5 Challenges and Tips for Cloud Managed Service Providers (Cloud MSPs)

Jul 23 2015 | by Vittaly Tavor

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Many cloud-based MSPs act as cloud service resellers and provide their own integrated cloud management and support services. Handling multiple cloud consumers, MSPs need to centralize their management in order to report cloud costs for each of their clients while achieving cloud operations efficiency. As important players in a growing market, cloud MSPs need to overcome a few challenges to ensure their success. In this post, I’ll share five of these challenges and offer tips on how to tackle them.

Current Challenges and Tips for MSPs

Challenge #1: Charging Clients

MSPs bill their customers by invoicing them based on chargebacks. Cloud vendors charge MSPs, who in turn need to perform chargebacks based on the specific usage that is allocated to each of their clients. Moreover, MSPs need to keep track of their own service charges. In order to achieve all of this without losing control, MSPs need to have a single-pane-of-glass view that includes their clients’ cloud usage and additional service charges.

MSPs aren’t that different from large enterprises in the sense that they need to use resource tagging to engage in cost allocation. Both need to segment each business unit or client according to cloud usage. Continuously tagging provisioned resources and services per client will allow for automated dashboard reports, and by having a tagging policy across a cloud environment, MSPs can cost allocate resources per client and provide detailed reports. These tagging policies generate transparency, as well as happy clients.

Challenge #2: Maintaining Cloud Efficiency

MSPs need to reassure clients that they’re partaking in effective cloud service usage. Initially, clients may not know which resources to choose or the amount that they need, like instance types or disk storage size. MSPs need to assist their clients with proper resource allocation and sizing.

It’s possible to use Cloudyn’s sizing recommendations that highlight resources that are insufficiently utilized. In addition, leveraging reduced cost capacity such as AWS’ Reserved or Spot Instances is crucial. MSPs can optimize their client’s environment (as well as their own) by learning about usage trends and SLAs. By doing so, they can enjoy economies of scale and exchange resources between customers.

Challenge #3: Choosing the Right Cloud

If a client wants to roll out a new project, MSPs are expected to analyze and recommend or even decide which cloud vendor and services to use. MSPs need to know about various cloud offerings, as well as present cost performance analyses to their clients.

MSPs need to gather as much information as possible about upcoming projects and assess which cloud providers best fit their needs (e.g. region, compute type, products and services). It’s also possible to move to a private cloud after a project is stable. If so, MSPs need to assess the necessary capacity and find opportunities to leverage redundant or low resource utilization in order to consolidate and create more capacity for new projects.

Challenge #4: Reselling and Maintaining Margins

The cloud is changing traditional reselling methods. Whereas in most cases, reselling hardware includes benefiting from high margins and vendor exclusivity, it is known that in the cloud, MSPs’ reselling profit margins decrease over time. In addition, MSPs are expected by their customers as well as by cloud vendors to not charge more for a public cloud vendor’s specific resource unit cost, which can be quite tough as service brokers and resellers.

Luckily, there are a few mechanisms that help MSPs profit from cloud vendor services. First, they should leverage volume discounts and credits that they receive from public cloud providers. Second, they should leverage RI capacity (more specifically with AWS) and resell it at the same price or for a little less than what is charged for on-demand capacity. Third, MSPs need to keep a high margin on their value added core services, such as cloud integration, monitoring, and support.

Challenge #5: Optimizing Cloud Usage While Preserving Operational Metrics

Professional MSPs should always be sure to optimize their clients’ cloud usage while preserving operational parameters, like response times and SLAs. However, challenges may come up in some cases, such as downsizing. Cloud optimization costs need to be aligned with SLAs, without harming the required operational parameters.

In most cases, cloud MSPs are responsible for building and maintaining a cloud. It is recommended that MSPs resize while monitoring to make sure that operational parameters don’t decrease so as to avoid downtime and a lack of disk space. MSPs should perform thorough tests on how systems react to these changes before applying them in production.

Final Notes

MSPs have great challenges to overcome when managing cloud environments, and must provide their clients with exceptionally trustworthy and efficient services. MSPs should leverage the cloud’s flexible nature to prove that their clients’ environments are efficient at any given moment. Otherwise, they risk wasting resources, finances, and ultimately, losing clients. If they’re successful in overcoming these challenges, cloud MSPs can play a significant role in cloud adoption, increase trust in their services, and broaden their core IT management services.

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