How Managed Service Providers (MSPs) Can Maintain Revenue And Relevance In The Cloud

By Eran Farajun, Executive Vice President of Asigra

The move to cloud-based computing is disrupting a familiar and lucrative business model for managed service providers (MSPs) and value added resellers (VARS) who have built their businesses on implementing and managing computing infrastructure for customers with traditional on-premises data centers – services now in dwindling demand. How do MSPs and VARs maintain revenue and relevance as customers increasingly go directly to cloud service providers for management of their cloud-based compute resources?

Hint: By “following the data,” providers can identify opportunities to deliver valuable new services to customers as they shift their data and workloads to the cloud. 

I believe the movement of data to the cloud will be an accelerator, not an inhibitor, to business success for MSPs and VARs. As customers move workloads to cloud platforms such as AWS and Microsoft Azure, and create and store data in cloud applications such as Salesforce.com and Microsoft Office 365, their data management needs change and evolve but don’t disappear. Service providers who can develop a set of cloud-data best practices and turn these into services for managing data in the cloud will be in the best position to monetize the migration to the cloud.

But this won’t be business as usual. Succeeding will require new strategies, development of new business relationships, and new ways of thinking about everything from how you price services to how you offer value to your clients.

Sizing up the Cloud Opportunity

How large is the market for cloud services? Gartner forecasts by 2020, 50 percent of business users will employ cloud-based office systems (such as Google Apps for Work or Office 365), with the share growing to 90 percent by 2027. Another Gartner study predicts the level of IT spending on public cloud services such as AWS or Microsoft Azure to grow to $282 billion annually by 2018, with a projected combined annual growth rate of 22.4 percent between 2013 and 2018.

While established businesses make this transition from on-premise data centers and servers to the cloud, younger companies and startups today often go straight to the cloud for their computing support. These businesses load their laptops with software and deploy them directly to the cloud, without ever owning an on-premises server.

Chad Whaley, CEO and co-founder of Echopath, an MSP that offers enterprise data backup, data-recovery-as-a-service (DRaaS), and IT-managed services from its base in Indiana, says that nearly all of his customers use some form of cloud-based apps. “In today’s environment, pretty much 100 percent of our customers partake in some form of cloud-based application or server,” he says.

According to James Chillman, managing director of UK Backup, an England-based backup and recovery as-a-service vendor, “We’re seeing a lot of clients pushing data and systems to the cloud.  The biggest trend is the drive toward Office 365. We see companies with ten employees to 20,000 employees looking to streamline their IT systems, and one of the easiest ways to do that is to push email and collaborative productivity tools to the cloud.”

Monetize the Shift to the Cloud

While the opportunity is large and growing, it’s overlooked by many due to two major misapprehensions. On the one hand, too many MSPs see the shift to cloud computing largely as a threat. Secondly, businesses that move their data and workloads to the cloud often have the misguided expectation that cloud service providers actually provide data management as part of their services, or that legacy data protection and management solutions in the old on-premise data center are somehow still managing data in the cloud.  

“A lot of people were sold a bill of goods, believing that going to the cloud would take away their responsibility for managing their servers,” says Whaley. “In fact, it’s just that your data now lives in servers in the cloud. Just because the servers are no longer in your server room doesn’t mean you’re not still responsible for managing your own data.”

This “expectation gap” between what business customers believe to be true and the reality of what it takes to provide full management and protection of data in the cloud provides new opportunities for the MSPs and VARs that recognize this gap.

The opportunity starts with the requirement to educate customers about the need to deploy the appropriate cloud services to manage data in the cloud. Then “follow the data” to identify new services that will be required for cloud data, including:

• Helping customers migrate data from on-premise servers to the cloud.
• Analyzing and managing cloud data in accordance with data retention policies, including data storage and deletion requirements for external regulatory or internal corporate compliance.
• Developing new cloud-based applications to replace proprietary apps previously written in Unix or other datacenter operating systems.
• Scheduling and automating EBS snapshot management tasks for data backup in cloud servers.
• Managing service level agreements (SLAs) for cloud-based services.

Protecting Data in the Cloud

Probably the greatest need – and opportunity – for service providers is providing data protection in the cloud. That’s because the need is great, and the threat of data loss from SaaS applications is very real. Almost no legacy data protection solution can back up SaaS-stored data in such applications as Office 365, Salesforce.com and Google Docs. Further, data protection services that are able to back up data in the cloud are almost surely not included as part of customer agreements with these cloud vendors. As businesses migrate legacy datacenter servers to the cloud, on-premise backup software doesn’t “follow the data.” 

So when these cloud-based apps go down, they take unprotected customer data with them, as happened in early May when a database failure at Salesforce.com caused the loss of four hours’ worth of customer data. Or this Office 365 outage just a few months earlier that left customers without access to their email for more than a week.

Businesses need to look very closely at their agreements with SaaS vendors to see what data backup and recovery features – if any – they offer. Often, these vendors are deeply invested in ensuring high availability and uptime, but are not focused on providing customers with data protection that meets an organization’s needs for compliance, business continuity, data recovery, and Recovery Time Objective goals.

For instance, vendors such as Salesforce.com charge their customers a fee if a data recovery is required. After 15 days, Salesforce.com customer records that have been sent to the Recycle Bin can only be recovered (with the help of support) at a cost of $10,000 per recovery. After 90 days, these same files in the Recycle Bin are unrecoverable. Data restores, where possible, are ‘all or nothing,’ meaning subscribers could end up with a large and confusing quantity of disorganized files – not much help in a business continuity scenario. Office 365 and Google Apps have similar policies, which dictate that after a specific number of days, data restores may not be possible.

Another major threat to data stored in the cloud is ransomware trojans such as CryptoLocker. These viruses can encrypt data on an office laptop via infected email attachments, and then automatically sync with cloud-based applications such as Microsoft Office 365 to encrypt all the files in both locations.

“One of the main reason that we are called on to restore data today is when customers are impacted by CryptoLocker-style viruses,” says Chillman. “Unless you’re willing to pay the ransom, in those situations, restoring data without a backup solution is impossible. For all the money in the world, Microsoft will not be able to get your files back.”

Seize the Opportunity

The companies you serve may not know that their data is unprotected in the cloud, and you may need to remind them that they bear the corporate responsibility of ensuring that data is protected to meet regulatory compliance and recovery time requirements.

This presents an opportunity for service providers to offer a data protection strategy to protect customers against unscheduled and unforeseen outages as well as accidental data loss. Financial and customer data is the lifeblood of any business, and providing a cloud-based data management solution to protect this critical – and increasingly exposed data is a gateway to further discussions – and key to anticipating the needs of your clients.

However, developing data protection solutions that can ensure backup and recovery of SaaS data is complex, requiring in depth technical knowledge of SaaS platforms, cloud infrastructures, virtualization, and the intricacies of data protection technologies. MSPs and VARs who don’t have this expertise should consider partnering with IT data specialists who understand the requirements of SaaS platforms and can ensure that data is retained and recoverable according to business requirements.   

The move to cloud computing doesn’t have to spell doom to service providers. Those who are willing to seize new opportunities will find it opens tremendous business growth opportunities, with new and existing customers.

By “following the data,” MSPs can identify and address new horizons greater than the ones that are in the rear view mirror. The transition to a more services-oriented business model based on cloud computing won’t be easy, and it will be different from what you’ve done in the past. But you don’t need to have all the answers yourself. Forming the right partnerships to monetize the opportunities in the cloud will be key to success in this fast-evolving era of cloud computing.

I’d like to hear what you think about new opportunities for service providers in the cloud. What aspects hold the most promise to MSPs? Leave a comment or contact me at eran.farajun@asigra.com.