There is certainly a grey area when trying to create a distinction between cloud offerings, and managed service offerings.   Especially for those of you working with private cloud offerings.

‘Back in the day’ the on-premise solution was the only way to go.  Installing IT solutions meant you install on your own hardware, purchasing your own licenses, and maintaining your own IT staff.   This was costly for many, and applied a barrier to entry for many small to mid-sized businesses.  The evolution to this was the managed service.  Managed services allowed us to purchase licenses for software and install that software on outsourced hosted infrastructure, owned, managed, and supported by a 3rd party.  The benefits to this was to remove the need for an IT team to manage the infrastructure.   The 3rd party could manage multiple sets of hardware, and distribute the costs of an IT team allowing clients to share in the savings. This model worked so well, some providers then evolved to sell managed services for platforms and eventually software.  This allowed for greater support savings, however licenses and hardware were still capital investments made by the client, either directly or through their 3rd party provider.  This opened the market to some of the larger mid-sized businesses, but small-to-mid sized companies still had a hard time acquiring enterprise grade solutions.

Eventually some software vendors began creating multi-tenant licenses.   Allowing 3rd parties to effectively distribute license costs over a collection of clients.  The 3rd parties then began to resell services to smaller companies, and providing clients with outsourced platforms as well.   A fantastic example at the time was the availability of hosted Microsoft Exchange solutions.   This allowed clients to subscribe to the use of Microsoft Exchange via 3rd party providers, without costly licenses up front.  With this example, dating back as early as the late 1990s, the building blocks of cloud services began to emerge.  The downside to this was the these 3rd parties still needed to make large capital investments in licenses and hardware to resell these services.   Managed service providers then needed to maintain a minimum number of clients, and limit support options to ensure a sustainable and profitable business model.

Managed services are typically services which are yours to use in a silo, and managed by an experienced service provider reducing the need for IT staff, and providing higher degrees of customization.    For small and medium sized business this was typically cost prohibitive because managed services still require upfront capital investments in licenses, and hardware either by the 3rd party or the end users, but either way these were costs passed on to the subscriber. 

The intent of cloud is to utilize shared infrastructure and license resources.  The key distinction of the cloud is that cloud providers are now providing licenses to scale.  As with managed services, the cloud provides the benefit of outsourcing the support and maintenance of running a software solution while also providing scalability, security, and now, with the cloud, most importantly, pricing-to-scale. 

Pricing-to-scale is probably one of the best advantages and distinctions of the cloud.   Smaller solutions use smaller scale, and pay smaller subscription fees.   At Indatum we always say that the cloud has the potential to level the playing field for businesses to compete.  The pay-for-scale model means that Mom & Pop Online, can use the same payment engine that the largest retailers use and will not have to miss out due to large up-front costs.  Mom & Pop Online may not be able to consume this service in a manage services model and compete.  As Mom & Pop Online, grow to Mom & Pop Incorporated, and then Mom & Pop Enterprises, their cloud services will grow with them.  

Note: In this post, we use the term price-to-scale, where scale can represent per user, or per transaction, or per office.    

About INDATUM

At Indatum we pride ourselves on taking our customers through this cloud journey, and highly focusing on their success every step of the way.   If you have any questions in planning your journey, call us today. 

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INDATUM|  www.INDATUM.ca   |  @INDATUM_GODO  
Measured by Your Success

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