures will motivate acquisitions based on the technologies needed to round out portfolios rather than boosting customer footprint for the short term. Telcos, social media firms, large system integrators and MSPs will partner with or buy out the cloud onramp providers, orchestration technologies, security technologies and IT monitoring/management firms.

Regulation increases – The more cloud computing grows, the more energy data centers use: Data centers are now using about 3 to 5% of U.S. power, inviting increased regulatory scrutiny. Already there is regulatory discussion bouncing around with regard to high performance computing needs in the financial sector – bringing parity to all who trade. In addition, there are now regulations that specify data has to reside in the country where the business is. This means there is a big opportunity worldwide and will invite greater cloud participation by international hosters and service providers. For others it will mean an expanding footprint around the globe to cater to that regulation.

Hybrid topologies grow – Enterprise IT environments will continue to move in the direction of a ‘hybrid topology.’ This means one that makes use of third-party data centers, infrastructure or applications that include all the benefits of a cloud computing platform, making them real (virtual) private clouds rather than just a modern, virtualized IT environment that resides on premise.

In a world where end users expect always-on, on-demand services, just deploying the infrastructure is not enough. Understanding these trends will better enable you to take advantage of the massive opportunities cloud computing brings. And many of these issues are under your control as an MSP and will help you boost service levels, give customers an increased level of confidence in your services, and enable you to capture more market share as a result.