Castles in the sky? UK MSPs and current cloud opportunities

The UK government estimates there are just under 11,500 managed service providers (MSPs) active in the UK.  These businesses create turnover of approximately £52.6bn and drive a market set for compound annual growth (CAGR) of 12% until 2027. Which equates to a sector worth nearly £74bn by 2028.

When it comes to how these businesses position themselves, the same report also found that 60% of MSPs mention a cloud offering on their website. And in terms of alliances 56% have partnerships with Microsoft, 43% with AWS and 13% with Google Cloud . 

Whilst it is always dangerous to infer those relationships - or even partnerships – equate to business actually being done and revenue being billed, it is clear from these figures that cloud activity is seen as an incredibly lucrative opportunity for the UK MSP community.  The question is what shape this activity will take?

The question is valid because there are now so many cloud projects being undertaken that are so diverse, it is becoming difficult for MSPs to position themselves credibly to take advantage of as much opportunity as possible.

Filtered through the lens of MSPs, this has created three drivers of cloud change: 

• Changes in immediate customer demand as they look to embrace alternative platforms 

• Preparation for impending shifts, including the impact of regulatory changes such as the EU Digital Operational Resilience Act (DORA)

• The MSPs own need for operational efficiency to improve margins and ultimately profit

Changing platforms – the rise of cloud repatriation

One of the biggest current opportunities for MSPs is cloud repatriation. 2022 the growth of businesses using the public cloud began to decline. For forward-looking businesses, the direction of travel reversed, backing away from cloud and considering alternatives.  Despite the massive hype – and undeniable potential advantages – around public cloud, organisations began shifting data and entire platforms to on-site, private data centres. Cloud repatriation was born.

Having been marketed as offering businesses all they needed for digital success, the issues of scale, cost and unnecessary functionality, led organisations to re-evaluate the alignment of their technology and business goals. A recent study by Citrix identified that 25% of UK organisations have moved at least half their cloud workloads back on-premise .

Given the substantial cost savings on offer (one recent repatriation project saw cost savings of 85%), this is an area in which MSPs can demonstrate huge value to customers. 

Exploring regulations – DORA and beyond

The Digital Operational Resilience Act (DORA) is an EU regulation that will apply as of 17 January 2025. It aims to strengthen the IT security of financial entities and ensure that the sector in Europe is resilient in the event of a severe operational disruption. If a UK-based business provides financial or critical ICT services to entities within the EU financial sector, DORA will apply.

With reference to cloud and MSPs, DORA spans digital operational resilience testing (both basic and advanced) ICT risk management (including third parties) and oversight of suppliers.

All of this represents a potential headache to customer organisations and an opportunity for MSPs. The scale of this opportunity is hard to gauge but will likely involve investments in technology, processes, and skills development, creating an opportunity for those MSPs at the forefront of technological innovation, and those who enjoy strong, trust-filled customer relationships.

Optimising operations to boost profitability

In the face of opportunities such as repatriation or the impact of regulation, MSPs need a consistent technological basis upon which they can base their offerings.  They need digital infrastructure partners that enable diverse, even bespoke services across within the managed services ‘wrap’ by offering choice at the infrastructure level.

This choice is critical as it is no longer a ‘cloud-first’ world in which cloud is the default assumption for all businesses. The different perspectives on cloud across leaders and laggards can be so diverse as to necessitate completely different strategies. 

To address this diversity, MSPs need to be able to assess the ‘cloud-viability’ of an opportunity and have access to the infrastructure that best addresses that opportunity. Our PlatformEDGE offering of a national portfolio of twelve data centres, connected by a low-latency network that extends out to public clouds and beyond, was designed to offer this choice.

It bears repeating that cloud is a huge opportunity for MSPs – especially for those prepared to specialise. Cloud is an incredibly broad church, with no shortage of funding for the various niche disciplines: 

• Revenue in the UK cloud security market alone is projected to US$416.40m by 2029  

• For those looking to specialise in hybrid, Mintel has previously reported that 80% of multi-cloud adopters had moved to a hybrid strategy 

• Top concerns of businesses when assessing cloud moves include understanding app dependencies and assessing on prem vs. cloud costs 

Given the breadth and depth of the ‘established’ cloud market (even without reference to the impact of AI) it is clear that MSPs can still mine a deep seam of opportunity: especially when partnering with a digital infrastructure specialist that offers MSPs the choice and options that they themselves offer.