The managed services model is set to become increasingly appealing to traditional VARs in 2024, as more businesses seek to purchase cloud and IT services based on usage. However, transitioning from a traditional VAR to a managed services provider is no easy task. It requires a fundamental shift in the way VARs do business, which cannot be accomplished overnight. These large organizations are not built for this new model, as the in-house development and integration of new technology and go-to-market strategies take too long and are too expensive to implement. VARs simply lack the necessary resources, flexibility, and expertise. In today’s economic climate, OPEX (operational expenditure) reigns supreme, and no one has the CAPEX (capital expenditure) or the desire for extensive in-house projects.
VARs are finding it increasingly challenging to meet customer demands for a wide range of products and services. The fast-paced nature of the market and the reliance on data place greater pressure on VARs to deliver. It is clear that channel businesses are struggling to meet customer expectations, whether it be for on-premises or cloud solutions. To address this issue, VARs need to determine what they can deliver themselves and what they should outsource. Outsourcing or white labeling is an effective way to provide customers with a diverse and high-quality portfolio.
In 2024, VARs will likely turn to MSPs (managed service providers) that possess the technical expertise to effectively utilize utility-based models. These MSPs can quickly execute projects, have experts in the field, and offer services tailored to the needs of vendors, customers, and end users. They will be the preferred partners for VARs.
We anticipate more businesses will adopt the utility-based model offered by MSPs for cloud-based data management. This approach relieves the burden on teams, reduces risk, and ensures uptime and business continuity in the face of disasters, data breaches, or ransomware attacks. Additionally, we have observed a trend of companies willing to pay for services upfront, locking in costs for extended periods (such as 6-12 months) to safeguard against inflation. This financially prudent decision is especially beneficial for cash-rich companies looking to protect their data over the long term, as market volatility can impact prices elsewhere. We expect this practice to become the standard in the coming year and beyond.
As cloud and SaaS service prices continue to rise with inflation, businesses are becoming more cost-conscious. This is why many have shifted to an OPEX model that covers essential capabilities like disaster recovery and backup. This consumption-based model, paid for in monthly installments, allows businesses to reduce CAPEX, avoid wasting data center resources, and focus on their core priorities.