MSPs Feel Impact as Google Stokes Cloud War

Google’s new push into public cloud portends to accelerate the already torrid pace of business adoption and force managed service providers (MSPs) to reassert their value to customers – including some who question if they still need third-party support.

The tech behemoth last week announced it’s investing billions for more capacity and enterprise-critical enhancements, declaring its intention to seize market share in a competition now led by Amazon and Microsoft.

But the explosive proliferation of cut-rate cloud services threatens to disrupt many MSPs, with some needing to quickly add cloud offerings and others forced to resell clients on the importance of the managed services relationship in the new paradigm.

“It’s having an impact on our ability to acquire new customers because business owners think they can do this themselves,” said Joe Popper, who still works at the successful MSP he sold two months ago, after 25 years as its owner.

Aggressive marketing for products like Office 365 tout free migration and an average 20 percent savings in IT expenditure. Popper said he’s run across business owners who view the cloud as a means to cut costs by shedding monthly service subscriptions.

“’Cloud’ is one of the very few (IT) buzzwords – other than ‘Internet’ – that the layman understands,” Popper said. “The problem is that they think they can get everything out of the cloud …  But if it blows up, they’re in a world of hurt.”

Cloud Demand Soars

A survey commissioned by Microsoft found that 37 percent of SMBs were using cloud-based apps in 2015, a figure expected to rise to 78 percent by 2020.

Evolve IP’s “2016 North American Cloud Adoption Survey” of business technology professionals, found 86 percent believed cloud computing represents “the future model of IT.”

That survey also found:

David Bryden, owner of MSP Stonehill Technical Solutions in Laguna Beach, Calif., said his customers generally understand that a key component of their service subscription is customized expertise.

“The value we provide has nothing to do with where you store your data or where you get your CPU processing,” he said. “We’re there to look at the business case: What is the need for the business and how can we leverage technology to help them meet those goals in a cost-effective and efficient way.”

Disruption from cloud will be felt most acutely by MSPs that still rely too heavily on obsolete revenue models, Bryden predicted.

“It’s those people who are hardware pushers,” he said. “Someone who just loves to sell their white box solution or make 10 points on a server, that type of thing is definitely going to be challenged.”

Amazon Web Services, with a 31 percent share of the public cloud market, leads Microsoft’s Azure division, which owns 9 percent, according to a USA Today article, citing a Synergy Research Group study. IBM and Salesforce are also players, with 7 and 4 percent market share, respectively.

The market potential is nothing short of enormous. A Gartner study calculated that cloud spending last year reached $175 billion and is expected to surpass $315 billion by 2019, USA today reported.

More Capacity, New Tools 

The war among the tech titans has already triggered price wars and fueled introduction of a constant stream of innovative tools aimed at speeding cloud adoption. All vow to grow their as a service offerings.

Google’s plan to expand its 4 percent market share only intensifies that competition.

“Google is all-in on what we can do for the enterprise,” announced VMWare co-founder Diane Greene, a member of the Google’s board of directors, who was named head of Google Cloud Platform last November.

In addition to $9.9 billion in cloud-related investment during the past year alone, Google officials said they’ll add to their three existing data centers by opening new facilities in Oregon and Tokyo by the end of 2016, and 10 more by the end of 2017.

Among the new enterprise features introduced by Google last week was Google StackDriver, a highly customizable system for cloud monitoring, alerting, incident management and logging, that has interoperability with Amazon’s cloud.

StackDriver allows searches across GCP and AWS clusters from the same dashboard interface, provides detailed visual insights and can alert users when an instance is near capacity.

Other features rolled out include machine learning, audit logging and IAM roles, which allow for granular assignment of permissions to specific cloud-served resources.

“This launch provides the core infrastructure needed for individual Google Cloud services to provide immutable audit logs along with multiple initial service integrations, including Google App Engine, BigQuery, Dataflow, IAM for Projects and Service Accounts, as well as API Credentials,” said a blog post by Brian Stevens, vice president of product management for Google Cloud Platform.

“Audit logs are delivered to the Cloud Console Activity Stream as well as to Stackdriver Logging, from where they can be easily archived in Google Cloud Storage, streamed to BigQuery for analysis, or exported via Google Cloud Pub/Sub to a variety of partners, such as Splunk, for additional interrogation,” Stevens wrote.

Opportunity for MSPs

Amid the dramatic growth in cloud, managed services experts see a silver lining.

The Evolve IP survey found that 53 percent of organizations have deployed a cloud solution on their own. Of those attempting to move to the cloud by themselves, about half said they would outsource the deployment if they could start the process over again.

That’s no surprise to Stonehill’s Bryden, who said setting up and managing cloud technologies can require significant time and skill.   

“I actually know partners who are charging more money for a cloud solution,” he said, adding that his firm does not charge a different rate for cloud work. “I get the logic behind it.”

Tommy Wald sold his Austin, Texas-based MSP in 2013 after 20 years, and now does consulting.

He sees a bright future for MSPs that adapt to the reality of ubiquitous cloud computing and provide customers with solutions and peace of mind through reliable set up and management of their cloud environments. 

“My personal opinion is cloud is a great thing for MSPs,” Wald said.

Successful MSPs must accept the fact that the age of “two guys in a truck” doing backup and network maintenance are gone for good, he said.

“That’s really not where the business is anymore,” he said. “They’ve got be proactive and figure out a way how they’re going to maintain that value proposition going forward.”

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Here’s a video featuring a tour of a Google Data Center: