'Managed Services' Has Different Cloud Meaning

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IT vendors and cloud service providers are talking up managed services as their preferred partnership model going forward in the cloud. This may sound like good news to the legions of MSPs in the channel. Trouble is, they’re not talking about that kind of managed services.

Cloud service providers, IT vendors and distributors are reaching out to the channel to accelerate cloud sales and market expansion. The target-of-choice is often “managed service providers,” a demographic based entirely on service business models. The presumption is that MSPs get annuity revenue and can easily adapt to deliver and support cloud services.

The latest example of vendors appealing to MSPs is Hewlett-Packard. Our friend Joe Panettieri at MSPmentor interviewed Zorawar Singh, senior VP and GM of HP Cloud Services, who said MSPs are best-positioned for cloud because they understand the revenue model, automation and service-level delivery.

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He’s absolutely correct, except for one thing: He’s not talking about conventional managed service providers.

HP isn’t alone in its quest to recruit scores of managed service providers to expanding cloud programs. CA Technologies, IBM, Microsoft, Cisco, Verizon, Amazon, Century Link and others are also targeting the “managed services” community to augment their cloud efforts.  When they say “managed services,” they mean partners who can develop or migrate business applications to cloud infrastructures and manage them independently of the vendor or customer.

The 2112 Group, publisher of Channelnomics, subscribed to the same notion as HP and others that MSPs were the natural migration point for cloud evolution in the channel. 2112 worked with several hosting and cloud companies over the last year studying conventional MSPs. What was discovered is that the lack of advanced application knowledge and skill prevent MSPs from engaging in the cloud in a meaningful way.

The underlying premise is essentially correct, though. Managed service providers do have the basic recurring revenue model and must concern themselves with the quality and consistency of service delivery. The two service models differ greatly after these points. Conventional managed services are essentially break/fix providers that have automated processes to scale service delivery and reduce costs. Cloud managed services is all about the applications, relieving end customers of the application development and administration burdens.

Some managed service providers will say they are application providers, too. Many of the remote monitoring and management (RMM) tools vendors have partnered with software vendors to extend support and integration of security and backup applications through conventional MSPs. While this extends the value an MSP, it’s not the same as cloud applications. RMM apps have taken on the flavor of control panels; and that’s not the same as application management.

In the near future, cloud managed services will go beyond integration and support of complex business applications in hosted environments. They are already evolving to include the brokerage of cloud services and the portability of data across multiple hosting domains. And these same service providers will be called upon to quickly develop, provision, implement and revocate applications with speed and efficiency that businesses cannot achieve on their own.

The difference between the two managed services is no less than comparing the Wright Brother’s Flyer to the Space Shuttle.

Holding back the average MSP from truly engaging in the cloud is a lack of investment in developing business practices, skill sets, infrastructure and staffing. Becoming a cloud managed service provider requires a tremendous investment, and most MSPs don’t have the capitalization or risk tolerance to make that turn. This is especially true since most cloud businesses do not produce a quick return on investment.

Several industry analysts, most notably Gartner’s Tiffani Bova, says the lack of investment in cloud skills and capability will result in a 40 percent attrition rate in the channel. This “application deficit” in the channel could change the dynamics of the channel community, marginalizing the survivors to reseller and referral agents among a greatly reduced channel population.

If conventional MSPs want to engage the evolving cloud services market, they’ll need to invest in higher-level application skills and develop the ability to provide comprehensive application and data management services on behalf of their customers. Those who remain focused on relatively rudimentary managed services will be relegated to a commoditized position.

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