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Reports are starting to emerge that some organisations are bringing workloads from the cloud back to owned datacentres as the benefits of cloud computing they had hoped for have not been achieved. Many MSPs operate on a cloud basis – a massively shared platform serving many clients through shared functionality, partitioning off areas that need security, such as databases and so on, to client-specific environments.

If this is the case, should MSPs be worried that some of their customers will take the opportunity when contract renewals come up to jump ship? I think that is doubtful.

Move to on-premises is limited to specific use cases

My read on the situation is that repatriation is primarily happening in a couple of specific cases:

  • Some of the hyper-scaled clouds including AWS, Azure, and Google Cloud Platform. Here, many workloads are just reproductions of on-premises workloads. For example, organisations taking SAP or Oracle applications and placing them on an infrastructure or platform as a service environment, rather than looking for equivalent functionality available as a service from cloud-native providers.
  • Where cost expectations are not being met. Again, when looking at using IaaS/PaaS services, costs can be become less predictable than hoped for. When payment is based on usage at the individual resource level (bandwidth, CPU, and storage) rather than a per user or per period basis, then organisations can find that their hopes for being able to demonstrate to the business that cloud is saving money, can be blown out of the water.

Therefore, for single function MSPs providing that service on a defined and repeatable cost basis, any thoughts of repatriation can only come down to the customer either being unhappy with your service levels or feeling that the defined costs (particularly when such costs are raised due to energy costs, inflation, whatever) are no longer in line with expectations. These two areas are, to an extent, under an MSP’s control as service levels are something that makes or breaks an MSP. Consistently poor service levels mean that an MSP is unlikely to survive in the market anyhow. Cost issues, when due to outside factors, need to be messaged with plenty of notice and with sufficient detail so as not to surprise or scare the customer.

Simplicity, clear communication, and honesty are key

For more complex MSPs offering a range of functions, then simplicity is still the key to avoid repatriation. It’s important to ensure that prospects building up a list of desired capabilities from the portfolio can see simple costs at all stages, bringing everything together and highlighting discounts they receive for taking multiple services. The same is true for existing customers and MSPs should ensure that if they take on extra services, the impact on their existing subscriptions is detailed, and discounts identified.

When it comes to future price increases, during the past decade or so, most have been low due to low inflation and steady energy prices. As such, customers have tended to be loyal to those MSPs that have maintained pricing within expected limits of a few percentage points. Now, MSPs will have to be careful. Many utility companies now have written into their contracts that there will be a cost increase equivalent to inflation every year. Many also include an extra rise on top of that – something that I do not recommend, as this screams profiteering to the customer. If sufficient profit margin is factored in within the original contract, then that will be maintained even as prices increase.

Also, be honest with existing customers.  As efficiencies increase, with better hardware and optimised ways of provisioning and running workloads, don’t just assume that the resulting savings are all for you. Passing on a part of such extra margin to the customer makes them less likely to move away from you – and is something that they would struggle to attain through an on-premises solution.

Demonstrate technical and business knowledge

Be prepared to sit down with prospects and customers and discuss their needs. Internal IT departments will do this occasionally, but many organisations do not have the internal skills to be able to provide in-depth insights to the business.  Areas such as the evolving security landscape, the use of newer technologies such as microservices and artificial intelligence, while of massive interest to most organisations, just can’t be covered internally. Use the opportunity to demonstrate your own levels of knowledge at both the technical and business levels. Just what could a prospect or customer gain from using your platform when it comes to integrating other functions via microservice APIs? What can AI bring to the game to improve the efficiency and effectiveness of the customer?

Overall, while there may be more headlines and reports covering the repatriation of cloud workloads, many of these will be looking at workloads that should not have been outsourced to the cloud in the first place. However, for those seeing such headlines and not looking beyond them, it could raise questions in their minds as to whether they should be looking at swapping a well-operating, well-priced MSP solution for the unpredictability of an on-premises solution.

Head them off at the pass by assuring them that you have everything required to easily demonstrate why an MSP solution makes technical, business, and economic sense.

Photo: vectorfusionart / Shutterstock

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Clive Longbottom

Posted by Clive Longbottom

Clive Longbottom is a UK-based independent commentator on the impact of technology on organizations and was a co-founder and service director at Quocirca. He has also been an ITC industry analyst for more than 20 years.

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