Originally published in MSP Today

The radical transformation of the IT industry shows no signs of slowing down. Cloud is the new default model for nearly all service, from real-time voice, messaging, and video to hosted ERP, CRM, web and mobile apps, and cybersecurity solutions that protect assets from the core to the edge.

Now, after two decades of cloud innovation, trillions of dollars invested, more computing power than we could have imagined, and blazing fast networks as 5G, WiFi6 and other network protocols become readily available,  the impact of the consumption model is settling in when it comes to CSPs and MSPs bringing IT and OT services to their end-customers.

No longer bound by technical debt, as the notion of an “IT closet” and multiple types of purpose-built servers has long been written off, there is no reason for any business , regardless of size, to have to hire an IT staff with wide-ranging skills and certifications. Nor do they need to pay for equipment, maintenance and other traditional expenses.

Ben McGahon, founder and CEO of Kalibr8, a cloud optimization platform, software and services company, has seen it all, having built and grown MSPs. He recognized the impact cloud would have early on.

“We are still in the early days, and there is more confusion around the definition of cloud services, the cost of cloud, and the way cloud is sold, consumed, and governed is perplexing to say the least,” McGahon said.

“When we set out to build our solution, we did so with the benefit of having to figure out how to migrate IT services to the cloud, one by one, until even the most high-stakes enterprises became comfortable with the very idea of blending public, private and hybrid clouds for different applications,” he explained. “For vendors and value-added-resellers, the speed at which data centers, servers, software, security, applications and networks evolved was nearly paralyzing, in part because legacy approaches were in their DNA and in part because it was daunting to imagine having to run their business supporting on-prem and cloud-first offerings.”

Today, B2B cloud marketplaces are streamlining and simplifying the ability to discover, test drive, provision and deliver the entire range of IT services. A growing range of OT services, including smart building, sensor-based solutions that are supported by edge networking and edge-to-cloud connectivity, make it possible to get much more work done remotely, for less cost, and with bigger and better business outcomes.

“We work with distributors investing billions in marketplace innovation and development, with venture capitalists and private equity firms happy to throw billions of dollars into maturing and consolidating regional cloud marketplaces into global providers who are giving MSPs more options than a handful of hyperscalers,” McGahon said. “This is further driving up cloud consumption, especially when the most advanced B2B cloud marketplaces make it easier than ever to run an MSP business, including adding integration and automation of PSA systems. The ability to truly understand what cloud services really cost, from one end of the supply chain to the next, is growing even more complex, which is causing havoc, especially when cloud invoices come in and the MSP – and their customer – says, “What? When did this happen?”

IT Channel experts at Canalys forecast cloud marketplaces will deliver $45 billion in revenue by 2025 and grow by a CAGR of 84%, and top analyst Jay McBain recently wrote that, “Distribution is going through a massive transformation, with market consolidation and new ecosystem-friendly services to help partners. New distributors, such as Pax8, Sherweb and NEXTGEN, that focus on cloud software have grown significantly while avoiding legacy supply chain, warehousing and capital/credit value adds. Finally, we have technology solution distributors in the telco space, such as Telarus, Avant, Intellisys and AppDirect, which are very active in M&A and crossing over into IT distribution quickly.”

McBain also explained that moving from margins to multiplier language is the first step in engaging with the on-average seven partner businesses need for full-stack IT and OT support. In writing about the evolution of channel ecosystems, McBain said, “Every partner now crosses over several different motions – segmenting your partners by type no longer works in an ecosystem model. Every person inside each of these partners is unique in what their onboarding, training and competencies need to be to drive success. Your ecosystem model needs to be delivered in a single global program but executed at an individual level.”

McGahon said that the wave of the future across all cloud-first, cloud-only, and cloud-to-edge and edge-to-cloud data rich real time services is “integrate, automate and accelerate. There is no reasonable way to optimize MSP revenues and profits without intelligent overlays that help measure the cost of services sold and the margins that stack up in the supply chain. In a perfect world, every service sold would carry with it full transparency and levers that would automatically scale consumption up and down, depending on the time of year, new business initiatives that require more compute, new customer experiences that bring people together online in real time, and increasing adoption of building automation and IoT, for example.”

McGahon also said that hiring more people to look after a completely new mix of expenses can wipe out any gains, and believes that over the next few years, while the consumption and costs of cloud services won’t exactly be on autopilot, “We definitely believe the best MSPs operating platforms will be akin to assisted driving. Companies like Pax8 are disrupting how MSPs run their business, by clearing the paths between provisioning licenses and services from vendors to marking those licenses and services up, delivering them directly to their end-customers, and billing those customers on a single invoice once a month. They are growing extremely fast because they are doing a service for MSPs that all MSPs will need at some point in order to compete.”