Traditional MSP Crosses the Line in Cloud Services

Many traditional managed service providers (MSPs) are still finding their place in the cloud, but others have made significant progress. As the cloud becomes mainstream, how are regional MSPs faring?  

One regional MSP serving the Carolinas and Georgia, VC3 Inc., was an early adopter of the cloud. "I believe we are ahead of the curve in the cloud managed services business," said David Dunn, CEO of VC3. "Last January, we crossed the line of 50 percent of managed services revenues coming through our private cloud offering, and we're pushing 60 percent now." 

The More Things Change, the More They Stay the Same
Through a private cloud managed services model, the VC3 datacenter hosts its clients' software -- from Exchange to line-of-business applications. "Private cloud looks a lot like the traditional managed services model to the customer," Dunn said. "But we also offer mobility and other features that the midsize customer can only afford to do through a cloud model."

From the 80-person MSP's perspective, the biggest change has been the change in revenue composition. "In the traditional managed services model, you could count on 30 percent of revenue being project-type work. With project and hardware costs, you would never get about 70 percent in recurring revenue," Dunn explained. "With private cloud, you are no longer doing project work at the customer site. It's all built into the price, so we're getting into the 75 to 80 percent recurring revenue range."

Otherwise, the operations of the business in terms of customer support and employee responsibilities are largely unchanged. Telephone and Web-based support that were established over the past several years have served well through the cloud transition. IT professionals still go to customer sites to address user-device issues and deliver consulting services. 

Pure Cloud Versus Regional Providers
For many traditional MSPs, the concern in diving into to the cloud has been the prospect of going head to head with pure cloud providers. Different cost structures and revenue models make competing on price impossible.

Dunn sees plenty of competitive advantages for the regional MSP. "The differentiator between traditional MSPs, like us, and the pure cloud providers is that we do have a hands-on presence at the customer. We take responsibility for things on the client side. Even though we are moving our clients to the cloud, we still provide a client touch."

VC3 focuses on several vertical markets that allow it to differentiate through industry knowledge, as well. A significant portion of its private cloud clients need support for their line-of-business apps. Through familiarity with industry-specific applications, the VC3 engineers can solve issues faster than the clients can do it themselves.

Opportunity in 2014
In addition to focusing on execution of the current model, Dunn sees opportunity for 2014 in data security. The proliferation of devices and transportability of data exposes organizational data to more risk. Businesses are just starting to understand the implications of losing control of their information.

"There are some bad practices out there regarding sensitive data, so there is a big opportunity to help customers manage their overall data security," Dunn noted. "From a best-practices perspective, as well as through the tools and technology, we can help clients improve their processes to reduce risk."

The Cloud Realized
As the cloud goes mainstream, it's good to know regional partners are still finding success by building on the basics. Customers are benefiting from centralized hardware management, but still appreciate a knowledgeable hands-on approach. Adding a vertical component to a regional practice adds value to the service equation and differentiates the business. Not the stuff of headlines, but the promise of the cloud is being realized.

How has the cloud impacted your business? Add a comment below or send me a note and let's share your story.

Posted by Barb Levisay on January 09, 2014