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Do you watch Seinfeld?
There’s a hilarious scene in an episode called “The Secretary” which indirectly presents an analytical framework for partnership models within the managed service provider (MSP) marketplace.
Jerry is suffering through dinner at a popular restaurant with an annoying former colleague, Kenny Bania, after the dry-cleaner accidentally swapped their orders.
Then, to Jerry’s horror, Kenny starts to review potential options for their next meal together.
“Should we come back here, or should we go someplace else?” Kenny asks. “You know, it has its pros and cons. On the one hand, here, you’re guaranteed a great meal. On the other hand---”
“Yeah, yeah, I know,” Jerry interrupts, frustrated with the conversation. “This would be good, but it would be the same. But if we go someplace else, it would be different, but it might not be as good. It’s a gamble… I get it!!!”
While far less humorous – many MSPs face a similar conundrum when choosing a product strategy for their backup solutions: How do you compete against thousands of other service providers re-selling the same software and storage repositories within a “red ocean” marketplace?
Sorry to add more buzzwords – we have enough confusing technical jargon in our universe.
But you don’t have to be an industry tycoon like Warren Buffet or Rick Stevens to understand Red Ocean / Blue Ocean methodology.
Let’s pretend your backup business is a shark.
Would you rather swim around red, blood-infested waters competing against other sharks for the same prey?
Or would you prefer a pristine, crystal-blue abyss with a variety of different dining options and limited competition?
Those are the schematics for Red Ocean / Blue Ocean methodology in a nutshell. Professors W. Chan Kim and Renée Mauborgne introduced this concept in their 2005 international best-selling book, Blue Ocean Strategy. The core blue ocean framework is designed to unlock demand in fierce competitive landscapes through the simultaneous pursuit of differentiation and reduction of costs.
Let’s take a moment to analyze what factors are driving red ocean saturation in the managed data protection marketplace followed by several blue ocean tactics to consider applying to your backup business.
The red ocean shift in the managed security marketplace is heavily fueled by the commoditization of storage and the introduction of hyperscale public cloud providers.
For example, what do you think happens when over 100,000 partners within the AWS Partner Network (APN) all re-sell the same storage repositories?
You get stuck in the “commodity vacuum” – where the managed storage service is measured by price instead of return on investment.
The terms cloud storage and cloud backup are often used synonymously. But the replication of snapshots to an off-premises public cloud storage environment is a common commodity. Comprehensive Backup-as-a-Service (BaaS) and Disaster Recovery-as-a-Service (DRaaS) offerings with the ability to achieve tight uptime requirements for hybrid IT landscapes are solutions.
The accelerated introduction of hyperscale public cloud re-sellers with similar software licensing strategies has also initiated the Law of Diminishing Returns. This results in decreased end-user valuation, higher Customer Acquisition Costs (CACs), and reduced market cap for software-defined storage services.
The hyperscale public cloud business model also damages the elasticity of scale for their re-sellers due to vendor lock-in. For example, it’s free to replicate your data onto their network. This is called network ingress. But the hyperscalers charge network egress fees to migrate data off of their cloud environment and onto a separate storage location. Data egress is a regular component to day-to-day business operations. So these fees quickly compound when you factor in the exponential data growth within multi-tenant MSP workloads along with the strict provisioning requirements.
So how the heck do you survive and thrive in this red ocean filled with sharks?
Let’s analyze how to discover unexplored opportunities within the MSP cloud backup universe through Blue Ocean Strategy’s recommended approach to differentiation and reduction of costs.
Zebra sharks aren’t the most terrifying macropredatory fish patrolling our oceans.
But their ability to navigate through narrow cracks and crevices creates an uncontested blue ocean marketplace where larger apex sharks simply can’t compete. The zebra shark’s beautiful brownish-yellow stripes also differentiate their hunting patterns through camouflage – presenting a more efficient path to market compared to other sharks with blander, rudimentary dorsal surfaces.
In other words, the zebra shark is clearly a microcosm for differentiation strategy within the managed cloud backup marketplace. Let’s see how the hunting patterns of these majestic reef-dwellers apply to blue ocean strategy for MSPs:
I wish Professors Kim and Mauborgne would write a Blue Ocean Strategy sequel analyzing the numerous differentiation strategies within the KeepItSafe Partner Program and MSP marketplace.
Unfortunately, we may never know.
Now let’s take a look at the other half of the blue ocean framework: reduction of costs.
The best benchmark to measure to calculate the cost of your backup solution is the Total Cost of Ownership (TCO). This is the sum of all direct and indirect costs required to develop, maintain, and support the service offering. The direct costs are much easier for MSPs to identify. These are mostly capital hardware expenditures, software licensing, IT staffing, compute resources, and storage requirements. Indirect costs are a bit more complicated – like provisioning a hyperscale public cloud. These calculations include more subjective variables like opportunity costs, vendor risk analysis, long term storage forecasting, BATNAs, and Cost Benefit Analysis.
But as an MSP conducting a TCO assessment for a cloud backup solution – a good jumping off point is a Cost Benefit Analysis for the three most common go-to-market deployment models:
Option 1: Architect a cloud internally with open source technology.
Option 2: Utilize a hyperscale public cloud provider like Amazon.
Option 3: Partner with a trusted Cloud Service Provider (CSP) with channel benefits.
Option 1 appears to present countless opportunities and the most autonomy. But if your supply chain starts to resemble a spider web – there’s a good chance that you’re administrating too many solutions and the network configuration is becoming more complex than the laws of thermodynamics.
Option 2 appears to be the cheapest route to market with price-per-gig thresholds lower than the ocean floor. But be cognizant of the hidden costs associated with the hyperscale public cloud business models and the commoditization their storage.
Option 3 appears to present lesser margins due to an additional buffer between the CSP partner and the Independent Software Vendors (ISVs). But CSPs specializing in managed backup and disaster recovery services will have an existing purpose-built cloud environment and technical support capabilities to extend IT resources.
Each of these three models has its own unique pros and cons. But MSP partnership opportunities with custom CSPs (my favorite) are often overlooked. These (sea) BaaS providers can help your business discover blue ocean segments and advance your go-to-market strategy through the following advantages:
Many sea bass families also have symbiotic relationships with zebra sharks. So these are fitting analogies for MSPs to consider exploring new tropical blue oceans through a CSP Partner Program.
Whether you’re new to backup and disaster recovery, or an industry veteran testing the marketplace for other opportunities, KeepItSafe can help you surpass your customer’s most stringent and difficult recovery requirements.
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