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CompTIA: Service providers grapple with cloud

A decade into cloud computing, many managed service providers are taking a less-than-aggressive approach to this widely adopted technology.

According to CompTIA’s fifth annual Trends in Managed Services report, published June 29, 44% of the 400 U.S. MSPs surveyed only support cloud services when requested by a customer to do so. That’s a fairly tepid embrace of a computing approach that has seen broad endorsement among businesses of all sizes.

Carolyn April, senior director, industry analysis, CompTIA, said she was surprised by the number of service providers that only provide cloud offerings when asked — particularly at this stage of the market’s evolution.

“That is really, to me, pretty shocking,” she said. “[Cloud] is an inevitable part of the way the IT landscape is going. It should be part of their portfolios.”

Amazon Web Services launched its Elastic Compute Cloud service in 2006, setting cloud computing on the path to mainstream technology status. IDC reported earlier this year that 70% of small businesses and 90% of midmarket companies, both important sectors for MSPs, now engage with the cloud.

Quite a few service providers, however, appear to view the cloud with a good deal of trepidation. The CompTIA study asked MSPs what issues kept them awake at night: Cloud ended up the No. 1 concern, with 62% of the respondents pointing to the technology.

When cloud computing first emerged, most channel companies, MSPs among them, were concerned that the cloud would put them out of business, April said. She said some MSPs may still have that fear, but noted the larger percentage of service providers now worry about where they fit in the cloud and how their companies can maximize profit and growth. Indeed, generating money from the cloud has been a struggle for MSPs.

“They are trying to figure out what their role is with the cloud,” April said, noting that role can range from cloud consultant to cloud reseller to cloud aggregator.

On the other hand, cloud has caught on with a bit more than half of the companies surveyed. CompTIA said 54% of the MSPs provide cloud-based offerings and services as a strategic part of their businesses.

Beyond cloud, another top worry for MSPs is the perennial issue of margin erosion, with a little more than half of the companies surveyed identifying that concern. April said margin pressure has intensified in the last five years as the MSP space has begun to commoditize. She said commoditization has come more quickly to the MSP space than other markets due to price competition among service providers.

April said some MSPs price their offerings to undercut their rivals, but fail to take the longer view. She said savvy MSPs know how to price for the value they provide, while others price simply to win the next deal at all costs.