Cloud hosting platforms for business are booming. From the SMB sector to enterprise clients, VMware, AWS, and Azure are seeing record gains. These are variously parsed out into the many XaaS offerings, such as IaaS (Infrastructure as a Service), SaaS (Software as a Service), and DaaS (Desktop as a Service), depending on the customer’s individual needs.

This is where the traditional Managed Service Provider steps in. Usually operating as small businesses themselves, with expertise levels of varying degrees and offering support for specific offerings or platforms, the Managed Service Provider adds a service layer to these products, which are often boxed with minimal support. The big fish have simply decided hosting and product development is where their bread is buttered. Providing the high levels of support to, say, run a construction firm, or manage a hospital, is not scalable for their purposes, and will take a sizable bite out of profits.

For the traditional Managed Service Provider, who up to 5 years ago may still have worked with legacy hardware onsite only, this presents a tremendous opportunity to provide expert level service, whether by providing application layer expertise, designing a custom IT infrastructure to be a business driver, or in providing escalation and support to existing in-house IT for their environment.

So far, so good.

What causes many Managed Service Providers to shut down in this volatile market, however, is an inability to make this opportunity into a scalable business model. Traditionally, with in-house support, expertise with the server, the software, and networking might have done the trick. Now, things are a little more complicated. Applications have diversified. Businesses run on private, public, and hybrid clouds in a variety of platforms. MSPs have got to mind the gap between new business opportunities and expenditures necessary to accomplish the work. Adding manpower for each new contract simply will not work. If added business leads to narrower gap in profits, you won’t be around long.

“Even as we tout cloud’s scalability for customers, cloud services are difficult to scale for MSPs.”

In the past, MSPs often attracted customers with an “anything you need” approach, acting as consultants, providing comprehensive services to address needs at any layer. In today’s environment, that can be fatal. And the reason is scalability. Even as we tout cloud’s scalability for customers, cloud services are difficult to scale for MSPs. The problems become so complex, the projects are often underscoped, since the tech might have to do extensive leg work to research the solution, or the MSP has to staff or contract for that issue. Adding new Opex for each business opportunity often means revenue flatline.

Eager to build a reputation as experts, today’s MSPs often bite off more than they can chew. To survive, providers have to be more judicious, identifying their core areas of strength, streamlining those into two or three core service offerings, and either passing on other opportunities, a huge no-no in the past, or else drawing on existing partnerships to accomplish the work.

A few steps toward building a scalable service model:

  • Get the right people in house

This is easier said than done, but hiring high character, team-oriented techs with a diverse skill set willing to go the extra mile is essential to long-term success. Skimping in this area will only cripple you in the long run.

  • Pay attention to culture

IT departments aren’t known for being very touchy feely. Enough left brained people in a room will do that. Make sure encouragement, positive energy and communication are in place, and employees know they’re appreciated. The service sector can be nerve-wracking. Make sure the home base isn’t.

  • Identify core strengths

What do you do better than most? In what areas are your service techs most skilled? Security? Applications? Cloud migrations? SharePoint development? Develop a skills matrix and take a look at what jumps out.

  • Streamline services

Recent studies have shown MSPs who fail to do this also fail to remain profitable. Check your CFOs reports to identify the most profitable services. Check with your Account Manager to see what services are currently in highest demand. Balance this with your skills matrix and, voila, you have your two or three core services. This will require some tough decisions on where to cut back and may involve a methodology for solving disagreements in those areas among key decision makers.

Cloud computing helps businesses scale. Make sure your MSP business does, too.