Is hosted private cloud right for your MSP business?

Mark Cavaliero of Carolinas IT explains how he built a successful cloud services business by spinning out hosted private cloud services.

ORLANDO, FLA. -- At MSPAlliance's MSPWorld 2015 Spring Conference, held here this week, a few hundred attendees learned how to grow, strengthen, improve and measure their business in an ever-changing IT climate. At a breakout session on Thursday titled "How to build a scalable and profitable private cloud practice," about 50 attendees heard the pros and cons of spinning out their own hosted private cloud practice as well as how that compares with reselling another provider's cloud services.

There's no one-size-fits-all answer to the question of whether building a cloud service is right for an MSP business. But there are a lot of questions that any MSP has to answer before going down what could be a very lucrative road, according to Mark Cavaliero, CEO and founder of Carolinas IT in Raleigh, N.C. Founded in 1996, the company had a strong professional services practice, an MSP practice and a 24x7 NOC, and built a cloud practice in 2011 after getting burned by a cloud service provider that offered backup as a service. Today, Carolinas IT is an $8.7 million company with 56 employees. In his presentation, Cavaliero talked about hosted private cloud provisioned to multiple companies that each access the services through their own private network connection.

If MSPs leave cloud out of their portfolio, they'll miss out on a lot of revenue, said Cavaliero, adding that it's important to be able to offer customers options in the cloud -- whether that's Office 365, private cloud or some type of mix of public and private cloud. Carolinas IT offers customers a mix of cloud services.

"If you're an MSP taking on a cloud services offering, it's a great add-on. You have advantages that [vendors] don't have. You have your reputation, engineering, your help desk and you know the client's environment. That's a big thing," he said.

If you're an MSP taking on a cloud services offering, it's a great add-on. You have advantages that [vendors] don't have.
Mark CavallieroCEO and founder, Carolinas IT

Developing a hosted private cloud practice is also a way to differentiate an MSP business, but firms must remember that a cloud services offering is about user experience so it had better be good.

When considering a hosted private cloud practice, companies should get it right from the get-go and learn from the mistakes of others, he said.

Some takeaways from the hour-long session: For starters, MSPs must ask themselves a lot of questions, such as where they want be and how long they plan on staying in the business. Answers to those questions will impact the type of cloud practice buildout. Companies also have to look at factors such as expertise, engineering assets, whether they prefer to buy or lease technology, what capital they have, and what challenges they have in their business.

An MSP firm also has to evaluate its client base: what it looks like today in terms of typical company size, vertical industry, etc., and what it may look like down the road, Cavaliero said.

When it comes to cloud, MSPs have a lot to evaluate in deciding if offering hosted private cloud services makes sense. For example, they need to consider both the reward as well as the risk and liability for hosted clients; and they have to consider opportunity costs, such as dedicating existing engineers to cloud.

On the flip side, a partner could opt to resell a vendor's cloud services. Or they may opt to white-label a vendor's cloud services. Reselling cloud services is a quick on-ramp to selling cloud, Cavaliero said.

However, there are tradeoffs with reselling too. "Many companies do very well reselling, but it's not as secure as if you stake out your own position. There's also less stickiness with the customer," he said. "There's more responsibility with your own private cloud but more control over the customer relationship."

Carolinas IT's value to its customers increased because of its hosted private cloud practice: It grew another revenue stream and built up its brand, Cavaliero said. The company's hosted private cloud offering differs from that of companies like AWS in that the customer has more flexibility and the opportunity to customize its cloud offering for greater control, according to Cavaliero. Carolinas IT manages the customer's cloud and offers 24/7 help desk support.

Not only do firms have to think about what choices they have when it comes to adding a cloud practice, he said, there's also a long list of considerations from liability, flexibility, scalability, facilities and bandwidth, how to bill customers and how to plan cloud migrations, to name a handful.

Once partners tackle the choices and considerations, they move on to a getting-started checklist that includes, among other things, coming up with a documented initial concept of operation, designating teams and roles, setting timelines and milestones, consulting with legal and insurance resources, architecting the cloud, lining up partners, planning sales and marketing strategies, and identifying sources of financing.

Cavaliero gave some additional guidance for MSPs considering building a hosted private cloud practice: pay attention to renewal and warranty costs, don't go cheap, build in fault tolerance, success means that there will be a lot of data, and set up expectations for maintenance windows, for example.

Jason LaPorte, director of information technology at Power Consulting Group, a New York City-based MSP, attended the session to compare notes about his company's foray into a hosted private cloud offering four years ago and that of Carolinas IT.­

"It was an affirmation that we're moving in the right direction," LaPorte said.

Today, Power Consulting offers cloud services such as infrastructure as a service (IaaS), disasater recovery as a service (DRaaS) and backup as a service to its clients.

LaPorte said that his company ran into some of the same issues along the way as Carolinas IT, such as the rapid increase in storage requirements as well as the need to train or retrain engineers. While Carolinas IT has built out a second data center site, Power Consulting is just heading down that path.

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