Challenges for Managed Service Providers in Today’s Multi-Cloud Market

Enterprises are looking to move some of their applications and workloads to the cloud, but do not have the cloud skills they need in-house, presenting a great opportunity for managed service providers. In fact, organizations are looking to move workloads out of their own datacenters with 60% having flat or shrinking data center foot prints[i]. However, organizations are looking for providers and solutions that do not lock them into a specific platform or cloud. This can present challenges for managed service providers and make it difficult to seize this opportunity as they do not have the budgets to invest in tools and platforms to enable mobility.

  1. Expanding revenue without expanding complexity: In order for managed service providers (MSPs) to expand revenues, new services, platforms, and capabilities need to expand as well. For every new platform or cloud service that is added, tools are added as well. This adds complexity in the environment as tools need to be integrated so that workloads, data, and applications can effectively communicate across clouds and platforms. MSPs may consider increasing headcount to support new environments, which can increase costs and cut into revenue increases. MSPs need to look for tools that cross clouds, hypervisors, and platforms, and execute tasks consistently.
  2. Customer Retention: Keeping customers who are trying to avoid lock-in is very challenging. MSPs need to increase customer loyalty by becoming a trusted advisor and helping IT make the right decisions, even if it means a workload moves to the public cloud. MSPs need to enable IT to work with public clouds while helping their customers avoid cloud lock-in. Even if an organization has no plans to move a workload out of the cloud, they want to make sure they have the option to do so.
  3. Participation in client’s public cloud strategy: According to Gartner, enterprises use 4.6 clouds on average for their workloads. Most likely, one is public cloud, which can make it difficult for MSPs as some have no services based on public clouds, and others may have services based on just one. MSPs need to evaluate public cloud and determine the best way to partner, whether it is more as a consultant, or to actually build services that support public cloud. Most likely, enterprises will be looking for an MSP that does both.
  4. Becoming a part of Digital Transformation and IT Modernization initiatives: Many organizations are looking to modernize legacy applications and transform service models to better support business initiatives. MSPs need to ensure they have a transformation offering and services to help with technical and/or business processes. For example, MSPs can look at how to accelerate application deployment cycles into public cloud.
  5. Aligning income and costs: Enterprises love the operational cost model, as they pay a monthly cost versus seven figures every three to five years. However, this means that the managed service provider must spend seven figures or more to have the right infrastructure, platforms, and tools to offer to their customers. Some vendors offer leasing and subscription, but it is hard to find true pay-as-you-use to align to their revenue streams.

These challenges need to be addressed in a multi-cloud environment and in some cases, a cloud-first strategy. MSPs must ensure they engage with enterprises that are looking for strategic advisors to help them select the best platform, infrastructure, or cloud for their workloads, initiatives, and business processes.


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