How MSPs can take advantage of the XaaS model

As digital transformation continues to accelerate Managed Service Providers (MSPS) need to keep up with customer demands and industry innovations.

They need the ability to quickly provide efficient and optimised services to their customer base and one of the ways they are achieving this is by using ‘as a Service’ (XaaS) technology.

Infrastructure and application technologies have grown and evolved at a staggering rate over the last five years and the SaaS market alone has tripled in size, with no signs of slowing. This blog explores why MSPs are adopting this model and the key benefits of its implementation.

Portfolio scalability

The opportunity for MSPs in the XaaS space is ever-growing and opens new revenue streams with minimal effort or investment. It’s offering MSPs the freedom to introduce new services into their technology stack without having to think about the limitations, for example how much physical Infrastructure is required or the impact it would have on other platform resources.

As they are not tied down by physical hardware and solution restrictions, they can react much faster to customer needs and changing business conditions. MSPs can then change on demand, whether this is scaling up or down to fit a new business need, selecting a new vendor entirely or simply re-defining a new business process.

Using the example of off-site backup, service providers can easily sell off-site backup solutions to their customer base without needing to consider their Infrastructure requirements and capabilities. Instead, if an MSP partners with an XaaS provider then it is the provider’s responsibility to forecast this growth, not theirs.

However, one major consideration when evaluating vendors is the true flexibility around the upscaling and downscaling of resources. Some vendors offer an almost ratchet like approach, where you can expand and reduce resources but are then left paying the high watermark. This itself can make or break the profitability of a solution for an MSP.

CapEx to OpEX

Legacy systems can’t keep up with digital transformation today, but with XaaS, the service provider is responsible for upgrades and platform maintenance, deploying ongoing enhancements and improving services – not the MSP. XaaS enables the MSP to focus on the customer and not on upgrading or maintaining their own independent solutions.

For MSPs, one major advantage is to the business’s bottom line and XaaS solutions typically require little investment on the front end. CapEx no longer becomes an issue and fees become an operational expense through simple licencing.

Managing and running your own platform is expensive and often unpredictable, but an XaaS solution protects MSPs from unforeseen costs. The recent heat wave that hit the UK left many data centres struggling to cool down the facilities and keep equipment stabilised in the heat. This, combined with the recent increase in energy costs for an MSP can result in a massive, unforeseen bill for the service provider. With XaaS, this responsibility would fall on the vendor.

These costs in addition to the staffing fees that would also have been spent on maintaining their own Infrastructure can be used in other areas to promote business growth and revenue.

Recurring and predictable revenue

Another notable benefit is the opportunity to generate recurring revenue. The XaaS provider will bill the MSP on a scheduled basis, and this is typically replicated down to the customer. This recurring revenue offers security and predictability for MSPs – how would it feel to start every month with 10% subscription revenue already closed? What impact would this have on the business?

Increased profitability

XaaS offers much more than business cost reductions, when implemented creatively and effectively it can also help drive significant growth and revenue. In addition to partner and wholesale margins, MSPs thriving through XaaS solutions are also adding their own solution value on top of these services to increase customer trust and contact.

Close the skills gap

MSPs and Enterprises are already struggling with the technology skills shortage and in-house skill gap, XaaS vendors and solutions providers like virtualDCS bring these skills to the table and remove the need for staff upskilling and investment within their organisation.

Business support

It’s in the XaaS vendor’s best interest to support MSPs in their growth and to help them expand the service throughout their customer base. Depending on the vendor buy-in, this support could include training, pre-sales support, marketing resources and more.

The conclusion

These are just a few of the benefits and reasons why MSPs are exploring XaaS services, but just as with any network, database or service, a clean and compatible fit is key. There are many different XaaS vendors out there and finding the right one that can help reach your business objectives is essential.

If you’re considering deploying XaaS solutions to your customer base, we can help. virtualDCS offers a range of Infrastructure hosting and Disaster Recovery services that are designed with the Channel in mind.

To find out more about our Cloud Channel Partner program simply email partner@virtualdcs.co.uk or speak to the team on 03453 888 327.