Cloud Cost Optimization Opens Doors for 2024 MSP 501 Winners

Cloud services play a big role in the business plans of the 2024 Channel Futures MSP 501, with 89% saying they sell cloud storage and 81% selling software as a service or cloud backup. With many of their customers looking to optimize cloud costs, managed service providers see that as an area where they can become more trusted advisors.

Recurring cloud services made up 11% of the revenue from the 2024 MSP 501, fourth behind managed services, hardware reselling and professional services/project work. That was slightly down from 2023 when recurring cloud services represented 12% of MSP revenue.

When asked to list their three biggest gainers of 2023, both SaaS/cloud backup and cloud storage drew mentions from 16% of the 2024 MSP 501. When asked to forecast top gainers for this year, 15% listed SaaS/cloud backup and 14% said cloud storage.

Those slight drops give credence to industry speculation that organizations are taking a hard look at their public cloud spend while not yet repatriating data in large quantities. At the same time, those cost-saving initiatives open the door for MSPs to help out.

“Cloud cost management is becoming more of a topic that people are talking about, because they might have purchased that during the pandemic during haste,” said Marcial Velez, CEO of Xperteks Computer Consultancy. “Maybe now if they didn't configure it correctly, it's costing them a lot more than they anticipated. And they're now looking for cloud cost management, to see if they continue using that solution, or they may be thinking about bringing it back on prem.”

Related:2024 MSP 501 Webinar On-Demand: Business Insights from Top MSPs

Velez said his customers haven’t brought everything back on-premises, but “the conversation is starting at, ‘Do we continue to do this?’ This year I'm seeing several markets ... pull back a little bit on cash liquidity, and spending is starting to slow down a little bit. So now everybody's more cost-conscious. And cloud computing is a multiyear commitment. Now you're saying, ‘Hey, are we currently spending this much? And are we going to continue to spend that much? Can we do it for even less?’”

Mark Nelson, VP of managed services for 3Cloud, said the MSP has a thriving Microsoft Azure business with a strong adoption rate. Customers are still moving custom applications and increasingly running artificial intelligence in the cloud, and looking for support there. Yet he also sees 3Cloud customers who seek a better grip on public cloud costs.

3Cloud's Mark Nelson

“What we saw in 2023 was the clients’ focus on efficiency and cost management,” Nelson said. “In the previous few years, clients were in growth mode. I’m not saying they weren’t focused on costs, but maybe it wasn’t their top priority because of the velocity of the business. This last year a portion of our clients either had a tough year or they’re being pushed to find cost savings. So we spent a lot of time with clients on the spend-management program that's part of our core cloud managed service offering.”

Related:Channel Futures MSP 501: Top Managed Service Providers 2024, 501-451

Nelson said 3Cloud helps clients find the best licensing programs to save money, such as buying reserved instances with a longer-term commitment.

“We’re also looking at whether the architecture is scaled correctly, or is it scaled too high?” he said. “We're helping implement tagging programs to track costs, trend reporting, helping them really understand costs. On a month-to-month basis, we're providing clients with recommendations on how to effectively use the cloud. We were able to retain many of these clients and make sure those who were really looking for cost-cutting to have the most efficient Azure cloud environment. So we see cloud adoption really continuing to be strong, but clients want to make sure that they can really do it cost effectively.”

Omega Systems CEO Mike Fuhrman said cloud optimization opens the door for MSPs becoming strategic advisors.

“We are starting to see the beginnings of people realizing they made a mistake of with a one-size-fits-all solution where everything moves to Azure, everything moves to AWS,” he said. “They’re selectively choosing to bring pieces back for performance, for security, for cost reasons.

“And that's where being an MSP at our scale and capability set allows us to be strategic advisors to those customers, and really guide them on making those right choices," he added. "We don't really care where the solution sits because we manage it wherever it goes. And we talk about meeting that customer wherever they are on that journey.”

MSP Ensono sees a different opportunity for the cloud.  As part of small group of AWS mainframe modernization partners, Ensono combines modern hyperscale compute with the venerable mainframe. AWS mainframe modernization services can migrate and modernize mainframe workloads to AWS.

Ensono's Marc Capri

“We’re focused on a certain type of enterprise,” Ensono president Marc Capri said. “Our clients operate in heavily regulated industries. Hybrid cloud, which includes the mainframe, is really the platform that runs the global economy. So we will we look at clients and the application state, They want to modernize a lot of the applications that today run on a mainframe, but they want to build systems of engagement that run on a public cloud, a private cloud, it could be AWS, it could be Azure, it could be Google Cloud. We sit in the middle of that. We have great partnerships with AWS and Microsoft to help clients on their journey to a more modern world.”

That cloud-infused mainframe business can become a major growth driver for Ensono this year.

“That is really picking up steam in 2024,” Capri said. “If you think about large banking applications or insurance companies, there are a lot of mainframes still out there.”