Software as a Service (SaaS) development is driving IT evolution and the demand for nextgen MSPs.
Why? In the next five to ten years, every core business application will be deployed by enterprise cloud vendors (ECVs) and accessed through a single secure portal managed by your managed service provider (MSP).
Most of the physical technology infrastructure will be much less visible. And the executives who approve budgets will save money. They’ll also spend a lot less time trying to understand trivial details. These benefits don’t mean complexity will disappear.
Public Cloud is Driving Innovation
According to Scott D. Lowe of Nutanix, several positive developments related to the costs for IT deployments within large data centers, the delivery systems for public cloud are behind the trend:
- Flash storage is becoming more affordable while its capacity is increasing. Fast, durable, and dependable auger well for longevity.
- Storage vendors have hit the market with NVMe (Non-Volatile Memory Express) flash devices, which simplify storage access and enhance performance.
- Intel continues to release advanced processors, which allow the software to supplant the role of more expensive hardware-related functions, ramping up the speed.
- Hypervisors, the software behind virtualization, have become commoditized with new vendor alternatives, competitive pricing, and high availability for easy workload migration.
- Containers have arrived as a quick and easy alternative for developing, testing, and deploying applications.
- The hyperconvergence of commoditized storage and compute resources simplifies administration, decreases costs, and improves the client and customer experience, i.e., for you and your customers.
(Source: Enterprise Cloud For Dummies®, Nutanix 2nd Special Edition)
Simply put, the commoditization of hardware drives the evolution of the software-defined data center (SDDC).
What is the key takeaway here? Billion-dollar public cloud vendors like AWS, Microsoft Azure, and Google are becoming less dependent on hardware. So the rest of us can benefit by jumping on board.
The following four sections highlight where we’ve been and where you can go with the right MSP partner.
IT Evolution Stage 1 – On-Premise IT
Generally speaking, in the 1990s and very early 2000s, most small and medium-sized businesses (SMBs) had most of the following IT service categories onsite.
- Applications
- Databases
- Operating Systems
- Hypervisors
- Physical Servers
- Storage
- Networks
This list is a traditional, client-server software model (sales, finance, operations) with a dense equipment footprint requiring in-house and third-party monitoring, management, and support.
This legacy list’s only slightly modern detail is the hypervisor, which signifies virtualized servers. For instance, five different services may be running on one bare metal box instead of five services running on five bare-metal boxes.
IT in the 90s and 2000s
During most of the 90s and beyond, keeping IT systems up and running and supporting users required more physical bodies, time, and manual supervision to maintain and update core infrastructure.
Since fast, affordable, and reliable Internet wasn’t mainstream, businesses could choose between inexpensive and relatively slow DSL or slightly quicker and costly T1s.
Digital assets had to be onsite due to bandwidth constraints.
Developers were also creating software destined for servers, requiring complicated user licenses and predictable annual software maintenance agreements. These vendors were not architecting solutions with the web in mind.
This period was the heyday for IT providers of all shapes and sizes to provide various flavors of IT support with a heavy reliance on maintaining a physical presence, even for tactical user support.
When the IT guy showed up in your office, he was a hero saving the day. Even if his handiwork was the ultimate reason he had to make so many personal service calls.
The classic question “How responsive are you?” was born in this era because clients always called tech support for emergencies. Nowadays, these “emergencies” are avoidable.
IT providers also sold most of their equipment in three, five-year refresh cycles with 40% product resell markups and large blocks of project hours.
In 2009, the CFO of a 50-person insurance brokerage wouldn’t laugh in your face if you showed her a $30,000 project quote for a Microsoft Exchange Upgrade.
Internet Innovations
During the late 2000s, internet innovations started to make significant strides, and the business world began warming up to the cloud.
According to Statista, the average internet connection speed in the United States grew from 3Mbps in 2007 to 18.75 Mbps in 2017.
And costs fell. In 2004, a 1.5Mbps X 1.54Mbps T1 was $500 per month. In 2022, 100Mbps X 100Mbps (6666% more) is yours for the same price.
No wonder most SMBs are now running more than 80% of their workloads in the cloud and partnering with MSPs to receive various levels of consulting and support.
While I would be hard-pressed to identify any businesses with a 100% Stage 1 profile in 2022, it’s essential to provide a walk down memory lane to illuminate the rapid rate of technology realignment happening right now.
If the first part of that last sentence created a sinking feeling in your stomach, please start researching MSPs that lead with Microsoft cloud solutions and have Gold Partner status.
Learn More: Microsoft Partner Competencies
IT Stage 2 – Infrastructure as a Service
We are now in the present day, where most businesses have shifted to Infrastructure as a Service (IaaS).
This setup is a hybrid environment with a mixture of onsite and cloud deployments. The following three categories still sit in your office:
- Applications
- Databases
- Operating Systems
Everything else is in private clouds or public clouds:
- Hypervisors
- Physical Servers
- Storage
- Networks
Private clouds and public clouds are two different things. Private clouds were popular about ten years ago.
Forward-thinking MSPs (at the time) would either build out small network operating centers in their offices, lease rack space in larger data centers and host client assets on servers there.
Moving assets offsite creates several benefits:
- Greater disaster recovery resilience
- Less reliance upon power issues in the office
- Real estate space savings
- Easier remote access for employees
- Lower administrative overhead for full-time IT employees
- Capital expenditure reductions
New Challenges
Moving assets offsite also creates new challenges when old and new worlds collide.
- Assets in private clouds require expensive legacy hardware, operating system, software licensure, ongoing updates, maintenance, and refreshes.
- Much of this technology was not designed to run over the Internet and requires architectural workarounds to integrate with applications, databases, and operating systems back in the office.
- In this setting, file and sequel servers require a VPN or Remote Desktop. This method is inferior to a web browser or mobile app.
- These factors contribute to availability issues, lower quality of service incidents, user frustration, and inefficiencies.
- Private clouds are expensive and can’t compete with the pricing and flexibility of hyper-growth public cloud providers like AWS, Microsoft Azure, and Google.
- If your MSP has your assets in their private cloud, you may stay joined at the hip because you’re not ready to deal with the expense and perceived hassle of a transition.
- Many private cloud MSPs don’t have a game plan for moving clients to public clouds and aren’t sure how to make money with this new business model.
- Suppose you still have in-house IT overseeing your MSP relationship. In that case, they may not be current on certifications, comfortable with managing change, and reluctant to make recommendations that potentially jeopardize their job security.
- Your average in-house IT professional came up in the 90s and probably still has a workstation and server-first mentality.
- They’re in their late 40s or early 50s. These employees have families and new responsibilities and may not be ready for the pivot to software in the public cloud.
IT Evolution Stage 3 – Platform as a Service
We are getting closer to the complete transition with Platform as a Service (PaaS) as the next stepping-stone.
In this stage, applications are the only category of services that still require onsite support and attention, either internally for a larger SMB or through an MSP for smaller entities.
Everything else is in the public cloud:
- Databases
- Operating Systems
- Hypervisors
- Physical Servers
- Storage
- Networks
Most smaller entities can skip this phase and go straight to Stage 4.
However, there are exceptions to the rule. Here’s one example where the client would have no choice but to adopt a hybrid setup:
- They’re hosting all applications in the enterprise cloud – Salesforce, Dynamics 365, NetSuite, Workday, QuickBooks, Morningstar Office Cloud, NextGen Healthcare, Sage Business Cloud, Thomson Reuters CS Professional Suite, etc.
- Some cloud-based storage solutions may not synchronize and update files quickly enough without errors, so they require some form of onsite network-attached storage.
- The client may be unwilling to clean up their data or have multi-year retention policies dictated by compliance.
- Bandwidth availability and cost are still a concern. While Internet access is becoming faster and more affordable, high speed and lower cost is not the norm for every business location on the map.
I also don’t envision a future – at least five to ten years from now – where an office with fifty people would not have a physical network (firewall, switch, low-voltage cabling and wiring, UPS, redundant power).
IT Stage 4 – Software as a Service
This section will be much shorter because software as a Service (SaaS) simplifies your IT footprint. There’s a lot less to talk about since everything is offsite (at least theoretically):
- Applications
- Databases
- Operating Systems
- Hypervisor
- Physical Servers
- Storage
- Network
With IoT (The Internet of things), every device on the planet seems to be network-enabled and software-based.
Learn More: Cloud Satisfaction Extremely High
Why is the world heading in this direction?
- Enterprise software vendors (ESVs) want to sell more software with fewer obstacles to adoption.
- Who wants to rely on end-users making expensive and ongoing upgrades to their hardware and operating systems before buying more software?
- End-users can’t stand complex software licensing requirements, and ESVs have increasing disdain for their high administrative costs.
- They are phasing out client-server software and putting development resources behind software designed for internet browsers and mobile devices.
- ESVs already use the major public cloud platforms to deliver their applications directly to us.
- Microsoft’s $1.5 trillion market cap is due to the popularity of cloud services like M365 and Azure.
- This detail is great news for SMBs already accustomed to using Microsoft because these tried and true applications work seamlessly in the Microsoft Cloud.
- Competition with public cloud providers will bring pricing down while introducing heightened cybersecurity protection and business continuity with geographically diverse data centers.
- Software solutions to manage diverse public clouds from a single pane of glass are making big waves. These tools give in-house IT and MSPs increased visibility and control.
- IT pros can quickly improve operations with a few keystrokes or automated settings and shift workloads to other providers to avoid vendor lock-in.
- Finally, IT specialists can move workloads and applications back onsite to accommodate changing business requirements. While a move like this would be more likely with a larger enterprise with a more extensive in-house IT staff, it’s nice to have options.
Your Evolution to SaaS
I hope I helped you understand software’s dominant role in your organization’s digital transformation over the next five to ten years.
If you work with an MSP who is embracing the cloud, you should be in good stead.
Paying for only what you consume during business hours is a much more attractive proposition than sinking money into applications and hardware that sit dormant from the close of business until the following day. That’s the big allure of SaaS.
Is your MSP driving this conversation about the road ahead?
Historically, many MSPs have resisted change and lost customers as a result. Many IT providers kept clients on Hosted Exchange and completely missed the boat on Office 365 (now M365).
Do you have confidence in your internal IT resources?
Forward-thinking MSPs see an opportunity to partner with in-house IT professionals and give them new tools to add value.
