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Will Monthly Cloud Subscriptions Kill Annual MSP Commitments?

When it comes to managed and cloud services, many customers are opting for “pay as you go” with no long-term commitment. You know: Monthly cloud subscriptions. The approach, mostly driven by consumer cloud companies, is now catching on with businesses as well. Gone are the days of vendor lock-in and longer-term contracts. Or so I thought…

Over the past few days, After Nines Inc. (ChannelE2E’s parent) has been weighing a rather simple question:

  • Continue paying a monthly fee to ChannelE2E’s hosting provider?
  • Or, switch to a one-time annual fee — and gain a 20 percent discount for doing so?

Monthly Cloud Subscriptions: Familiar Territory

Fortunately, we had data and experience on hand to help shape our decision. Rewind to 2008 or so. At the time (at our previous company) we were building out The VAR Guy and MSPmentor. Our monthly bill for hosting services gradually climbed as traffic on both sites rose. Then, we added a content delivery network (CDN) — an add-on fee — to help speed site performance. Then, we added 24×7 phone support. Another fee… Then we added another site (WorksWithU, 2008-2010) and another site (Talkin’ Cloud, 2010-).

Overall, the hosting services were still cost-effective. But the monthly fees gradually rose until our business was acquired in August 2011, and we shifted to the new owner’s data centers in 2012 (our team delegated to new owners and exited the business in 2014).

I certainly don’t have all those historic hosting bills at my fingertips. But the data is essentially burned into my mind. And the data says as website traffic and reader interaction grows, your monthly cloud services bill will rise accordingly. Just to state the obvious: Much like your experience with Salesforce.com or any other SaaS service, each new seat typically adds incremental cost to the system…

2015 and Beyond

Fast forward to the present, and the hosting option for ChannelE2E seems obvious — we should lock in a lower-cost annual commitment to avoid rising monthly costs as traffic and reader engagement grows.

Not so fast… at least not when it comes to the billing side of the equation.

I’ve always like the monthly model — which forces the hosting and cloud provider to earn our business each and every day. Fortunately, there often is a middle ground between the long-term (discounted) commitment and the monthly (slightly higher fee) approach.

In the case of our hosting provider, we quietly gained ample experience with them before launching ChannelE2E. We tested their support lines. We observed how other sites were served up on the web. We interacted across our own DevOps team and their IT support offerings. Frankly, we learned to trust and respect the hosting provider’s services.

So earlier today, we abandoned the monthly fee. And locked in for an annual fee with a 20 percent discount.

The Managed Services Provider Lesson

The lesson for managed services providers (MSPs) and channel partners: Even in the age of pay-as-you-go cloud services, if you earn a customer’s trust — each and every day — they will lock in with you for the long haul. And often, the decision isn’t based purely on money. Indeed, sometimes switching providers can be more pain than it’s worth.

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