Rise of multi-cloud computing plays to MSP strengths

Posted by Mike Vizard on Jan 26, 2017 3:37:08 PM

MSP strengths.jpegThe rise of public cloud computing has transformed the way most IT organizations view investments in data centers, but it turns out providers of public cloud services are not the only major beneficiaries of that shift.

A new report from 451 Research finds that as of the third quarter of 2016 the datacenter colocation and wholesale market was on track to generate $28.9 billion in annualized revenue. The research firm is predicting the datacenter colocation and wholesale market will top $48 billion by 2021.

That level of growth suggests that while IT organizations may not be investing in building new data centers as much as they once did, they are not moving all their application workloads into the public cloud. Instead, they appear to be applying the IT infrastructure lesson taught by public cloud providers in a way that allows them to maintain more control of the IT environment while benefiting from higher levels of service.

Mastering multiple types of IT environments

The datacenter colocation and wholesale market is fragmented. There have been some significant mergers in the past few years, but there’s no clear indication a handful of providers will dominant the market the way a small number of providers dominate the public cloud today. That means managed service providers will find themselves managing three distinct types of IT environments: public clouds, private clouds hosted in a raft of third-party data centers, and the data centers many organizations have already invested in.

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MSPs that can master all three of those deployment scenarios will have a distinct advantage. As the costs associated with running a specific application workload in one environment begin to change, IT organizations will want to be able to move that workload. For example, it’s generally not as cost effective over time to run an application workload on a public cloud as it is to deploy it on a private cloud once it achieves a level of scale. As cloud computing continues to mature, MSPs can expect IT organizations to start relying more on them to optimize application workload deployments across a multi-cloud environment.

Increased need for managed services

That shift presents MSPs with some investment challenges if they plan to provide those capabilities. But on the plus side, the more distributed the application workload environment becomes, the more likely it is that IT organizations will look for external expertise to manage it.

The size of the MSP market has always been limited by one factor — internal IT organizations have a vested interest in maintaining control of application workloads. Most of them still view external service providers as a threat to their existence. They can’t get along without help from MSPs, but almost all them try their best to portray external service providers as the more expensive option. Of course, the math that supports that contention usually doesn't include all the fully-loaded costs associated with both hiring IT people and giving them a physical space to work.

Going forward, the need to manage IT environments spanning multiple clouds should push many internal IT organizations beyond the limits of their skills. Not only will there be more application workloads than ever to manage; those workloads will be geographically distributed in ways that require 24/7 support.

The cost of IT labor associated with managing IT at that level of scale is nothing if not considerable. MSPs reduce those costs by aggregating them across multiple customers. As the number of workloads increases, it should become much more apparent to everyone concerned that the economics scale used to measure the total cost of IT is starting to tip in favor of the MSP.

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Topics: IT Services Trends

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