When cloud computing came into play, IT resellers quickly realised they needed to offer cloud services in order to stay relevant and profitable. Many of these channel players added cloud services to their portfolio of offerings by creating and running their own clouds.
Yet due to the major up-front and ongoing costs in creating and managing cloud environments, these have generally been small, offering limited services and a local footprint.
What many MSPs and their channel counterparts did not realise was how expensive the upkeep would be, not to mention the cost of hiring and training additional employees required to run the new cloud environment.
In addition to the exorbitant cost associated with creating and running these clouds, resellers soon realised their local cloud service also had technical drawbacks.
Specifically, they found that in order to support their global and multinational customers, they needed, for performance, latency and data residency requirements, to have services located in all the markets where these customers operate.
This focus on "global footprint, local execution" is one of the emerging differentiators for cloud - a major hurdle that many in the channel did not initially consider.
Another hurdle that MSPs and channel players face is competition from large public cloud service providers such as Amazon.
These providers are highly focused on competitive pricing and keep their costs so low that other resellers cannot even try to stay at the same price point.
As a result of the drawbacks associated with the creation of their own clouds, resellers are now realising that maintaining their own clouds is not financially feasible.
So we can expect to see big changes in the cloud over the next 12 to 18 months - that is, many of these small clouds that have been created by MSPs and the like are going to slowly shut down and morph into something else.
For MSPs, rather than focusing on technology to build a cloud, Cloud 2.0 should focus on this value chain and creating clearer roles for all of the participants
It is like the traditional manufacturer-distributor-reseller value chain, but for selling services. Cloud distributors will differentiate by providing services in many local markets, so resellers can meet their customer performance, latency and data residency requirements and do so at a wholesale price point.
This will allow the reseller to not only make margin but focus on their value added services, such as consultancy, migration or transformation offerings or ongoing support, which will vary by partner and skill set.
This will facilitate faster entry into the cloud services market, with reduced up-front costs and an ability to add complementary service offerings using particular skills.
Look for white-label offerings to put your own brand front and centre, and to partner with wholesalers whose management capabilities are required to provide strong levels of customer support.
This is the best road to future profitability and growth for MSPs in the coming years. They've already done the groundwork developing and fostering their relationships with their customers, and now they can take the next step to developing a strong and profitable line of business.
John Humphreys is vice president of marketing at Egenera
Robots, predictive analytics and selling without a salesforce: Where the UK's leading MSPs think the market is heading
MSP bosses to share their thoughts on the future of the managed services market
In an interview with CRN, Wendy Mars says Cisco and its partners are no longer having to arm-twist customers on the need for digital transformation
Vendor's announcements include AI-powered Microsoft Office, a move away from password verification and an alliance with Adobe and SAP
Vendor claims hackers are hijacking machines to mine for cryptocurrency