2 important ways MSPs can profit when selling cloud services

Richard Tubb

The move to cloud computing has impacted many IT solution providers and managed service providers (MSPs). Traditionally, solutions sold to customers would involve them making an upfront capital expenditure (CAPEX) investment in hardware or software – which the MSP would make a 20%+ margin on – plus profitable time and labor charges.

The shift to cloud-based services has removed much of the need for (and profit margins associated with) new hardware. It has also virtually eliminated the need for customers' CAPEX expenditure on software (again removing more profit margins for the MSP) and typically may appear to need little in the way of time and labor charges to implement.

So, how do MSPs make a profit when selling cloud services? Here are two important things to remember:.

Wrap services around products

One of the most common assumptions by MSPs is that it’s too difficult to make money providing services and support for cloud services, as the cloud vendor themselves does all this as part of their offering. This is understandable as cloud vendors such as Microsoft and Google typically make deployment of their services relatively simple, providing ongoing maintenance and including technical support as part of their costs. That being the case, why would one of your MSP customers pay for your time and expertise to help them with these services?

Well, while you as an IT Professional may think that Office 365 is relatively easy to deploy – your client doesn’t necessarily share that thinking. Modifying MX records and changing DNS entries isn’t for the faint hearted – especially when the continuity of their critical business services is at stake. You should consider charging your client for deployment services and migration from other solutions into the cloud.

Similarly, while cloud services such as Google Apps are relatively easy to maintain, your clients don’t want to learn which dashboard they need to access to add a new user, or change a password. They want to have the easy answer of contacting you to make things happen for them. Importantly, they also want the peace of mind of knowing that if anything goes wrong, then their IT people will have their backs.

Up sell additional services

In a similar vein, most MSPs assume that because cloud services, such as Google Apps and Office 365, come with in-built backup and security solutions and that the customer is happy they are safe and secure.

While it’s true that Microsoft provides backup for Office 365 solutions, when your customers spot an issue they want immediate help. For instance, if one of your users deletes a critical email, they can restore a backup – provided they spot the mistake within 14 days. But what if the important email was from a month ago, or even a year ago? This is where the MSP needs to offer full continuity for email service – even for cloud based email clients such as Office 365. This can enable them to generate lucrative recurring revenue.

There are other additional services MSPs might want to consider too:

  • If the customer is moving to the cloud then their Internet connection may need upgrading  and redundancy adding (perhaps via bonded ADSL) to avoid costly downtime. 
  • Services such as Google Apps are backed up by the cloud vendor, but these backups won’t protect against entire user account deletions or other user errors. Services such as Spanning Backup allow MSPs to add an additional layer of backup that will protect the user and provide recurring revenue opportunities.

It’s worth remembering that most of MSP customers will still work from a Desktop PC or Laptop that will need an antivirus solution, monitoring and maintaining.

Conclusion

The move to cloud services can be a challenge for MSPs. On the surface, the traditional way of making money – through time and labor, and margins on products and services – are no longer applicable. But the move to cloud services needs a change in thinking from MSPs. There is money to be made in deployment, migration, ongoing support and up-selling a raft of additional services.

In short, the move to the cloud doesn’t mean clients no longer require a managed service – it’s just that managed service might be different to the one MSPs are used to providing.