UPDATED 12:00 EDT / JULY 16 2019

CLOUD

MSPs make unlikely friends with public-cloud fat cats

Today’s information-technology market is turning out to be an unlikely friend to smaller, managed service providers. Not only did public cloud not kill them as some foresaw, it actually paved the way for expansion. And mid-sized enterprises may even prefer them over hyperscalers.

The twists in the service-provider market during recent years are reflected in phoenixNAP LLC’s history. “We’re hosting guys that went into the data-center business and became infrastructure people,” said Ian McClarty (pictured), president of global IT services company phoenixNAP.

The business started with a focus on connectivity and telecommunications. It now operates 15 collocations services globally and offers a full suite of infrastructure services. These range from collocation to bare-metal dedicated cloud systems. In the middle are virtualized cloud platforms, standard VMware Inc. deployments, etc.

The company began offering hosting services when it was still considered “boutique,” according to McClarty. Then public cloud came along and offered a similar service — scalable, easy-to-absorb infrastructure — to a broad market base. Thanks to cloud providers like Amazon Web Services Inc. and Microsoft Corp. Azure, infrastructure as a service is mainstream now. Yet, hyperscalers have not razed companies like phoenixNAP to the ground. In fact, the runoff from those companies’ broad successes has nourished them.

“They did a lot of market development that we ourselves cannot do because we’re smaller companies,” he said.

Today, smaller service providers are playing nice with hyperscalers in ways few would have predicted several years ago. They may partner with large cloud providers, build their own services on top of public clouds, or provide managed cloud services for customers of all sizes.

McClarty spoke with Dave Vellante (@dvellante) and Peter Burris (@plburris), co-hosts of theCUBE, SiliconANGLE Media’s mobile livestreaming studio, during the VeeamON event in Miami Beach, Florida. They discussed the evolution of service providers and why mid-sized enterprises are choosing them (see the full interview with transcript here). (* Disclosure below.)

This week, theCUBE spotlights phoenixNAP in our Startup of the Week feature.

Strange service-provider bedfellows

“A lot of MSPs are afraid they will lose business to the cloud,” said Alexandria Huber, director of alliances at Cloudtrek Pty. Ltd., a provider of private cloud, hybrid cloud, and colocation services, as quoted by CRN. “But we cloud providers need MSPs. We just can’t offer the services MSPs can,” she said.

Examples of these services are cropping up all over the MSP sphere. For CenturyLink Inc. customers, public cloud provides a homebase for applications, while CenturyLink does the dusting and polishing.

“Once workloads have been transitioned to AWS [a CenturyLink partner], we’re able to manage those as a managed service provider for the organizations,” Dominic Deacon, sales director of cloud services and alliances, EMEA, at CenturyLink, recently told theCUBE.

Other MSPs may help customers choose public cloud services and combine them with their offerings to build business solutions. “Those services are not easy to roll out,” said Michael Gray, chief technology Thrive Operations LLC. “You still need someone to understand what the business needs are and then translate those into technology solutions,” he told theCUBE in May.

The managed services market will grow from $180.5 billion in 2018 to $282 billion by 2023 at a compound annual growth (CAGR) rate of 9.3%, according to a MarketsandMarkets Research Private Ltd. report. Major growth drivers include increasing reliance on IT to enhance business productivity and growing demand for cloud-based managed services, according to the report.

The mid-sized enterprise play

Mid-sized enterprises are in a somewhat awkward position. They’re bigger than small-to-medium-sized businesses but smaller than large Fortune 500 enterprises. They might take in about $50 million to $500 million in revenue, according to McClarty. They have some skilled IT people in-house — though they’re usually generalists — and some budget to work with. So they don’t want to outsource everything to a hyperscaler cloud, but they need what McClarty calls “supplemental IT.” They also tend to be a bit fussy; their IT needs are nuanced, and they want a tight relationship with providers.

These factors make mid-sized enterprises an easier target for the smaller providers to nail, according to McClarty. “It’s a very hard space for the public clouds to act in today,” he said.

PhoenixNAP is focusing on managed infrastructure as a service. It is changing and flexing with their customers’ needs and with infrastructure itself. For example, lately, customer conversations are often about Kubernetes, the open-source platform for orchestrating containers (a virtualized method for running distributed applications).

“What are we going to do to have a managed Kubernetes stack that is deliverable in an [application program interface] model? That’s our vision for the company,”  McClarty said.

Road to Fortune 500 is paved with data

The ambition of the typical mid-sized enterprise is to become a large enterprise. If we look at large enterprises today, they are often data driven — they treat their data as valuable company assets. This is why becoming data driven is at the fore of these customers’ minds today, McClarty pointed out. “That’s the bulk of our conversations right now for net new customer acquisition,” he said.

For example, data backup, protection and recovery are now topics of heightened interest to these enterprises. Data is a valuable asset now, so companies need to ensure that it’s protected and easily recoverable in the event of a disaster. Many vendors — both startups and legacies — are revamping disaster recovery for the data-driven user. They’re building data-management services on top, for instance.

PhoenixNAP has built a lot of competency around Veeam Software Inc.’s backup and DR solution. It fills in a crucial piece in its infrastructure services. The simplicity of the product — its incorporation of backup, recover and restore — makes it an easy sell to customers nervous about their data, McClarty concluded.

Watch the complete video interview below, and be sure to check out more of SiliconANGLE’s and theCUBE’s coverage of the VeeamON event. (* Disclosure: Veeam Software Inc. and phoenixNAP LLC sponsored this segment of theCUBE. Neither Veeam, phoenixNAP nor other sponsors have editorial control over content on theCUBE or SiliconANGLE.)

Photo: SiliconANGLE

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