According to some industry analysts, the managed service provider (MSP) business grew out of the system integrator sector in the 1980s and morphed into what we have today in the 2000s with the birth of the Internet. The reality is that outsourcing computer services goes back a lot further to the days of the blue-suited “IBM Man” of the 1950s. It’s big business, projected to exceed $26 billion in annual revenue by 2028.

Today, being an MSP increasingly involves cloud services and managing the MSP client relationship using cloud tools. There’s more to being a cloud MSP, however, than just offering cloud services to your clients. Getting to success means navigating a multi-dimensional set of business challenges. This article explores what it takes to build and scale a successful cloud MSP business.

Understanding Cloud MSPs

Before we dig into building and scaling your cloud MSP business, let's take a minute to define the category and trace its evolution in the digital age.

Defining a Cloud Managed Service Provider

What is a cloud managed service provider? A cloud MSP is typically an MSP that pursues a “cloud-first” strategy. This means emphasizing cloud-based tools, services, and infrastructure for your clients and making the cloud the basis for delivering managed services. This is not to say that a cloud MSP cannot offer on-premises services. If your client runs AS-400s on-premises, then you’re going to be supporting that heavy iron where it currently sits. However, as a cloud-first MSP, you might devise a strategy for migrating your client off AS-400s and onto a cloud-based system.

Why would you want to be a cloud MSP? The cloud offers a number of advantages when compared with traditional on-premises MSP practices. These include:

• Scalability—The cloud enables you to spin up resources for clients on an on-demand basis. For example, if the client needs additional storage, the cloud makes it easy to store exactly what you need without having to first provision and install more hardware.

• Flexibility and speed—With the cloud, you can quickly set up resources such as storage and then reconfigure them as the use case changes over time. Everyone can access these resources from anywhere, which helps the client adopt policies like remote work or open branch offices, and so forth. With the cloud, you also don’t spend much time setting up local infrastructure.

• Low-to-no CapEx—There’s very little upfront capital expense (CapEx) with the cloud, unlike in traditional on-premises systems. Instead, the cloud is entirely a matter of operating expense (OpEx). The CFO tends to like this because cloud computing helps the company conserve its capital.

• Cost savings—While the cloud is not necessarily inexpensive, it does tend to drive savings when all cost factors are taken into consideration. For example, you don’t have to employ as many IT administrators because the cloud provider handles much of their traditional workload. Plus, you'll always save on building or renting data centers since those costs are included in the cost of the service.

• Greater reliability—Cloud infrastructure is usually better maintained and more reliable than corporate-owned infrastructure. This is partly a matter of scale, with the cloud provider being able to employ more people and deploy cloud management systems that support tens of thousands of users. The cloud also enables geographically diverse failover instances that are easy to set up, leading to higher availability. 

• Higher profits—Properly managed, a cloud MSP business should be more profitable than a traditional MSP business due to the low overhead associated with reselling cloud services.

One of the main reasons why MSPs are becoming cloud MSPs, however, is because their clients are demanding managed cloud services. If you don’t become a cloud MSP, you might start to lose business to competitors with strong cloud offerings.

The Evolution of Cloud MSPs in the Digital Age

MSPs have had to adapt to changing customer needs in the digital age. At one level, many MSP clients are pursuing their own cloud-first strategies, so they expect their MSPs to keep up with them. If the client wants to use Microsoft 365, then their MSP will want to support that cloud-based suite of applications.

More significantly, cloud MSPs are evolving to help their clients achieve ambitious digital initiatives, such as digital transformation. For example, a business may want to deliver an omnichannel customer experience that keeps customers in touch with the brand through websites, mobile apps, and in-store kiosks, all of which utilize cloud-based software. If the business wants to outsource the management of this setup to an MSP, that MSP must develop the necessary capabilities to support it.

Starting Your Cloud MSP Journey

At this point, there is probably no such thing as a cloudless MSP; nearly every MSP interacts with the cloud in some way. However, becoming a profitable, scalable cloud MSP involves building both skills and infrastructure.  

Essential Skills and Knowledge for Cloud MSPs

Being able to offer cloud services to your clients requires gaining specific knowledge. For example, if you want to sell cloud storage, you have to know how services like cloud object storage work, become familiar with the nuances of cloud storage pricing, and more. It may be necessary for your people to train and become certified, e.g., become a Microsoft Certified: Azure System Administrator Associate.

In the big picture, it’s useful to understand that the skills required for a cloud MSP are holistic in nature. It’s not just about knowing how to provision cloud backup or spin up a cloud-based server. The MSP organization should become attuned to the needs of the cloud marketplace. For instance, sales and marketing teams have to understand the MSP’s unique cloud value proposition for clients. Support staff and the policies they work under must understand and accommodate their cloud services provider. The legal team needs to understand how cloud services are different from regular MSP services and reflect those differences in contracts and service level agreements (SLAs).

Setting Up Your Cloud MSP Infrastructure

You have choices when it comes to setting up your cloud MSP infrastructure. The simplest approach is to build on existing public cloud platforms from hyperscalers like Amazon Web Services (AWS) or Microsoft Azure. They provide almost everything you need to deliver a wide range of cloud services to your customers. However, electing to work with one of these providers may exclude your clients from a multicloud architecture that spans AWS, Microsoft Azure, Google Cloud Platform (GCP), and other best-of-breed cloud services. Punitive data egress and API fees also make this approach cost-prohibitive for many MSPs and their clients.

An alternative is to build your own cloud capability by creating a private cloud environment in your own data center. This is a sizable commitment, though, with lots of upfront costs and overhead to manage. For this reason, it is recommended that cloud services be provisioned as requested by customers and managed through a cloud-based MSP administration and ticketing tool, especially one that offers flexibility when it comes to multicloud and hybrid-cloud solutions.

Services to Offer as a Cloud MSP

What services should you offer as a cloud MSP? The best approach is to start small and build your portfolio of service offerings as you gain competencies and customer references. Start by looking at what your customers are currently buying from you and map those services to cloud offerings.

Core Services That Define a Cloud MSP

If you’re new to the cloud MSP field, it makes sense to consider certain basic services that customers are already buying, such as:

• Productivity tools, e.g., Microsoft 365 or Google’s G Suite. Both of these products have reseller programs that enable you to make money by provisioning the tools to your customers.  

• Backup, disaster recovery (DR), and business continuity and recovery based on cloud-based storage services. Vendors like Wasabi offer cloud reseller programs that enable your MSP business to start offering cloud-based backup, DR, and business continuity to clients.

• Storage made possible by a wide range of cloud vendors, e.g., Amazon S3, Dropbox, Wasabi, and others, to cover a range of storage use cases and contingencies.

• IT support services, including cloud-based system monitoring, ticketing, and remote helpdesk support.

Innovative Services to Distinguish Your Cloud MSP

Going beyond the basics, innovative services can be a path to growth and differentiation for a cloud MSP. Given that almost every imaginable IT solution is available on the cloud, or can be constructed for cloud operation, the sky is the limit. You could offer cloud-based software development environments and DevOps platforms. The Internet of Things (IoT) and secure access service edge (SASE) are ripe for cloud-based services from MSPs. So is legacy integration. While it may be difficult to replace legacy systems, you can add various cloud-hosted add-ons that make them easier to use.

Best Practices for Running a Cloud MSP

A cloud MSP is a somewhat different business than a traditional MSP. The main difference, of course, is that your business is run through a variety of third-party vendors. Consider Microsoft 365. If you previously deployed Microsoft Office as an MSP, you would install Office licenses on client hardware and manage the application, perhaps using remote monitoring and helpdesk. With Microsoft 365, you are straddling a relationship that spans three businesses: yours, the client’s, and Microsoft. While Microsoft provides many tools to make this process go smoothly, you have to adapt your business to make it work.

Implementing Effective Cost Management Strategies

Being a successful cloud MSP has a lot to do with how well you manage costs. You have to select the right tools for managing your cloud MSP business. These may be different from what you are currently using. New cloud MSP tools enable you to engage in remote system monitoring, endpoint management, remote help, helpdesk, and billing, all over intuitive cloud-based interfaces.

Getting it right is about more than just technology, however. Your people will need new skills. And, the organization may need a different structure. You will have fewer people at client sites, for instance, but your staff will need to be conversant with a wide range of cloud and SaaS products that may be new for them. The workflows and business processes will be different from what people are used to, and you will have to keep a keen eye on efficiency to keep costs down.

Ensuring Security and Compliance

Security and compliance, always important, arguably become even more urgent considerations for a cloud MSP. Not only are there more arm’s length relationships between third parties which can amplify risk, but the security parameters of a cloud service may not always be clear to everyone involved. For example, the cloud works on a shared responsibility model for security. The customer is responsible for securing its data in the cloud. But, in an MSP scenario, who is “the customer”?

At a minimum, it is essential to establish, contractually, who is responsible for each aspect of security and compliance. The MSP’s customer should establish security policies or agree to policies suggested by the MSP. The MSP is then responsible for policy enforcement, e.g., if the client’s GDPR compliance and data security rules require them to store data in a specific geography, the cloud MSP must make sure that it follows these rules.

Scaling Your Cloud MSP Business

The opportunity for growth for cloud MSPs is virtually unlimited, however, scaling a cloud MSP business involves a combination of internal and external-facing strategies.

Strategies for Growth and Expansion

There is no one right way to achieve growth in a cloud MSP business, but expanding your cloud service portfolio can be an effective path to scale. The cloud segment comprises hundreds of cloud services you can support or resell to your client base. Within a single major platform you can find dozens of modules to add to your portfolio. A major SaaS vendor like Salesforce.com similarly offers numerous extensions of its core offering for sale, e.g., customer support, sales operations management, and so forth. Vertical expansion is a related activity, wherein you add specific industries to your cloud service mix, such as for financial services or healthcare.

Partnerships and Collaboration Opportunities

Scaling a cloud MSP business means partnering and collaborating with cloud vendors. The vendors want this, unsurprisingly, so most of them have reseller and technology partner programs that both parties can benefit from. These programs may offer marketing support along with sales referrals, and they often provide compatible integrations with other essential technologies. Wasabi, for example, integrates with hundreds of Technology Alliance Partners that offer a range of services from backup and cybersecurity to media access management, data analytics, and surveillance security services and solutions. These types of integrations and partner ecosystems create complete solutions ready for your customers to buy.

Marketing Your Cloud MSP Services

Marketing cloud MSP services is a potentially challenging activity. The basics are not hard: You have to establish your value proposition, generate leads, nurture them, follow through on sales, and so forth. To succeed, you may have to differentiate yourself from the cloud service you plan to offer.

A further difficulty has to do with the fact that the cloud is neither new nor unique. You’re entering a crowded market in which almost every sales prospect will already be using some cloud services directly. To break through and win business, you have to establish why they need an MSP to handle their cloud services.

Identifying Your Target Market

One way to overcome the challenges of cloud marketing is to identify your target market and position yourself in a way that your advantage becomes clear. The MSP market tends to reward specialization, so if you think you have the best fit with midsized manufacturers who need cloud enterprise resource planning (ERP) software, then you should build your competencies to meet the needs of that target segment and focus your marketing efforts on them.

Effective Marketing Channels for Cloud MSPs

Cloud MSPs can benefit from a channel marketing strategy. This is not always clear cut, as some of the major resellers are channels for their own MSP services, but it is possible to find cloud service providers that sell their own products in tandem with MSPs. That could be you.

Sales Strategies for Cloud MSPs

Selling cloud MSP services will be a departure from traditional MSP sales. Some of the core processes are the same, but the tactics and prospect dialogues will be quite different.

Crafting Your Sales Pitch

A cloud MSP sales pitch should be rooted in your core value proposition, core competencies, service portfolio, and target market. It might pay to conduct some research on the common pain points affecting your target segment and gear your sales pitch toward a solution. For example, if manufacturers are unhappy with a cloud ERP solution because it doesn’t integrate with Microsoft 365, then that’s a problem you can solve and shoot to the front of the line.

You will also likely have to address concerns about security and data ownership up front. Clients are less worried about these issues today, given the prevalence of the cloud, but they will want to know how your MSP will handle them. Pricing is a further point of difference, too.

Figuring out how much to charge for cloud MSP services is a balancing act. Cloud prices tend to be lower than what you’re used to with traditional on-premises managed services, and you have to pay the cloud provider on top of that. Be sure to choose a cloud service provider that can provide a healthy margin to your business without pricing out your potential customers.

Navigating Negotiations and Closing Deals

Negotiating deals and closing business as a cloud MSP depends on understanding where you add value and how you solve customers’ problems. This is elementary in sales, but if you’re new in the cloud MSP field, you’ll have to feel your way through it in the beginning. You’ll have to do some good quality listening and learning to hear when the client demonstrates that he wants your MSP, rather than the upstream cloud vendor, to manage the service.

Cloud Storage Built for Service Providers

If your MSP business is still concentrating on traditional on-premises work, maybe it’s time to think about becoming a cloud MSP. It can be a path to growth and a scalable new direction for your business. Plus, your customers are already heading in that direction, so the cloud MSP route may be obligatory if you want to stay in business. Not that the shift over to cloud MSP will be easy; you will have to revamp your service offerings, staffing, legal agreements, marketing, and sales processes.

The good news is that you will not be alone. Many cloud vendors have partner programs that help you get to where you want to be. Wasabi’s MSP program, for example, offers tools, training, and products that enable MSP partners to thrive and grow by selling cloud storage and backup services. The Wasabi Account Control Manager enables you to manage multiple client accounts through a single interface. Many cloud vendors offer comparable programs. With their help, and your own hard work, you can successfully transition to being a scalable, growing cloud MSP.