As an MSP, you don’t sell Public Cloud; you sell added value

Is there a business case for MSP’s to deliver the Public Cloud?

Public Cloud is a success, and it will only grow bigger in the coming years. It presents an excellent opportunity for the partner channel that adopts the Public Cloud. But that opportunity doesn’t present itself in a conventional reseller model with high margins provided by suppliers. If there is any discount at all, it is more aligned to covering the cost for billing and customer relationship than that it represents a healthy margin where companies can rely on for their existence.

The Public Cloud Multiplier

Instead, the opportunity the Public Cloud offers to partners is all about the multiplier. This multiplier states that with every dollar or euro spent on the Public Cloud, a partner can sell anywhere from 4 to 8 dollars or euros of added services. There is no silver bullet for generating that extra revenue. Instead, this added value is built up as a layered cake, with each layer adding value and generating a healthy margin.

MSP’s need added-value services

So, what type of services should you be thinking of that create that well needed healthy margins? According to a report from IDC*, an average of 66 per cent of Public Cloud partner revenue is generated from their own IP, which can yield as high as 85 per cent gross margin on software and 30 per cent to 50 per cent on professional and managed services. 

Cost efficiency is vital when delivering the Public Cloud

Many conventional Hosting companies that adopt the Public Cloud struggle to change their business model. They lose their current margin on infrastructure services and need to build that layered cake of added value services.

Satya Nadella says ‘upwards of 70 per cent of Microsoft partners may not make it. That’s causing a lot of buzz.’

Successful MSP’s

The ones that are truly successful combine their added value services with cost-efficient automated delivery and billing of their cloud services. They invest heavily in automation and tooling to create a recurring business while cutting out costly and labour-intensive processes.

They have done their homework and worked on the essential checklist for MSP’s that support Public Cloud:

  • People: Have the right skillset 
  • Process & tooling: Enable automated delivery, management and billing 
  • Added value: Create added value services 
  • Business: Focus on recurring revenue

Have you done your homework, or does it need updating? Then start with these essentials to keep your focus on the things that matter.

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* How Partners Are Winning in the Google Cloud Economy: Google Cloud partner opportunity to triple by 2025 | Google Cloud Blog