Microsoft, Google and Amazon are all chomping at the cloud market - problem or opportunity for MSPs?

The Very Hungry Caterpillar is a favourite book in the Saunders household. My two eldest sons used to love it, and more recently my two year old son now demands I read it every evening. He corrects me on most of the items the caterpillar eats ("No daddy it's not a gherkin it's a cucumber!"), but I'm fine with that. When you read a book so many times, you can't help thinking about it in other contexts, and it's occurred to me recently that most service providers involved with Internet technology (call them ISP, MSP, whatever) are going through the same evolution that the caterpillar did.

Most businesses have to deal with change, but as I've written before in From ISP to MSP, the MSP industry leads the field when it comes to the pace of change. Much of this is down to the rate of development of technology and the insatiable demand our customers have to consume this technology, but much of this is the MSPs own desire to broaden its portfolio and capture more of the potential spend of its customer's IT budget.

Like the newly hatched caterpillar, most service providers start with something simple and grow by doing more of it (one strawberry, two apples), but growing is expensive, and once outside investors get involved, the hungry caterpillar develops a real appetite. This is the stage I think most of the service provider market is in right now, the innocence of the early days has gone, and the urge to grow faster and faster has resulted in many service providers branching out into non-core areas of business like building huge assets of data centres. Some MSPs will argue that building data centres is a necessary, core area, but I disagree. The clue is in the name, service is what a service provider is all about, not assets (well not of the financial/physical kind).

I have some sympathy with the argument that when you cannot buy something elsewhere you need to build it yourself. If your core proposition is about having a data centre somewhere remote, it makes sense you have to build it. Up until recently this has been true of server infrastructure, within which I include servers, storage, server networking etc. It hasn't been possible for a service provider to buy this kind of infrastructure in a cost effective way, so everyone built their own.

Everything is about to change, and this change is going to be huge, both for the MSPs and the customers they serve. The three big cloud infrastructure companies, Microsoft, Amazon and Google are starting to understand that partners, and in particular service providers hold the key to opening up a huge chunk of the IT market place, and are now finally putting into place partner programs that allow service providers to buy infrastructure in the way they need to, in order to better service their customers. It's by no means perfect yet, but the last 12 months have seen a dramatic change in billing and support models, and the cloud infrastructure companies have even hired the odd partner account manager or two…

So where does this lead the hungry caterpillar service provider? Well for some this is the best news they could possibly want. They have one less thing to worry about (data centres, servers and storage), and more time to focus on service. For others though, this is a huge threat to their business models. Going back to the greedy caterpillars, to grow fast and stay profitable you have to make some big bets, and for most that involved building some seriously big data centres full to the brim with kit, written off over 15-20 years or more. You aren't going to want to host on Amazon or Azure if you have a data centre which is thirty per cent full with ten years if life left in it. But can you also afford to keep up with the big three?

So right now, we have some caterpillars eating fresh green leaf and focusing back on service again, and some greedy caterpillars still eating cake and gherkins. Depending on the sorts of services businesses need, MSPs might need to mix their own infrastructure, while partnering with the big three. Whatever approach they take, they must emphasise customer service. Who turns into a beautiful butterfly only time will tell, but my bet is the caterpillars who get two greedy and rely too much on their own infrastructure will end up being eaten by the hungry sparrow, or is that an analogy too far?

Written by Martin Saunders - Corporate Development Director

Martin has over 16 years’ experience in the Service Provider industry, with particular expertise in internet technologies and high availability network services. He joined Claranet in 2006 and previously worked as Claranet's Product Director where he had responsibility for the company’s product strategy. Recently Martin has moved to an exciting new role as Corporate Development Director.

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