Why MSPs Are Poised To Capitalize On The Hybrid Cloud Data Protection Boom

By Chris Cummings, FalconStor

Three ongoing trends are coming together today to create a significant opportunity for MSPs:

• Enterprises are standardizing on hybrid cloud architectures for their IT operations in the post-pandemic landscape.
• Data protection, often a behind-the-scenes activity, is under increasing levels of scrutiny given the rise in ransomware attacks and the market is growing fast.
• Enterprises are increasingly outsourcing data protection to cope with a growing application development agenda and work-from-home IT needs and a loss of technical talent within organizations, with Managed Services Providers (MSPs) coming to the rescue. This need is even more acute in specialized technology areas such as IBM and Power Systems, tape systems, and mainframe, but the opportunity in open systems has grown steadily over the past two years.

This combination of factors is good news for incumbent MSPs that can offer data protection services based upon a hybrid cloud approach but is also driving traditional value added resellers to transform into service providers.

How big is the market potential? According to Mordor Reports, the worldwide cloud applications market has grown from $30 billion in 2013 to almost $100 billion today. The hybrid cloud market alone is predicted to reach more than $200 billion by 2027. The data protection-as-a-service (DPaaS) segment may well represent the area of greatest potential in the U.S. From $2.44 billion in 2016, DPaaS will soar to over $20 billion this year and triple to more than $60 billion by 2027, according to Grandview Research. Without a doubt, this is one of the highest growth areas in all of IT.

Data protection encompasses a wide range of services. These include backup and recovery, disaster recovery, data security, cloud migration, and related professional services. Backup is the largest slice of the pie, but each segment is growing rapidly. According to Grandview, the combined might of managed data center, managed network, managed mobility, managed infrastructure, managed communication, managed backup & recovery, managed information, and managed security will be worth $168.4 billion by 2028 in the U.S. alone. The last three managed services (backup & recovery, security, and information) are all related to DPaaS and will account for about 40% of the total.

That’s quite some potential. But the only MSPs that will take advantage of it will be those that prepare correctly and adopt the right approach to delivery. What does it take to capitalize on this opportunity? Ability to Support a Broad Swath of Applications and Technologies: MSPs don’t get to choose the apps and gear that their customers have, so having core data protection technologies that can serve the diversity of their target customers’ IT environment will generate the greatest opportunity.

Software-defined architectures simplify deployment and management: Software-defined storage and services make it much easier to manage existing cloud services and rapidly add new ones while keeping costs down. For example, those offering software-defined backup can broaden their portfolio by adding data reduction technologies that further lower the cost to serve, store and protect data.

Focus on Predictable Pricing Models to Increase Velocity: A great many current services base their pricing on data volumes as well as the modeling of deduplication rates i.e., the amount of data reduction achieved by eliminating duplicate files – which can be 20:1 or higher in some cases. Any MSP attempting to measure data volumes and deduplication modeling for each customer up-front and as the relationship grows will tie up resources, reduce efficiency and eat into profits. The best approach is to find a fixed price per MSP customer (or tenant) per month to maximize ease and speed.

Start Fast: Large up-front commitments in the form of customer tenants or capital equipment hurt cash flow. Most data protection technologies require up-front CAPEX and cloud services will require large up-front commitments to get decent volume discounts, which can make it tough to get started, and even more painful if the service doesn’t work out and all of those customers have to be transitioned to a new platform. It is best to find a way to start fast with a low commitment, get the service started, and learn as you go. Some data protection technologies allow MSPs to start with as few as ten tenants and scale up rapidly when required.

Avoid Cookie-Cutter SLAs: Everyone recognizes that the volume of data to protect is rising rapidly – and that trend is only going to accelerate. What isn’t always understood, however, is that the scrutiny and specificity of protection requirements are rising in parallel. Those providers offering generic SLAs will run into problems as customer environments are becoming more complex by the day. The market has evolved to demand customized SLAs that can be implemented by app, data type, industry, and/or tenant. MSPs, therefore, need to be able to tailor SLAs around the differing application needs of customers and offer a wide range of data security options. Where software-defined solutions are omitted, this level of flexibility will be hard to achieve. Those MSPs struggling with overly rigid SLA settings will find themselves at a severe disadvantage.

MSPs are fundamentally focused on achieving high rates of customer satisfaction at maximum scale and efficiency because the combination translates into high retention rates and profit. Your technology choices in DPaaS must be able to deliver that level of flexibility and efficiency to drive a scalable, profitable business that can stand the test of time and new requirements.

About The Author

Chris Cummings joined FalconStor with 20 years of leadership experience in cloud, software, and hardware technology concerns. His expertise spans all aspects of strategy and marketing, including product and solutions management, technology ecosystem development, and go-to-market to drive strategic growth. Chris’ experience includes serving as CMO of Datera, a software-defined storage leader, CMO, and SVP of strategy at Cleversafe, the leading cloud object storage company acquired by IBM’s Cloud Group, and in a variety of leadership roles at NetApp. Chris holds an MBA from Northwestern University’s Kellogg Graduate School of Management, where he is a frequent lecturer on go-to-market strategy and a BA from Stanford University.