Gartner recently reported that by 2020, the “cloud shift” will affect more than $1 trillion in IT spending. The shift comes from the confluence of IT spending on enterprise software, data center systems, and IT services all moving to the cloud.
With this enormous shift and change of practices comes a financial risk that is very real: organisations are spending money on services they are not actually using. In other words, wasting money.
The size of waste
How much is actually being wasted? Let’s take a look at the cloud market as a whole. According to the Gartner study, the size of the cloud market is about $734 billion. Of that, $203.9 billion is spent on public cloud. Public cloud spend is spread across a variety of application services, management and security services, and more – all of which have their own sources of waste.
Within the $22.4 billion spent on infrastructure as a service (IaaS), about 2/3 of spending is on compute resources (rather than database or storage). But roughly half of these compute resources are used for non-production purposes: development, staging, testing, QA, and other behind the scenes work. The majority of servers used for these functions do not need to run 24 hours a day, 7 days a week. In fact, they’re generally only needed for a 40-hour work week at most (even this assumes maximum efficiency with developers accessing these servers during their entire workdays).
Since most compute infrastructure is sold by the hour, this means that for the other 128 hours of the week, companies are paying for time they’re not using.
Should managed service providers (MSPs) help in reducing this waste? If so, how?
Cost reduction as an element of total value
The concept of an MSP helping customers save money on cloud services is a tricky one. If customers purchase cloud services through the MSP, won’t reducing the amount the customer spends also reduce the MSP’s revenue? Besides, is “saving money” really an outcome customers seek from their service providers?
I’ve been grappling with some of these questions lately as I’ve considered potential partnerships with MSPs and cloud consulting firms. When I talk to them, I ask questions about their clients’ key priorities and how they seek to deliver additional value.
I pay particular attention to how they prioritise helping their customers save money. It appears that while cost reduction for clients is seen as important, it is often framed as a way for users to get more bang for the buck – not as a reduction in total spend. MSPs report that their clients typically have annual budgets that can be spent across all cloud or IT services. Therefore, staying within budget across all services is the primary goal. But any dollar saved on cloud compute services can then be put to work in other areas of the business. This keeps the end user satisfied by giving them more value per dollar. The MSPs are satisfied by providing more, and stickier, services to their customers.
In addition to cost savings, MSPs want to deliver productivity gains to clients. This can be done by directly implementing solutions on clients’ behalf. Increasingly, however, MSPs prefer to put tools in place that their clients can then use to optimise their own cloud infrastructure. Many small businesses don’t have the technical expertise necessary to migrate their technology infrastructure to the cloud, though once they are up and running, they are often able to self-manage parts of their own infrastructure.
As one MSP recently told me, “we could probably write custom scripts for our customer to turn things on and off, but that really doesn’t scale. To be honest, I think they would prefer controlling their own environment.”
The key to MSP success in the cloud
As the role of the traditional MSP continues to evolve, the most successful providers increasingly seem to understand the following:
- Helping customers optimise their cloud spend is very important
- Providing customers with self-service tools to better self-manage their own cloud environments is key to sticky customers.
Although there will be many goals against which MSPs and cloud consultants are measured, it seems clear that reducing/optimising cloud spend and empowering customers with the right tools to manage cloud are two side of the same coin and a real key for MSPs to succeed.