After years of hyperbole and derision, most technology professionals would now agree that the cloud has moved well beyond the hype curve and is now firmly in the heart of the industry - and will, along with mobile, be the dominant force shaping our sector for the foreseeable future.

Just as the likes of Dell eroded the profit margins of VARs in the late 90's and helped create the MSP revolution, the direct-service SaaS model of products like Office365 promises to disrupt the MSP business model in the years to come.

After working with hundreds of MSPs around the world from my base in the heart of tech disruption here in San Francisco, I've identified a number of patterns that smart MSPs are getting out in front of - while none of us have a crystal ball, I hope these are useful for you and your business!

How the Cloud is Disrupting Managed Services 

The disruptive threat posed by the cloud for MSPs often looks like one of channel conflict - clients being able to go direct to providers who used to work primarily through the channel, threatening revenue share. However, the real threat to an MSP from the cloud is found right there in the acronym - as a Managed Services Provider, the MSP needs to be managing services for the client. The cloud significantly threatens this model, because many aspects of the service are being managed by the cloud vendor.

In the short run this actually works out really nicely for the MSP - they can continue to charge their per-employee MSP fees and know that the fine folks at Microsoft will keep Office365 online and eliminating the familiar hassle of fixing local Exchange server or Active Directory servers. 

In the medium term, however, this is likely to disrupt the MSP model the same way Dell and friends disrupted the VAR business model - with less local servers to manage, the elimination of patch installs and updates and the automation of many other aspects of the tech environment, MSPs are looking at a world with fewer and fewer services to manage.

When combined with increasingly locked-down and disposable technology (smartphones, iPads and the like have much lower management requirements than a Windows workstation of 10 years ago), this erosion of services that the MSP actually manages is inevitably going to put pressure on recurring revenue and margins. Even if clients don't choose to "go it alone" (which would be brave and foolish), there's an increasing opening for lower touch, lower cost providers to give clients a sense that they've got someone they can call - which is going to be disruptive to many MSPs out there.

The Real Cloud Opportunity - the MSP Evolved

While it threatens to disrupt the MSP model in more fundamental ways than just cutting out the channel, the cloud also presents a really big opportunity for IT service providers.

A decade or so ago, implementing technology for most clients looked fundamentally the same. You'd install, configure and manage the Microsoft stack. After setting up Windows Server 2003 and an AD domain controller, you'd then put in place Exchange, Sharepoint, ISA and other bits of the stack on the server side and then configure the Windows XP workstations to use it all. Once you've strung it all together, the focus would be managing the patches, backups and hardware that ran it all.

Comparatively, the process of selecting the right software was pretty straightforward for most clients - the real work came in keeping the Windows machines online, patched and secure. 

The Cloud is turning all of this on its head. Today, the endpoints matter less than ever - they're less homogenous (iPhones, Androids, Windows, Mac, Chromebooks, and others are all in play) but they're also dumber and less relevant.

Conversely, though, choosing and implementing the right solution (and new aspects of managing it) are much more complicated. Should this client be using Box, Dropbox, Google Drive, Microsoft Onedrive or something else for storage? What about CRM? What about accounting? And then, what about connecting bringing them all together? This is a much more complicated process requiring much more expertise, trust and guidance - and creating the opportunity for the next evolution of the IT professional, from MSP to Strategic Technology Partner (STP).

New Opportunities Mean New Tools

Continuum’s success so far highlights this industry shift - the business as usual "service" aspect that has previously been the proudly in-house part of the MSP offering is now able to be outsourced. While this commoditizes these services, the outsourcing allows the MSP to spend more time on what they're especially good at - being the trusted advisors and consultants to clients on an ongoing basis. With the constant changes in the cloud market there's a need to keep a constant eye on how the platforms work together, advising clients on ways to use new features (or whole new products) and adding value in a way which is much more interesting and enjoyable than responding to a 2 a.m. pager alarm.

Compared to the traditional MSP model, strategic technology partners can retain their ongoing contracts and recurring revenue, but they need to be more proactive in how they tackle it. How? By engaging more proactive with clients through projects instead of focusing so much on preventing tickets or dealing with them when they come up. This means using business tools that go beyond the ticket - you need a great CRM to manage your new and existing client accounts proactively, and strong project management that ties in with your recurring billing model. The biggest change with the move from MSP to STP is the focus once again on doing a great job in full view of the client, so you need to have a higher standard to getting things right on projects than you did in the more hidden world of tickets and preventative maintenance.

Projects need to be at least first-class parts of how you manage your business if you want to be successful in 2016. In fact, that understanding is what has driven the explosive growth of our product, Accelo, in the MSP market over the last year. Accelo’s latest integration with Continuum allows MSPs the option of adopting a fully synchronized workflow by combining Continuum’s leading technical tools for MSPs with Accelo’s integrated business tools, seamlessly. Accelo’s Smart PSA allows the thousands of MSPs already using Continuum the flexibility to easily manage all of their client work from one centralized system - taking their business to the next level as a strategic technology partner.