Brainstorm Magazine

April 3rd, 2014

MSP Roundtable: Managed service providers and the cloud

Managed service providers need to weigh up their cloud options before their customers do.

Will the managed service provider (MSP) market go the way of the dinosaur in the age of cloud? Or is the cloud an opportunity for MSPs to become more agile and efficient? Is it a good excuse for reinvention? When customers can pick and choose services online – and advanced services too – then where does that leave the local MSP? For Rob Sussman, joint CEO of the Integr8 Group, the cloud has prodded both his company and his client base in the right direction.

“Cloud has required us to change our business, has forced us to look at global trends and to look at its adoption in the local market. I think it’s been very good in that it’s educated our clients on the benefits of a consolidated, centralised and managed service.”

Glen Andrew, director of Enyuka.com agrees.

“We found it to be an opportunity both for us to educate the client base and for us to move into the space. However, in order for the model to work, we need decent connectivity.” Steven Preston, director of Xpand IT, says there’s both potential for MSP’s existing skills and for education.

“Whatever is being stored in the cloud is still being stored server-side. There will still be a number of Brought to you by servers that will need support and there will still be devices that connect to those servers. While the devices may be different, the executives we see in businesses we support don’t have much knowledge of cloud. I don’t think it’s going to affect business per se.”

Jakobus Koorts, director at Numata, says most IT companies had a break-fix model a few years ago and that’s evolved into the managed service provider model.

“Right now, we really don’t have a choice: we need to adapt our service offerings and in 2012, that means cloud offerings.”

JC Putter, director at Numata, agrees.

“As an MSP, you are the trusted advisor for business. Your customers do come to you first when they want to know more about cloud. So the MSP is the ideal gateway to take the customer into the cloud. There’s two ways to do that: doing cloud consulting and providing hybrid cloud solutions where you move certain services into a cloud environment. From there you can introduce virtual services through the cloud.

Integr8’s Sussman says the competitive landscape is changing and the competitors themselves are changing.

“The telcos are moving into the MSP space. Globally you also see a lot of telcos providing MSP services. So we’ve had to sit down and decide what we’re going to do: are we going to be a datacentre business? Or a hosting provider in someone else’s datacentre? Where does the telco end and the MSP begin? We’ve established very close partnerships with a telco. In the past, Integr8’s biggest partner was Microsoft. Now it’s MTN. The world is changing.”

Anton Coetser, services director of Triple4, says the MSP’s natural evolution is to move up the value stack.

“We’re now packaging products into our managed services.

So instead of just selling managed services, we’re selling products and the value-add is the managed service. So we have products in the cloud and we support those products.”

Mark Geschke, MD of Space Age Technologies, sees the move to cloud as part of something larger.

“Cloud is certainly a threat to our business when I take the long-term view. Cloud is just one part of many trends that are coming together. We see bring-your-own-device, we see massive datacentres being built. It’s not about pure virtualisation but someone else managing it for you. What is going to happen over the next couple of years is that most companies will have infrastructure somewhere ‘out there’ and smaller providers won’t have the scale. In that scenario, we will have to transform. We do a lot of work with Office 365 and there is no server management anymore – it’s gone. It’s changing very fast. How we manage environments and what we manage will change.”

Numata’s Koorts says the requirement for management expertise won’t change.

Garth Hayward, Kaseya International “We specialise in the SME industry – anything between ten and 250 users – and the perception of cloud computing is causing a lot of problems. It’s our job to educate the customer and to be the single point of contact. We need to have a close relationship with the telcos but at the same time you will always have part of the infrastructure that must be private. We need to explain that cloud computing won’t take away all physical infrastructure completely. The biggest call centre in the world is virtual but there are still servers running it somewhere.”

And customers do want a solution that increases their reliability at less cost. Comments Brett Scott, director of Xpand IT: “You can look at an example where we took a client onto a private cloud last year. I’d say their break-fix has dropped by 50 percent purely because they were dependent on a head office, which is no longer going down due to power failures, generators not kicking in and connectivity going down. Support has halved even though device management has increased because of tablet usage.”

User adoption

Preston agrees.

“To reiterate what Brett said, moving that customer into the cloud has been great. I hear what Mark says about the cloud but customers see these things affecting their bottom lines. The cloud will happen, it is a process, but it’s coming.”

Sussman would love to move all of his clients to the cloud.

“Our view is that if we could migrate every single one of our customers and put them in the cloud and manage them centrally, we would do it tomorrow. But the reality in South Africa is that we need to track user adoption of cloud. There are technical issues with latency and bandwidth. The first thing we see going into cloud is mail. We’ve given clients options: private, public or hybrid. We’ve also offered them a cloud model with their own infrastructure, which we manage. The market is changing and those companies that aren’t here haven’t changed with the times. We see a convergence, not around unified communications, but around telcos. If I want private cloud, I would go RackSpace. If I want public, then it would be Amazon. Unfortunately, Amazon isn’t building datacentres here, and neither are Microsoft or Google.”
That may be true for SMEs, but corporates are more cautious, explains Burger Lourens, business improvement manager at Bytes Managed Solutions.

“Corporates come to us and ask where we can help them with cloud. But they still want to be able to go into a datacentre and for you to show them their data on some servers. So hosting a service somewhere in the US or the EU is not a reality right now for them. They understand that the bandwidth isn’t there yet but in five years’ time, they will want it. And in certain verticals – in the financial sector, for instance – the reasons are mainly cost.”

Moving up the value stack

In one sense, the cloud is really good for this country, points out Garth Hayward, Africa regional manager for Kaseya.

“It frees up resources for us to work on things that are higher up the value stack.”

And things are changing fast enough to make customers more comfortable with the idea of cloud, notes Space Age’s Geschke.

“Two years ago, nobody knew what a tablet was. Things are changing very fast. The law of accelerating returns says that the time between major technological innovations is halving with every new one. Currently, lots of people are saying things will stabilise, but things will never stabilise — they will always be changing. Yes, people are concerned about latency and where physical servers are hosted, but wait until people start realising that these datacentres are much more secure and available than anything they could have done themselves.”

Does that mean a change in outsourcing as a whole? Sussman says no.

“We’re not seeing a big move away from outsourcing but we’re very aware of the change in the market: competitors are changing and the competitor landscape is changing.”

Numata’s Koorts says MSPs are still doing outsourcing but the nature of it will change.

“Outsourcing is definitely getting bigger but our job is to educate and look for new services to bring to the customers. The essence is we still do IT outsourcing and if we don’t change and evolve into something our clients want, then we’ll get dumped. None of us will be here in five years’ time if we don’t change.”

Kaseya’s Hayward points out that in the US, the best MSPs have moved into the vertical market.

“They do specialist services from start to finish. I just wonder whether the South African market will do the same thing: move up the value chain or keep being general.”

And MSPs agree that they themselves are moving with the times. Space Age’s Geschke: “If you look at our organisations, most of us are technical in nature. In five years’ time, we will need more than ever people who can talk business language. Our own company is very strong technically but we’re moving to talking business.”

Triple4’s Coetser says in South Africa, the market is too small to focus on just one vertical.

“IT is a general skill so to focus on a specific vertical means you will often go horizontal anyway. To focus on only one industry means putting all your eggs in one basket. I don’t think the market is big enough to support vertical specialists. There are a few big fish and a lot of little fish. To compete, you need products you can go to market with but still keep your base.”

Bytes’ Lourens says there’s another challenge: specialist knowledge.

“What we’ve found is that when you play in the vertical markets, you need to know the customer’s business almost better than the customer himself does.”

But for the SME, cloud is the great leveller, says Hayward.

“The cloud is a good thing for the SME market. It’s about giving SME clients access to enterprise software, which makes them more efficient. It’s not about Oracle selling to someone they’ve always sold to; it’s about attracting new clients to their base. If that’s the case, then the differentiator becomes about speed and agility. For the provider, it’s about how you keep relevant as a trusted advisor.”

Enyuka.com’s Andrew says the final challenge will be to innovate.

“What is differentiating us at the moment is innovation and performance. We’re getting feedback from our customers that since they’ve moved to us, they’ve got better stability and less break-fix cost. Staying that way keeps us ahead of things and thinking. We’re excited because it’s an opportunity to innovate