One slide after the next demonstrating the growth of public cloud infrastructure projected over the next five years left little room for doubt among managed service providers in the room at the Infrastructure Summit in Toronto on Wednesday – it’s time to change your business model if you haven’t already.
It’s not that on-premises infrastructure is shrinking quickly, though event host Structure Research predicts that spending in that area will decline between now and 2022, just that hyperscale cloud providers are growing so quickly by comparison. That leaves managed service providers that are still selling servers, storage, and service desk tickets with a quandary. Their customers are simply looking for a different way to access computing infrastructure.
“There’s a big pivot happening as more infrastructure gets run on the public cloud,” says Philbert Shih, managing director of Structure Research. “With Amazon and Azure and Google quickly scaling up and taking bigger portions of the infrastructure market, it’s going to cause a big shift.”
The losers, he says, will be those trying to play in the commodity space. MSPs will face smaller addressable markets unless they find ways to provide new value on top of the public cloud services that these hyperscale companies are providing. Those strategies can range from helping customers migrate and orchestrate those new cloud environments to building the processes around unlocking the business value.
One MSP adapting to the new world order is Chicago-based Ensono. Chief Technology Officer Gordon McKenna warns to not try and take the old way of selling IT and applying it tot he cloud. Ensono’s legacy business is as a mainframe services shop that helped large customers in the financial sector. Now it’s built out a middleware layer, Ensono MO, that spans the on-premises and public cloud environments in order to allow customers access to their workloads no matter where they’re running. Ensono now onboards all its new customers to this platform.
“If we don’t help our customers modernize to the public cloud, somebody else will,” McKenna says. “Some managed service providers want to keep their head in the sand and tell themselves they can keep doing business the old way.”
Public cloud services are adding complexity to clients’ operating environments, he says, but are still desired because of the unique capabilities they bring. As infrastructure shifts toward public cloud, applications will follow. He points to the insurance sector, which is increasingly using connected devices to collect information related to risk management.
“We’ve had to find a way to make public clouds our frenemies,” quips Luke Norris, CEO of Faction, a Denver-based MSP focused on Dell, VMware, and Netsuite technologies. His business has shifted from virtualizing on-premises workloads to helping customers migrate those VMware workloads to the cloud, mostly AWS.
Hosting, another Denver-based MSP, has shifted its legacy business to one that offers services on top of the AWS and Azure cloud stack. “There’s a boatload of opportunity to provide services on top of that platform,” says Joel Daly, CEO of Hosting. He advises changing business models to be process-focused so that it is repeatable for multiple customers.
When it comes to delivering services on top of the cloud, you can’t just throw people at the problem and solve it once. You need to figure out the automation aspect so it will work every time.