When asked about a popular restaurant, Yogi Berra once uttered: "Nobody goes there anymore; it's too crowded." In some ways that's the scenario facing the managed services market. Our ongoing MSPmentor 100 research suggests the best MSPs continue to grow rapidly. Anecdotal conversations with MSP software providers suggest sales are growing at a healthy pace this year. And more MSPs are entering the market. Now the twist: As more MSPs pop up it's getting more difficult to stand out in the crowd. Hardly surprising, some MSPs are reworking their branding and company descriptions to emphasize cloud computing. But is that really a long-term strategy or a short-term gimmick? Here's the update.

During the recent ConnectWise IT Nation conference in Orlando, Christian Johnston handed me his new business card. His company, DappleTech, helps solutions providers to "become an MSP Cloud Service Provider." Which is it? MSP or CSP? Maybe both?

Meanwhile, Long View Systems, one of the industry's best-known managed services providers, apparently is preparing a new corporate branding campaign. As part of the effort, Long View has started to describe itself as "a leading provider of IT Consulting, Cloud Services and Outsourcing Solutions." Funny, no mention of managed services there.

Follow the Consumer Cloud

But perhaps that's the point: For more than a decade, many MSPs and software companies have worked very hard to explain the value of managed services to end customers. Now, seemingly overnight, the cloud computing hype has caught on with end customers. Consumer ad campaigns from Microsoft and other big IT companies will further educate SMBs about cloud computing's value. The result: Some MSPs are riding the hype wave and branding around cloud. As long as those MSPs deliver the cloud computing goods, it's hard to argue with the branding moves.

So, will cloud computing crush the managed services market? Predictably, I'm biased and see managed services marching forward. As IPED veteran Ryan Morris mentioned in our comments area on October 15:
In an MSP engagement the terms shift from time+materials to SLA-based … but the essential service is the same: networks are monitored, databases are patched, servers are maintained. The fact that things can be done remotely is a productivity bonus, but not the essential component of the contract. The core agreement with customers is that an MSP will service their IT without being tied to the number of hours of service performed. Outcomes vs. Inputs.
In the move to cloud systems, the change is primarily at the underlying technology level (on-premise systems moving to virtual or off-premise deployments), while the contract for services to monitor / manage those deployments can remain the same. The essential point is that when “hosted” or “public” cloud deployments replace the on-premise infrastructure / resources, they do not eliminate the need to keep those resources up and running.
Morris, now running Morris Management Partners, went on to call managed services a business model, and cloud a technology model. I agree.

Close Cousins

No doubt, cloud computing and managed services are closely related. MSPs already have recurring revenue models in place so many cloud computing concepts are near and dear to MSPs. Not by coincidence, Ingram Micro North America has a single VP -- Renee Bergeron -- leading the distribution giant's cloud computing and managed services efforts.

If you read a lot of the media coverage -- including MSPmentor's -- some stories might make you wary of the cloud. But we need to remind ourselves that there are dozens of cloud options awaiting MSPs. Many of them surfaced earlier this week in the Ingram Micro Cloud marketplace. And during the IT Nation conference, quite a few MSPs described how they are rolling out VoIP, virtualization, online backup and security in the cloud.

So for many MSPs, the cloud is real. (<-- Spoiler alert: That link is a shameless plug.)

But back to the headline: Will cloud computing overshadow managed services? In some ways yes. When CA Technologies acquired Nimsoft earlier this year, the official CA press release mentioned Nimsoft's momentum with MSPs and the Nimsoft's cloud strategy. But much of the high-tech media doesn't pay attention to the MSP sector, so blog sites like TechCrunch and GigaOm played up the cloud computing angle.

Now, some MSPs are following a similar trend, adding cloud computing to their corporate branding efforts because basic remote monitoring and patch management aren't so sexy anymore. And companies like Channel Cloud are calling on MSPs to become Cloud Integrators.

Still, anecdotal evidence suggests the MSP market remains healthy. In recent weeks, MSPmentor has heard from key executives at IBM, Microsoft and CA Technologies -- each of which wants to more closely engage MSPs. Generally speaking, many of the folks at the IT Nation conference continue to describe their companies as managed services providers. And MSPmentor's web traffic has grown roughly 60 percent year to date... suggesting growing interest in MSPs. Or is it growing interest in managed cloud services?

Frankly, I don't care. Either way there's a healthy dialog around managed services and cloud computing. We look forward to documenting new milestones in the months ahead.

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