A new study has revealed that 79 per cent of managed service providers (MSPs) surveyed feel their greatest competitive threat in the market today is cloud vendors - not other MSPs.
That's according to recent findings from a report commissioned by United States-based public cloud information archiving company, Sonian - and carried out by Sweden's Berg Insight - that surveyed more than 300 MSPs.
The results reflect a significant shift from sentiments five years ago, when only 54 per cent of MSPs cited cloud providers as the bigger competitive threat, mirroring a changing market.
According to Sonian, not even 10 years ago, MSPs offered “unmatched” insights into customers’ datacentre environments, applications requirements and service portfolios. By intertwining insights and services within technology, Sonian said MSPs were well-placed to serve as the trusted IT advisor and solutions provider to companies of all sizes.
Yet, as the market has shifted to “cloud-first”, Sonian said, MSPs' position has been threatened by cloud vendors that have chosen to divert the channel, cut out the partner, and enter into direct engagements with end users.
Survey findings found that of the top powerhouses - Amazon Web Services, Google, Hewlett Packard, IBM and Microsoft - respondents of all sizes said they most often lose deals to Google, and anticipate the vendor to be the cloud market leader by 2021.
Whilst the MSPs surveyed cited Microsoft as their second biggest threat in terms of losing deals, results showed that they expect Amazon to become a force more formidable than Microsoft within the next five years.
According to the findings, the threat from cloud vendors has also forced MSPs to reduce their service costs, with 50 per cent of respondents reporting moderate reduction of costs in order to acquire new customers, and 18 per cent saying they substantially cut costs to keep up in the game.
Increasing service offerings is key in the face of competition
"Expanding their service offerings will be critical for MSPs in today’s market to remain competitive," said Sonian vice president of business development, Jeff Lippincott.
"The new survey findings confirm what we already have seen play out in the industry: that cloud vendors are having a real impact on MSPs' bottom lines by interfacing directly with end users.”
“To not only cope with this threat but thrive in the market, MSPs must take advantage of the opportunity to invest in new services such as secure data storage, business intelligence applications and hosted email applications. By doing so, they will be able to offer services their customers regard as indispensable,” he said.
Almost 55 per cent of MSPs proclaimed the creation of new business services to be critical, with security topping the list. Specifically, 64 per cent of respondents reported witnessing strong customer interest in security offerings and 52 per cent claimed security to be a key driver behind business growth within the past 12 months.
The top three service offerings MSPs plan to expand on in this period are security (67 per cent), pure cloud hosting (65 per cent) and storage (58 per cent).
Additionally, 45 per cent of survey respondents said business intelligence and storage have served as business development offerings in the last 12 months. Whilst only 47 per cent of those surveyed expect storage to continue to be key, 51 per cent expect data analytics and business intelligence to be serious value drivers.
For MSPs that offer software and services bundles (78 per cent), security tops the list, again, as those services are offered by 72 per cent of these MSPs.
Following closely behind are data protection bundles, which are offered by 66 percent of MSPs. For those that don’t currently offer software and services bundles, 63 percent plan to launch such an offering in the next 12 months, with security, productivity and data protection bundles the most popular planned offerings, respectively.
Security aside, the survey results revealed Microsoft Office 365 to be a high-value business driver for MSPs. Of the respondents who offer the email service (nearly 68 per cent), 61 percent are currently seeing moderate sales growth in the service, with 28 per cent seeing substantial growth.