More managed service providers forge into cloud

More MSPs run private clouds and conscript Amazon Web Services to be part of their services offerings.

Many managed service providers (MSPs) that built practices remotely managing and supporting customers’ data centers once viewed cloud computing as a threat to their livelihoods. Now, the most advanced among them are building their own cloud services and, in many cases, conscripting third-party cloud powers like Amazon Web Services into their own practices.

To the end user, some MSP services, like remote machine monitoring or log analysis, might as well be cloud computing, so it’s not a great conceptual leap from the customer point of view, said Doug Toombs, industry veteran and senior analyst for Tier1 Research, part of The 451 Group.

For customers, as long as the services work together well, their point of origin is beside the point. What’s different for MSPs is that they are starting to integrate their own cloud-based offerings with cloud infrastructure from Amazon Web Services (AWS) and other players to offer a complete set of services and solutions for customers.

Independent film studio and distributor Lionsgate, for example, engaged Freedom Open Source Systems (Freedom OSS), a systems integrator and MSP that now pushes integration with AWS as a major new service offering.

“The business loves the flexibility and agility -- my CFO loves the cost savings,” said Leo Collins, executive vice president and CIO at Lionsgate, a $2 billion media company, via email.

MSP puts Lionsgate’s SAP into the cloud

What’s most interesting about Lionsgate’s move into the cloud is that it’s not just doing the familiar list of ideal uses for cloud, like test and development, fancy Web services and so on. It is also migrating key backend office systems, like ERP and its internal SAP environment.

“The most obvious candidates are the most critical applications -- email (in all its forms) and the financial systems (based on SAP). These are the systems that we are working on first,” said Collins.”

Conventional wisdom has so far considered “business critical” applications the worst candidates for cloud because of their sensitivity, complexity and importance. Many businesses that are fine with running Web services or test and development on a public cloud infrastructure have balked at moving regulated data, like financial information, into the cloud.

But Lionsgate feels differently because Freedom OSS does all the work and is on the hook for maintaining compliance, security, uptime guarantees and so forth; that’s the bargain struck with the IT outsourcer. Collins said the SAP move was also made possible by a partnership between AWS and SAP. AWS has similar offerings for Oracle, IBM and other enterprise-grade software, but it hasn’t seen a great deal of adoption.

Collins wants to move as much as he can of Lionsgate’s workload onto cloud platforms, although he said it’s a work in progress. Lionsgate will by moving its SAP environment in stages onto AWS, but Collins is confident in the model. He thinks it’s a natural progression of the market for IT. “I would not think of building my own fleet of trucks and instead use services like FedEx and UPS. Why would I want to build my own cloud when I can use Amazon or one of the competing services?” he said.

Tier1’s Toombs said that user expectations are really the driving cloud for MSPs. Even the most Luddite CEOs and managers are aware that easy, cheap and flexible Web services are now available. They’re looking at their smartphones and wondering why their IT outsourcer is still charging by the year, said Toombs.

“The perception that the customers are starting to get is that they are able to buy everything on a custom basis. The [outsourced] Oracle server might be expected to always run white hot, but everything else, they’re getting used to buying only what they want, when they want,” he said.

MSPs are going to be cautious, of course, because there are still plenty of applications that simply won’t go into a cloud infrastructure or service, like data processing heavily dependant on latency, or older applications with complex or obsolete licensing. End users at many large enterprises are pleased with this new trend, of course. They’ve already absorbed outsourcing and understand that all the hassle of transitioning to cloud computing lies with the service provider.

Of course, MSPs are well aware of the savings and flexibility to be had in the cloud. Some, like Datapipe and Freedom OSS, are folding AWS directly into their portfolio, while others are moving their own infrastructure into the cloud as fast as they can. After all, the better the operating cost for the MSP, the better its margin when it sells services.

Patni presses AWS into its MSP services

Patni Computer Systems Ltd., one of the largest IT outsourcing firms in the world, with 15,000 employees and 16,000 enterprise customers around the world, views cloud computing as the next evolution of its own internal data center consolidation. The company went virtual and runs about 90% of its line of business applications in a private cloud -- it's now in the process of moving about 30% of that cloud into AWS.

“In the last eight months we have started moving much of the dev environment onto the AWS platform,” said Satish Joshi, executive vice president for Patni. Patni started by developing monitoring and provisioning systems based on VMware’s APIs and had managed an eye-popping level of consolidation, he said.

Patni supports 15,000 users on about 80 high-octane servers (two racks) that run 400 virtual machines. It runs an additional 200 legacy physical servers for certain older applications that it’s not convenient to move but which may eventually get phased out. It also runs hosting environments for many customers, many of which are virtualized, but they’re not part of Patni’s private cloud environment.

The firm plans to move about 30% of that cloud infrastructure directly to Amazon overall, and expects the three-year cost to come in at around $1.7 million, a 15% savings over internal operation. While the savings weren’t out of this world, in his view, the real benefits were not in the cost, but in the flexibility a public cloud environment enables.

“There isn't a good way to quantify that, but what you gain is definitely a benefit. … Our internal provisioning time used to be days; that has now been cut down to less than a day,” Joshi said.  Patni has been in operation for more than twenty years, and he said the biggest headache in the move to a hybrid cloud platform was standardization across what was practically a living history museum of IT hardware. “We had all the vintages of server hardware, all vintages of networking gear. There was a lot of standardization we had to do,” he said.

Joshi said Patni’s move to cloud was really driven by the need to stay ahead of its customers, who were also clamoring for next-generation platforms. By now, he said, most of its customers will have done some kind of virtualization and some streamlining and now wanted different types of service. “Probably the biggest change has been in the nature of the engagement,” he said.

Of course, there are always tradeoffs. Patni and other MSPs love the flexibility and utility of cloud, but it’s remote; and for a global organization, that is a critical issue. Joshi said that careful planning and study are necessary for anyone venturing into the cloud.

“Part of this migration plan actually includes increased spending on communication infrastructure. If the expansion of communication infrastructure was not required, the saving would have been much more dramatic,” Joshi said.

Let us know what you think about the story; email Barbara Darrow, Senior News Director at [email protected], or follow us on twitter.

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