Last year proved that the pace of digital transformation is largely determined by the human will for change versus the limits of technology. When necessity demanded, change cycles previously forecast to take years happened within a matter of months, even weeks.
That left IT teams and MSPs the world over scrambling to adjust. Weak spots in processes or operations that were considered annoyances and lumped into the category of “we’ll deal with that eventually” became crisis points that demanded immediate redress.
Let’s revisit some of the data points that came out of 2020.
In June, LogicMonitor reported that 87 percent of enterprises expected to accelerate cloud migration in the post-COVID world. Further, there will continue to be an almost even split between workloads residing in a public cloud versus a private cloud through 2025.
IDC reported that Infrastructure-as-a-Service (IaaS) adoption picked up speed in the year prior to the pandemic, while “the COVID-19 disruption has accelerated cloud adoption with both traditional enterprise IT organizations and digital service providers increasing use of IaaS for their technology platforms.”
IDC reported in August year-over-year growth for both IaaS and Platform-as-a-Service (PaaS) of more than 38 percent. (Software-as-a-Service, SaaS, followed at a still respectable 19.8 percent.)
CEO and co-founder of MSPAlliance. Founded the organization in 2000 and grew it from 5 founding members to over 30,000 worldwide. Author of "The Art of Managed Services & Cloud Computing." Featured in the New York Times, Wall Street Journal, and Inc. Magazine.
If you are an MSP active in the IaaS or PaaS spheres and your business is not experiencing the kind of annual growth noted by IDC, why not? What is causing you to leave money on the table and miss out on the opportunity?
The answer usually involves three interconnected issues:
A front office and/or a back-office mired in outdated manual processes reliant on spreadsheets when it comes to fulfillment, orchestration, and billing.
Lack of automation, whether internal or client-facing.
A rigid multi-year contract model for MRR (monthly recurring revenue), that fails to provide the client with the same flexibility to adapt to change as provided by a public cloud. This model also misses out on opportunities to upsell.
Let’s explore each of these through the experiences of three MSPs and how they each grew their private cloud businesses.
Case #1: “We want to take the ‘Man’ out of manual billing for our VMware private cloud”
An MSP in Europe that serves hundreds of small to medium enterprises had an MRR of $175,000 per month. Thanks to outdated manual processes, the MSP routinely required that a Tier 3 technician go through all of its control panels each month to sort out billing—about 70 to 80 hours taken away from client-facing activities.
But with automated usage tracking, the MSP was able to achieve more accurate billing, faster, and without having to waste the time of a Tier 3 tech.
As a result, the MSP was able to identify and address revenue leakage of 10 percent per month. Within the first year of using a more reliable and accurate automated system, the MSP recovered $210,000 in lost revenue.
Case #2: “We want to grow our private cloud business, but it won’t scale”
Many MSPs offer a white-label/white-glove service, but lack of automation limits growth.
A North American service provider that had expanded into the MSP business suffered from this challenge. In response, the MSP deployed an automated system with a dashboard that allowed clients to access a catalogue of standardized services and pricing, and that automatically updated usage by each client for each billing period.
Clients could quickly source the private cloud resources they needed, on-demand, without having to go through a lengthy order fulfillment and orchestration process involving multiple sales reps and engineers.
A private cloud business with an MRR of $350,000 consequently increased its core revenue within one year by seven percent. In addition, the MSP had the capacity to upsell an additional $670,000 annually (for an overall revenue increase of 16 percent) with BUaaS/DRaaS (Back-Up/Disaster Recovery-as-a-Service) services.
Case #3: “We want our private cloud to have public cloud flexibility and pricing”
This European-based MSP wanted to deliver pay-as-you-go private cloud services, with accurate hourly, daily or monthly rates and usage tracking, along with time-based discounts, to compete on an even footing with public cloud service providers.
In other words, the MSP sought to escape the outdated contract model that locks a client into a multi-year contract at a fixed rate for fixed services. It wanted the capability to adapt services, and service levels, on the fly as the client’s needs changed and reduce the risk of losing the client’s business to a public cloud provider.
Again, the answer was to deploy the automation tools that could accurately monitor usage and feed a billing system and a professional services automator (PSA) at month-end, coupled with a self-serve client-facing portal. In this instance, the portal integrated with ConnectWise Manage.
This enabled a private cloud business with an MRR of $65,000 to increase core revenue in the first year by 22 percent. This MSP also took advantage of the ability to upsell with BUaaS/DRaaS, for an additional $95,000 a year in revenue.
In conclusion: Your clients demand flexibility … you can be easily be equipped to deliver
The writing was on the wall for MSPs to invest in new tools and processes well before the pandemic. By investing in automation and new client-engagement models, an MSP can scale a private cloud business, increase profitability, and effectively compete with public cloud providers.
2020 demonstrated that the time to make that move is now. The good news for MSPs of any stripe is that this is doable and affordable. Getting started is just a phone call away.
