MSP_Playbook_SI_070817_v2.pdf

Cloud Managed Services
Provider Guide
A best practices guide for Systems Integrators
looking to transform their business

Making the leap 23
1. Assess the market 24
2. Realign the organization 27
3. Build the practice 29
Define the services 29
Align to ITIL 31
Leverage existing capabilities 32
Determine where to invest 33
Evaluate tools 36
Form the right partnerships 38
Automate, standardize, templatize 39
4. Crunch the numbers 40
5. Set the price 41
6. Establish a learning process 42
7. Get certified 43
8. Go to market 44
Table of contents
Welcome to the Cloud MSP guide 3
What is a Cloud MSP 5
The pivot from traditional to cloud managed services 6
Cloud-powered digital transformation 8
Cloud MSPs on Microsoft Azure 9
Cloud MSPs + Microsoft Azure = A modern partner 10
Why Cloud Managed Services? 11
Managed service opportunities 12
Cloud managed services: by the numbers 14
MSP transformation considerations 17
1. Different investments 18
2. Different culture 19
3. Different process 20
4. Different expertise 21
5. Different buyers 22
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2
MANAGED SERVICES PROVIDER GUIDE

Welcome to the cloud MSP guide
Introduction
A best-practices, business planning guide for System Integrator partners looking to grow their
practice, differentiate their services, and transform their business by providing Azure Managed
Services to their customers
This guidebook is targeted at Systems Integrators (SI) looking to transition business models and begin offering cloud managed services on Azure. In the
following pages, SIs will be provided with:
• Compelling proof that cloud managed services are a vehicle to profitability
• Learnings from partners who have found success making the transition
• Prescriptive guidance for partners looking to transform their traditional SI business models to modern cloud managed services on Azure
• Microsoft’s perspective on how the cloud managed services space will be shaped in the years to come
It was created, in part, through extensive qualitative interviews with senior executives at existing Microsoft Cloud Solution Provider (CSP) partner
companies who have transitioned from SIs to Azure Managed Services Providers (MSP). These conversations focused on:
• The steps partners took when creating a cloud MSP practice
• The learnings they achieved in the process
• Best practices for other partners to consider when building their managed services capabilities
3

This guidebook serves as an expansion of the “Azure Managed Services Playbook for CSP Partners” created in 2016. This 2017 version is not intended
to replace its predecessor, but rather provide supplementary exploration of specific concepts not extensively covered in the 2016 version. It is highly
recommended that partners read the “Azure Managed Services Playbook for CSP Partners” in addition to this guidebook as the 2016 version may refer to
specific concepts not covered in this document.
The “Azure Managed Services Playbook for CSP Partners” can be found here or at aka.ms/csp-in-a-box.
Who should read this?
Although this guidebook contains information that may be beneficial to many within your organization, the decision to transition to a new a line of
business lies with executive leadership. Thus, this guide is written for executive decision makers and leadership teams with the authority to pivot the focus
of the organization and influence the strategic direction of the business.
Furthermore, while this business planning resource contains helpful tips and tricks on building a functional cloud managed services practice, it is up to
partners to integrate their unique IP or “secret sauce” into their practice areas. Based on the anecdotal and empirical evidence contained in this document,
it is this differentiation and specialization that will contribute most to establishing a successful cloud MSP practice.
We sincerely hope that after reading this guidebook, SI partners will be inspired to build the services that customers around the world desperately need.
Enjoy!
4
Introduction

What is a
cloud MSP?
Chapter 1

6
The pivot from traditional to cloud managed services
Gartner defines MSPs as those who “deliver network, application,
system and e-management services across a network to multiple
enterprises.”1
Managed services is not a new business model.
For more than 20 years, large enterprises have relied on service
providers to manage their IT assets. Whether you call them
an outsourcer, a remote monitoring and management (RMM)
provider, or a managed IT provider, service providers manage
their customers’ workloads—either in their own datacenters or
those operated by their customers.
Cloud, however, adds an additional layer of complexity. Cloud
has a myriad of business benefits. It also requires a new method
of management because of its focus on scale, elasticity, security,
and automation. For CIOs, cloud represents a paradigm shift in
the way they think about embracing IT and those who provide
and support it as a managed service. Cloud is democratizing
the industry and this means that partners of all sizes and
backgrounds can explore this business model—not just ones
with their own datacenter.
CLOUD MANAGED SERVICES PROVIDER GUIDE
Chapter 1 | What is a cloud MSP?
1
Gartner IT Glossary 2017

7
The hyper-scale nature of cloud provides a completely new
meaning to scalability, elasticity, security, and resiliency—
redefining how applications are architected and delivered.
The pay-as-you-go (PAYG) model provides a fail-fast, agile
method of app development and management. Device and
data proliferation means customers want and can do so much
more with their IT assets. Cloud customers can unlock hidden
insights into the nature of their own business and customers,
with cloud providing the computing resources and services to
do so. Because of cloud, CIOs are demanding a new way to think
about every aspect of IT, from data governance and security to
continuous development and automation.
A cloud MSP is a partner who helps their customer transition to,
embrace, and capitalize on this paradigm shift in technology—
by guiding them in many aspects of their cloud journey. From
consulting to migrations, to holistic operations management,
cloud MSPs help customers realize all the benefits that come
with cloud adoption. For SI partners, the core of transitioning to
a cloud MSP is learning to adopt a business model that revolves
around running customer workloads in the cloud.
“It’s a fully managed cloud
experience for the customer.
US-based CSP partner

Cloud-powered digital transformation
Digital Transformation is a top-of-mind topic for many organizations around the world. IDC suggests that by 2018, 2/3 of the Global 2000 CEOs will
have digital transformation at the heart of their corporate strategy.2
Central to the promise of Digital Transformation are technical and operational
superiority, advanced services, and flexible delivery of cloud. Advanced cloud services from Azure—IoT solutions, business intelligence, and big
data and analytics—allow customers to reimagine tired business processes with never-before-seen capabilities. But customers can’t achieve
transformation without the help of partners and the cloud. Building a cloud managed services practice acts as an excellent platform by which
to have high value, Digital Transformation conversations with customers. At Microsoft, we describe these highly evolved Digital Transformation
service providers as next-generation cloud MSPs.
Next-generation cloud MSPs are positioned to better engage their customers, empower
their employees, optimize their business, and transform their products and services.
8
TRADITIONAL MSP CLOUD MSP DIGITAL TRANSFORMATION VALUE DELIVERED
Outsourcing vendor Trusted advisor and partner Deliver innovation agility
Security risk mitigation Security by design Continuous regulatory compliance delivery expertise
Static monitoring with fixed thresholds Dynamic monitoring with anomaly detection Proactive insight into end user experiences
“One-off,” project-based business model Continuous running of a customer’s cloud environment Recurring revenue, more focus on services, higher margins
Complex, manual change management
processes
DevOps tools and processes, CI/CD skillsets
Scale up, scale down, and move to different geolocation(s). Increased
developer productivity
Device-based SLAs Solution and Application-based SLAs Meet business outcomes and customer performance expectations
Centralized operations Decentralized operations and resources Modernized operations
Hardware-based solutions Software and cloud-based solutions Automation and orchestration
Emphasis on running and operating existing
environments
Expertise consulting, designing, architecting, automating,
and optimizing for the cloud
Increased agility and optimization
2
IDC FutureScape: Worldwide Digital Transformation 2016

“We decided to go all in with
Azure—not taking any more
customers who don’t want to
have a cloud component in their
infrastructure. We decided to go
with Azure and Azure only.
Netherlands-based CSP partner
Cloud MSPs on Microsoft Azure
At the heart of the cloud MSP business model is, of
course, cloud. The power and scale of public cloud is what
makes it so attractive to businesses of all sizes. Leading
the cloud charge is Microsoft Azure. Azure’s powerful,
open, and supported cloud platform makes it a popular
choice among cloud MSPs and their customers alike. In
fact, according to Pacific Crest, a US-based analyst house,
Microsoft Azure could emerge as revenue leader in the
public cloud market as soon as the second half of 2017.
9

Cloud MSP + Microsoft Azure = A modern partner
A successful cloud MSP is a modern Microsoft Azure partner. Azure MSPs often deliver next-generation
services around migration, DevOps, automation, cloud strategy, governance, security, and cloud-native
application design. They use the best Azure features while designing solutions—be it IaaS, PaaS, or SaaS
offerings—in order to meet their customers’ demanding and unique business requirements. Essentially,
they act as a one-stop shop for their customers by providing a common support, provisioning, and
billing experience—all with a flexible PAYG business model.
Modern partners focus on differentiation, modern sales and marketing tactics, highly optimized
operations, and customer lifecycle value management.
DIFFERENTIATE TO STAND OUT
Pursue a specialized strategy and create intellectual property (IP) services to differentiate your business.
MODERNIZE SALES AND MARKETING
Utilize digital marketing and build a scalable sales engine to enhance your go-to-market strategy.
OPTIMIZE YOUR OPERATIONS
Get the most from your people, process, tools, and tracking to improve your operational health.
DELIVER CUSTOMER LIFETIME VALUE
You’ve worked hard to land your customers. Become a trusted advisor and keep them for life.
Click here to read more about IDC’s point of view on a Modern Partner.
10

Why cloud
managed
services?
Chapter 2

12
Managed services opportunity
SIs turned MSPs report customer demand and higher
margins as key reasons why managed services makes sense
for their business
SI partners, who’ve successfully made the transition into the managed services space, understand
that customers recognize the value Azure can provide their business and are looking for partners
who can support them on their cloud journey. Customers are seeking a trusted advisor who can
help them migrate, right-size, and manage their workloads in Azure so they can capitalize on the
cloud benefits, focus resources on revenue-generating initiatives, and offload their biggest cost
centers—namely inefficient IT. An overwhelming majority of customers simply lack the expertise
to manage IaaS and PaaS offerings from hyperscale cloud providers. They need help maintaining
their workloads in the cloud and look to cloud MSPs to fill the skill gap.
In order to address common challenges, cloud MSPs can provide customers:
• Management for cloud infrastructure and networks through an MSP owned Network
Operations Center (NOC)
• Protection for workloads and data via a vigilant Security Operations Center (SOC)
• Ongoing patching and system upgrades
• An established knowledge base of support and help desk technicians
• Monitoring and alerting on issues with customer infrastructure and applications
• Continuous cloud resource and cost optimization
• And much more
Chapter 2 | Why cloud managed services?

13
But customers are also looking for
cloud experts who go beyond IT. They
need providers who understand their
specific industry, business, regulatory,
and compliance requirements as well.
SI partners see this as an excellent
opportunity to move up the value
chain, introduce recurring revenue
streams into the business, and
differentiate their services.
Partners should look at managed
services on Azure as a logical expansion
of their previous professional services
engagements. Instead of architecting
a cloud migration for a customer and
walking away, SI partners who have
a robust cloud managed services
practice can take on the management
of that new cloud deployment on
behalf of the customer. This unlocks
new opportunities for partners to build
ongoing relationships with customers
and generate reliable monthly cash
flow for the business.
In summary, cloud managed services help customers:
DEEPEN CUSTOMER RELATIONSHIPS
• Engage with customers, meet their needs, solidify relationships, and gain the “trusted
advisor” status
• Empower Digital Transformation by re-envisioning customer workflows, application builds,
and how IT services are delivered
DRIVE RECURRING REVENUE
• Bill customers for managed services packages month in, month out
• Enable continuous cash flow as opposed to one-time project-based revenue streams
• Grow wallet share as customer cloud spend and service adoption grows
• Upsell additional services for net-new revenue opportunities
GENERATE HIGHER MARGINS
• Tap into the typical managed services gross margins (50-60%), which are higher than
professional services (40-50%) and resale services (10-20%)
• Increase margins by incorporating increased scale and automation
UNLOCK PORTFOLIO OPPORTUNITIES
• Diversify your managed services portfolio with Azure solutions
• Add new offers like cloud dev/test, business insights, born-in-the-cloud app development,
etc. to your practice
• Serve global customers with Azure’s broad geographic presence
• Develop new revenue opportunities and increase margins—migration, monitoring, app
development, etc.

14
Cloud managed services: by the numbers
Managed services market size
Expected Compound Annual Growth Rate (CAGR) of cloud managed
services 2014-2018—a massive market opportunity
Managed services revenue for cloud services providers will grow from 17B in CY14 to $43B in CY18.
This growth rate is 60% faster than revenue from infrastructure only services.
2014
$17B
$42B
$59B
MANAGED SERVICES
CORE INFRASTRUCTURE SERVICES
TOTAL CLOUD AND HOSTING REVENUE
$43B
$74B
$117B
$60B
$130B
CAGR 25%
2018

Hyper-scale cloud growth + managed services growth
= significant lifetime value opportunity
*Structure Research Market share of Massive
Scale Clouds, 2016
**451 Research Market Monitor: WW Managed
Services, 2015; Cloud & Hosting Study, 2016
***Morgan Stanley CIO Study, 2016
$122B*
industry in 2020, up
from $19B in 2016
$43B**
industry in 2018
85%
of customers are beyond
discovery cloud phase
61.3%
CAGR
22%
of organization spend
is on managed services.
Another 23% on security.
30%***
of apps will be in a
Hyperscale Cloud by 2017
15

MSP profitability
Managed services are the primary revenue driver for cloud MSPs
Managed services unlock higher
margins and revenue opportunities
16
REVENUE MIX FOR AN AVERAGE CLOUD MSP TYPICAL MARGINS BY SERVICE MODEL
MANAGED
SERVICES
50-60%
PROFESSIONAL
SERVICES
40-50%
RESALE
<20%
IP
MANAGED SERVICES
HOSTING
PROJECT/PROFESSIONAL
RESALE
50%
20%
15%
10%
5%

MSP
transformation
considerations
As an SI partner, there are many
things to consider before you
begin the process of establishing
your managed services practice
As SI partners contemplate the transition to a cloud
managed services model, there are five general
themes—centered around people, process, and
technology—that emerge.
Chapter 3

1. Different investments
Because a managed services practice is drastically different than
offering consultative or professional services, there are a few
investments SI partners will need to make in order to ensure a
successful transition.
AREAS TO INVEST
• Help desk and customer service-oriented staff
• Training for solution architects and engineers
• ITSM, help desk, and monitoring tooling
• A billing portal that can charge customer based on Azure
consumption and integrates with the CSP portal
• Educating customers of the shift—marketing and sales
• 24/7 support—either in-house or via outsourced partners
• Service SLAs and customer contract restructuring
• New compensation structures for sales teams
Some of these investment topics will be covered in greater detail
in the “Build the practice” section of this guide.
18
Chapter 3 | MSP transformation considerations

2. Different culture
Cloud managed services is a very different business model than traditional SI services
and will require a substantial shift in thinking. As with any large-scale mindset shift,
there are a few key blockers to look out for.
First is the challenge of an ingrained workforce. As with any shift in business models
and priorities, people who are used to doing things the same way for decades may
have a difficult time accepting the new vision. It’s important that the new cloud
managed services strategy is clearly articulated and employees feel they have a clear
stake in the success of the business.
In some cases, this may force tough decisions to ensure there is the right cultural fit
within an organization that embraces this new direction. These changes are significant;
therefore, a successful implementation of these changes must include a high level of
attention and continuous reinforcement from leadership. This is important. Otherwise,
it can be a road made bumpy by those who resist the vision.
For many partners, the mindset may also have to shift from reactive to proactive.
Proactivity is a core calling-card of a good cloud MSP. Customers are expecting partners
to solve problems in their environment before they even know they exist. Partners who
take the approach of limiting the number of tickets customers open by proactively
remediating problems are positioned to win in this space.
“
We had a customer who needed additional
resources, and one engineer proposed
a hardware solution. We confronted the
engineer and the sales person saying, ‘This
is the perfect opportunity to spin up in
Azure, don’t do it again.’ That was the last
time we ever had a challenge getting our
representatives onboard with selling the
MSP model.
19

3. Different process
The processes SI partners have in place to engage, contract, and deliver
services to customers will need to shift to accommodate a new managed
services practice. Setting up perpetual contracts and establishing SLAs
for incident callbacks and help desk requests will require a committed
organizational effort.
Having a clearly defined cloud methodology is key. You may have moved
a customer’s on-premises environment to Azure, but taking the next step
and managing that environment is an entirely different effort.
All in all, cloud MSP partners should build and document processes
around:
• Assessing customer requirements and designing relevant solutions
• Security and governance to ensure customer and internal
environments are protected
• Migrating customers to Azure and supporting them in the process
• Ongoing cloud operations and service management
• Cloud SLAs, customer satisfaction, and cost optimization
• Continual improvement and process optimization
• Telemetry usage and adherence
Read more on this topic beginning on page 14 in the “Azure Managed
Services Playbook for CSP Partners.”
20

4. Different expertise
The cloud, specifically Azure, pressures partners to expand their skillsets in multiple areas such as
compute, networking, and storage, but there are also less apparent skills they must acquire.
Investments in DevOps and learning to run infrastructure as code are vital to automating customer
deployments, provisioning and de-provisioning virtual resources, ensuring quality of service (QoS) is
maintained, and enforcing compliance and security policies. Additional details on the development
investments partners must make will be explored later in this guidebook.
The ability to differentiate in the cloud managed services world also comes from developing next
generation capabilities around big data, IoT, Machine Learning, and Cognitive Services. Customers
are looking for partners who can deliver actionable insights to drive their own business forward and
help them with Digital Transformation initiatives, using the cloud as a catalyst. And they want all of
this “as services.”
Further consideration should also be given to the IT operational competencies you will need to
possess in-house. It is one thing to migrate a customer to Azure. It’s another to maintain that
deployment on an ongoing basis.
As a new MSP, you may not be able to deliver on all of this yourself. That is where the power of
partnerships comes in. Being a cloud MSP is really about picking the right partners. Customers
want “whole product solutions,” where they get a partner to migrate them to the cloud, manage
the deployment, make recommendations on how to optimize the environment, and develop
new solutions on top of it all. In that sense, the customers expect MSPs to be ISVs, MSPs, SIs, and
transactional partners—all at the same time. While it’s unlikely you will be able to provide all of this
to your customers yourself, tight relationships with adjacent partner business models will enable you
to deliver what customers need.
“
Do what you do best and
partner for the rest!
21

5. Different buyers
Not only do internal transformation considerations need to be accounted for when evolving an MSP practice, external
ones do as well. Like mentioned previously, cloud managed services are a conduit to the Digital Transformation
conversation. These strategic-level conversations typically take place at higher levels within the organization and are
often a business-led discussion, as opposed to IT. It is important to remember to orient the managed services pitch
toward business outcomes as well as technical ones.
The lines between technology and business are blurring. Technology is increasingly influencing and informing business
decisions. More and more, technology is viewed as a differentiator and competitive edge, helping drive the business
forward. Technological enablement will, of course, factor heavily into the transformation equation. However, the real
charge toward Digital Transformation comes from business decision makers who want to capitalize on the benefits
it brings to the organization. Some of these benefits include agility, efficiency, talent retention, and flexibility in work
styles. This means MSPs will need to be equally comfortable and effective talking to a CMO or VP of Sales as they are
talking to a CIO or CTO.
In many cases, this will require new organizational capabilities both in sales and services teams. These teams need to be
able to relate to technical and business audiences within their customers. This doesn’t mean IT is not influential in the
decision-making process, but it does imply that a shift in audience focus may be required.
Many MSPs are also thinking in terms of industry verticals. With that focus comes the added complexity of having to
possess expert domain knowledge, understand compliance needs and vertical workflows, and most importantly, deal
with an entirely new breed of buyers. Remember, starting with existing customers is always easier than trying to land
new ones.
The other aspects of this transformation are ISV or IP provider partnerships. Many ISVs tend to focus on industry
verticals and bring deep domain subject matter expertise. By partnering with them, you can learn specific industry
trends, pain points, and transformation drivers for those customers and incorporate that into building specific offerings
for those customers in partnerships with ISVs. This is perhaps the hardest transformation point for many partners.
22

Making the leap
Chapter 4
For SI partners ready to begin
their cloud managed services
transformation, this section
contains the 8 major steps to
start the journey
1. Assess the market
2. Realign the organization
3. Build the practice
4. Crunch the numbers
5. Set the price
6. Establish a learning process
7. Get certified
8. Go to market

1. Assess the market
It may seem fairly obvious, but talk to customers. Gauge their appetite for
managed services. Identify their pain points and challenges when it comes
to managing cloud. Ask key questions:
• Do they have applications they are struggling to manage on their
aging hardware platforms?
• Do they have a formalized incident response plan in the event of a
breach?
• Do they have a disaster recovery plan in place in case of an
emergency?
• Do they have an automated way to scale up and scale down a
development environment when infrastructure resources are needed?
• Do they struggle to keep up with industry-mandated compliance
policies?
• Do they have a plan for handling vulnerabilities related to shadow IT?
• Are they optimizing their current cloud spend?
• Can IT handle traffic spikes and heavy usage peaks?
• Is there a datacenter renewal, outsourcing push, or hardware refresh
coming? What is the strategy for each of these initiatives?
• Does IT drive business development or just keep things running?
These are all probing questions that will help pinpoint customer
deficiencies and define the offer roadmap down the road. Often customers
are simply in over their heads when it comes to migrating to and managing
their deployments in Azure.
In addition, many smaller customers may not even have the resources to
support a formal IT department. Reach out to them and see if you can help.
24
“
Customers tend to be generalists and
understaffed, so they have IT departments
that do everything—it’s a lot to ask a limited
amount of people.
Chapter 4 | Making the leap

Expect to tap into a mix of old and new customers and keep an eye out for
customers who are locked into contracts with traditional managed services
vendors. Those contracts typically run from 3-5 years and by the time they
expire, the customer may be ready for a real change.
There are also several business and IT events that result in opportunities to
pitch cloud managed services and modernize IT for the customer:
SOFTWARE END OF SUPPORT
• Without software updates, organizations become vulnerable to
cybersecurity threats and may be in breach of regulatory compliance
requirements—this is an opportunity to update a customer’s platform,
and potentially their applications
CONTRACTS AND LICENSING RENEWALS
• Rather than renewing current outsourcing agreements or on-premises
licenses, customers may be open to modernizing their support vendors
and technologies
DATACENTER CONSOLIDATIONS
• This is an opportunity to eliminate expensive datacenters, reduce CapEx,
and migrate customers to Azure
Beyond customer conversations, do outside research. Look for white space.
Gartner, Forrester, IDC, and 451 Research all have excellent resources to
determine what the cloud managed service market looks like now and in
the future.
“
We bet on our strong relationship with Microsoft.
We saw the fruits of [partnering with] Microsoft
and being one of the first in the CSP domain. When
I communicated that to any and everyone in the
company, they all got the feeling of ‘well, Azure is
the way to go.’
25

Talk to peers who are offering managed services. See if they have come out
with any reports on cloud managed services or pertinent industry trends—
especially in your region or market. Other partners are often willing to help
and may help form partnerships where skill gaps exist.
And don’t forget to talk to Microsoft. We have teams of people dedicated to
helping get our partners up and running with their Azure managed service
practice.
Everything being said, SI partners are in an excellent position to have a cloud-
based managed services dialogue with a customer, as these conversations
are logical extensions of professional service engagements. But a quick word
of advice: Pick an area of focus and stick to it. Very few partners have the
capabilities and resources to be everything to everyone, even if you think the
customers are clamoring for it.
26

2. Realign the organization
A managed services pivot will require commitment at every level of the
organization, from top to bottom. Based on our conversations with partners,
many suggest establishing a managed services practice as a separate
business unit with its own profit and loss (P&L) structure. This will enable
you to directly measure the success of the business without complicating
the finances of other units or dealing with conflicting priorities. Partner
recommendations include:
• Ensure buy-in from all top-line executives, stakeholders, and investors
• Put a managing director or C-level stakeholder—who has decision-
making authority—in charge of the transition
• Establish a team, solely focused on driving managed services business
activities—no overlap with existing business units
• Ensure commitment the bottom up as well—executives make the call,
but it takes buy-in from everyone to be successful
27
“It was a C-level conversation
when the decision was made
concerning public cloud—but
there was also a bottom-up
challenge to embrace the
public cloud.
Australia-based CSP partner

After the leadership team has made the decision to transition—and ensured
alignment company wide—it’s time to figure out how to compensate the
salesforce. Every SI company has their own way of paying their representatives.
What is consistent, however, is that the per-project compensation structure
associated with traditional SI partners won’t work for a cloud managed
services practice. For SIs, it will likely require a shift to consumption-based
quotas—whether it be per managed services SKUs, VM, percentage of Azure
consumption, etc.
Some SIs turned Azure MSPs have found success with the following activities:
• Sales incentives and contests with multipliers for multi-year agreements
• Paying higher commission rates if one-time projects have monthly
recurring revenue (MRR) services attached
• Altered payouts so that nearly all compensation is around driving
managed services while very little will be offered around traditional
professional services
• Compensation based on a percentage of customer’s Azure spend
However you decide to incentivize those who sell cloud managed services,
remember to keep them aligned to the company’s new direction and
focused on selling solutions and services that generate MRR. That may mean
considering a temporary “over investment” in compensation—especially in
the early days of your cloud managed services practice—to ensure alignment
and really incentivize your sales staff to push your new services.
28
“Recurring revenue should be
in mind for every business.

3. Build the practice
Based on the assessment of customer needs and market
requirements, SI partners should have a sense of the type services to
provide. Now it’s time to plan, build, and bring the offer(s) to market.
DEFINE THE SERVICES
The services shown on the next page do not aggregate an exhaustive list of all potential services partners
can provide to customers. But these are some of the common services Microsoft has identified as critical to
an MSP practice. In conversations with customers, you will likely uncover a few additional customer needs
that are not accounted for here.
The shaded cells in the table represent a configuration that would get a very basic managed services offer
off the ground. Beyond standard service bundles, partners may want to consider providing “freemium”
or promotional offers as potential “foot-in-the-door” deals. Good candidates for this include free cloud
assessments, IT health checks, or consultations. These services showcase the value you can provide to
customers while also teeing up future workstream opportunities to upsell additional offers into.
Ultimately, it’s up to the SI partner to decide how best to bundle services and sell them to customers. Some
partners choose an “a la carte” approach, some go with pre-configured bundles, and some build around
tiered support packages. While “a la carte” is still a viable pricing option for a cloud MSP practice, many
partners have found success with bundling their services and creating “SKUs” that consist of many services
together—presented as a single “product.” For more information on how cloud MSPs build and package
their services, check out the “Azure Managed Services Playbook for CSP Partners.”
29

30
Assessment
& Planning
Migration Deployments
Infrastructure Management
Monitoring
Cost
Optimization
Security Support
Config
Management
Backup & DR
Identity
Management
Automation/
DevOps
Application
Recovery
Lift and shift
Solution
design &
architecture
support
OS updates,
upgrades and
patching
Snapshotting
Subscription
management
ARM template
authoring and
deployment
Basic
infrastructure
management
(OS, compute,
storage,
network)
Usage and
spend analytics
Anti-virus/
Anti-malware
24/7 support
App
dependency
mapping &
visualization
Re-
platforming/
Re-architecting
Dev-test,
POCs and App
performance
testing
Password
resets
Managed
Backup (Short-
term)
User access
and RBAC
management
Continuous
integration &
deployment
Advanced
infrastructure
monitoring
(basic +
firewall/DNS/
load balancer
etc.)
Spend
and usage
forecasting
Security
and risk
assessments
Uptime and
response SLAs
Azure TCO
analysis
App decom-
missioning
Auto-scale
design and
deployment
Resource
configuration
and policy
management
Long term data
retention
User tagging
and change
management
Application
life cycle
management
Alerting/alarms
with response
SLAs
Tagging and
audit trails
Intrusion
detection and
remediation
System health
monitoring
Migration ROI
analysis
Compliance
and regulation
support
Audit log
management
DR planning
and DR drills
Single sign
on and
Multi-factor
authentication
Database
monitoring
Custom
invoicing
Security
information
and event
management
IT Service
and incident
management
Migration
planning Deployment
automation
Deployment
operations and
troubleshoot-
ing
Automated
failover and
restore
App
performance
monitoring
Capacity
planning
and resource
optimization
Web
application
firewall
Custom
control panels/
customer
portals
Log analytics &
alerting
Encryption
and key
management
Dedicated account management and architect support
Governance and planning
Compliance and regulation support

ALIGN TO ITIL
Another key component of a robust cloud managed services practice
is adherence to an industry-recognized IT service management (ITSM)
framework such as the Information Technology Infrastructure Library (ITIL).
ITIL serves as an excellent mechanism for partners to measure their service
delivery against a widely accepted industry standard and add credibility to
customer conversations.
The ITIL framework emphases on five core concentrations:
1. Service strategy
2. Service design
3. Service transition
4. Service operation
5. Continual service improvement
MSP partners agree with the value of ITIL alignment.
For SI partners unfamiliar with ITIL practices, we encourage you to learn more.
31
“
We implemented full, ITIL-based service
management. All the automation in the
world won’t help you if you don’t have a
solid framework of IT Service Management.
UK-based CSP partner

LEVERAGE EXISTING CAPABILITIES
Once the offering roadmap has been defined, it’s time to take stock of the
resources and skillsets you have in house. If you are an expert at standing
up high performance computing cluster, use it. If you have specific
industry or vertical expertise, continue to target those customers. If you are
extremely adept at building customer DevTest environments in Azure, that
is the perfect catalyst for having managed services conversations.
It will seem like you need to build the business from the ground up, but
that is not likely the case. Many SI partners have taken their in-house
expertise and applied that to the managed services space. In fact, many of
them parlayed that expertise into their unique differentiators as an MSP.
Potential assets to leverage on the journey:
• Strengths in the professional services and consulting space—will
enable you to more easily migrate customers from on-premises
environments to cloud
• The ability to deal with complicated legacy infrastructure and
simplifying/streamlining this for customers—can help open the door
to managed services conversations
• App development proficiencies—can enable your partners to assume
the management of the very applications they built, a high value
activity for customers who are not adept at maintaining complex
application deployments
Whatever your core competencies are, look for ways to extend those
strengths into your cloud managed services practice.
32

DETERMINE WHERE TO INVEST
Based on the services roadmap you define, you will have to decide on what
gaps you fill and the areas you invest in. In general, it is recommended
that partners expand their development capabilities, as DevOps and CI/
CD methodologies are vital to scale and streamline your operational
efficiencies.
There is also a lot of integration work that goes into making the
monitoring tools, reporting dashboards, and ticketing systems all “talk” to
one another. Connecting APIs and building IP around integrated systems is
beyond the ken of typical IT operations folks. From a tooling perspective,
developers can bring all the disparate tools together to provide the best
experience for customers and increase efficiencies internally. This is why
solid developers are so vital.
By incorporating development talent into the mix, you will also unearth
more about your customer’s back-end environments. This will help you
make better recommendations and add a lot of credibility to engagements
with existing and potential customers.
33
“
We’ve built a DevOps team that automates
the majority of our tasks, adding to the
bottom line. We’re always looking to
increase efficiency and automation tooling.
UK-based CSP partner

Depending on the services you are looking to provide customers, it will
likely make sense to pursue investments in technologies for migrations,
business continuity, firewalls, etc. Finding and assimilating the right
combination of tools is a common investment challenge partners cite. For
more information on tooling as it aligns to managed services offerings,
read the “Azure Managed Services Playbook for CSP Partners.”
Regardless of the makeup of your services portfolio, we also encourage
partners to have Microsoft-certified, full-time employees on staff. MCSE
(532, 533, and 534) + LFCS certifications are recommended, as well as
training in:
• Azure Fundamentals
• Intro to DevOps
• Infra as Code
• Automating Azure Workloads
• Azure Security and Compliance
• Azure Skills Initiative MooCs
• Gold and Silver competencies also come in handy and add a lot of
credibility to customer conversations
34
“
Investing in skills—PowerShell, Azure
automation, and security were money
well spent.

Some other considerations, especially for SI partners who are
unaccustomed to providing ongoing support services, include:
• 24/7 help desk capable of providing tier 1 support and proper
escalation paths to engineers and 3rd-party solution vendors
• Ticketing systems for tracking incidents, problems, customer change
requests, etc.
• SOCs that ensure customer workloads are always secure and compliant
• An NOC capable of managing hybrid deployments
• Billing portals with tight CSP integration
However, SI partners shouldn’t feel like they have to build every capability
in-house. Partnerships are often a superior way to fill skill gaps and provide
the best possible service to customers as it minimizes the learning curve.
For more information on forming strategic partnerships, check out the
“Form the right partnerships” section in this document.
35

EVALUATE TOOLS
Once you’ve determined the right tools to invest in, it comes time
to compare. While we will not cover the tooling conversation
in detail here, it is worthy to note that partners recommend
selecting solution providers who offer tool licenses that align to
your organization’s pricing model. For example, if you charge
customers per their Azure consumption, ensure the license you
pay for the firewall technology is based on a pay-per-consumption
basis. That way, you can pass the costs on to the end customer
and simplify the billing process for all parties, without having to
budget the firewall as a separate line item.
Here is a sample of some of the Microsoft tooling to leverage
when building a cloud managed services offering. Please note that
this table is not exhaustive.
36
DEPLOYMENT
Assessments
Azure Channel Pricing Calculator Azure TCO Calculator
VM Readiness Assessment Tool Operations Management Suite – Service Map
Migrations
Azure Site Recovery Azure Solution Architectures
SUPPORT
Configuration management
Azure Resource Manager Azure Automation DCS
Operations Management Suite – Automation and Control
Automation/DevOps
Azure Resource Manager Azure Automation
Azure Quickstart Templates
Backup and DR
Azure Backup Azure Site Recovery
Azure Traffic Manager
ID and access management
Azure Active Directory Azure Multi-Factor Authentication
Enterprise Mobility + Security
Cloud monitoring
Operations Management Suite Azure Application Insights
Azure Log Analytics System Center Operations Manager
Cost optimization
Azure Advisor Peek
Security
Azure Security Center Operations Management Suite

Here is a sample of some of the 3rd-party ISV tooling to leverage
when building a cloud managed services offering. Please note that
this table is not exhaustive.
For more details on tooling as it aligns to managed services
offerings, read the “Azure Managed Services Playbook for CSP
Partners” starting on page 14.
37
DEPLOYMENT
Assessments
Cloudamize Corent SurPaaS
RISC Networks CloudScape ATAData ATAVision
Migrations
CloudEndure Live Migration Risc Networks
Corent SurPaaS ATAData ATAVision
Cloudamize Racemi
SUPPORT
Configuration management
Puppet Enterprise Ansible Tower
Chef Automate
Automation/DevOps
Puppet Enterprise Ansible Tower
Chef Automate
Backup and DR
Commvault Veeam Disaster Recovery
Veritas Backup Exec
Cloud monitoring
DataDog Dynatrace
ScienceLogic New Relic
Splunk
Cost optimization
Cloudyn CloudCheckr
CloudHealth RightScale
Security
Alert Logic Barracuda NextGen Firewall
TrendMicro Deep Security
Ticket Management (ITSM)
Service Now
BILLING AND PRICING
Cloud management panels
CloudCheckr RightScale
CloudHealth Cloudyn
Racknap Autotask

FORM THE RIGHT PARTNERSHIPS
Partnerships are an excellent way to fill skill gaps and better serve
customers. A large part of the value that cloud MSPs can offer customers is
the ability to create advanced Azure services such as Business Intelligence
(BI), IoT, data analytics, and Machine Learning. You don’t need to shy
away from opportunities, even if you’re not an expert in the service area
that customers are asking about. When it doesn’t make sense to build the
capabilities in-house, form a strong alliance or subcontract to another
partner to ensure you can deliver.
For example, many partners work with 24/7 help desk outsourcers to
establish a “follow the sun” support mindset and meet the needs of
customers in disparate geographies.
Some MSP partners have created innovative approaches to providing
cloud managed services. An excellent example of this innovation is in
Western Europe, where several partners have created what they call a
partner consortium. It’s a tight alliance where each partner specializes in
a specific area—Azure, Office 365, SharePoint, etc.—and they maintain a
co-marketing, customer-facing presence. This way, if the customer comes
to the consortium thinking they are in need of a SharePoint solution, and
in addition realize a need for managed infrastructure, the partner has
a trusted and vetted ally to bring into the conversation. This symbiotic
relationship allows for each individual partner to focus on what they do
best, yet provide every customer with a whole product solution through
the power of the consortium.
38

39
Another innovative example is in the Netherlands where an MSP partner
has aligned to a large constituency of Microsoft Dynamics ISVs to deliver
managed infrastructure beneath their SaaS solutions. By leveraging this
co-marketing approach, customers are able to buy completely managed
Dynamics applications from top to bottom. This synergy enables both
partners to focus on their core competencies and provide a better
experience to customers.
In general, the world is moving to co-opetition, where playing nice and
making friends isn’t such a bad thing. Keep your eye out for opportunities
to partner with companies that may possess complementary skillsets to
your own.
AUTOMATE, STANDARDIZE, TEMPLATIZE
Automation and standardization are what really makes cloud managed
services hum. The only way to truly achieve the scale, efficiency, and
margins promised by cloud managed services is to script everything.
This is where the investments in developers who understand Infrastructure-
as-Code really pay off. Automation should permeate everything in an MSP
organization including assessments, migrations, ticketing, back-end break
fixes, service desk, billing, end-to-end business processes, etc.
Automation around provisioning and decommission infrastructure
resources is only the beginning. SI partners drive high-value efficiency
gains as they begin to templatize activities within Service Operation and
ITSM. Automating the ITIL processes is where you really start to see the
savings and efficiencies.
“
Move away from ‘every project is a
snowflake’ into standardizing delivery.

4. Crunch the numbers
Building an MSP practice will require significant effort in terms of time and money. Be sure to leverage existing revenue streams as cash cows to help
cover the costs of standing up the managed service business. Here is an estimated breakdown of the financial investment required to establish a
minimally viable practice:
40
Source: Microsoft survey of Cloud MSPs, N=50
The numbers on this page represent the cost to set up a minimally-viable MSP practice that can support 5-10 mid-
sized production customers at launch. The numbers are representative for an organization with US based employees.
This information should be used for illustrative and educational purposes only.
7 MONTHS
TO LAUNCH
13 MONTHS
TO BREAK EVEN
20 MONTHS
TO PROFITABILITY
SALES STAFF
Solution Seller (2-3)
TECHNICAL STAFF
Technical support (3 -6)
Azure architect (1-3)
MARKETING STAFF
Marketing
Manager (0-1)
13 months to break even
TOTAL INVESTMENT
$1.1 - 1.5 MILLION
6 - 10 staff
STAFFING
$800 - $1,000
per year
TRAINING
$8,000 - $12,000
per year
MARKETING
$50,000 - $60,000
per year
SOFTWARE TOOLS

5. Set the price
There are a few pricing strategies
partners can utilize, each with its own
merits and drawbacks. But ultimately, it’s
important to align your pricing strategy
to customer expectations and take their
feedback into account.
We have found that more and more
cloud MSPs are charging per percentage
of Azure spend in a tiered pricing model.
This allows for partners to account
for the variability in costs if there is a
spike in Azure consumption one day
and a drop-off another. MSPs with an
extremely mature automation practice
may be able to achieve a fixed pricing
model without significant exposure to
risk. This model provides customers
with coveted financial predictability and
partners with an excellent opportunity
to achieve greater margins. A summary
of pricing options can be found below.
41
A-LA-CARTE
Each function: support,
backup, monitoring, etc.,
has a separate SKU and
consumption meter -
most common for SMP
focused MSPs
PER USER/DEVICE
Typically used for
Managed Apps/Mobility
offerings or when
building per user, finished
services in Azure - most
common pricing model
used for applications such
as Magento, Sitecore,
Sharepoint online, and
Power BI on Azure
PER VM/NODE
Managed Service tiers
charged per VM/Node/
Instance - most common
pricing model, especially
for infrastructure services
PER PROJECT/APP
Commonly used for
finished solutions
abstracted from the
infrastructure - typically
has the highest margin
and usually involves some
degree of intellectural
property development
% OF CLOUD SPEND
Managed Service tiers
charged as percentage of
underlying cloud spend
- faster growing price
model; typically used by
born-in-the-cloud MSPs
FIXED
Provides customers
with greatly desired
predictability - likely only
possible for extremely
standardized offers where
variable costs are made
near-zero via automation

6. Establish a learning process
Continuous learning is the key to success. With new services from Azure—seemingly launching daily—it is
imperative that partner teams keep a pulse on what’s coming. This requires a close relationship between your
engineering teams and Microsoft. Hook into trainings as often as you can and consider having dedicated
resources that are specifically built to say on top of new technologies. If possible, dedicate resources to building
relationships with Microsoft product teams. They will have a firm grasp on relevant caveats, the product
roadmap, etc. This will also enable you to provide feedback on the product lifecycle, creating better solutions and
experiences for all.
Microsoft is likely not the only solution provider your organization will utilize. Ensure you are staying up to speed
on 3rd-party vendor trainings and look for ways to better integrate those tools into existing Azure technologies.
Establish an internal SharePoint where engineers can collaborate and communicate. If a customer issue arises, it
may be critical to crowdsource the fix so that you can get the customer back to green as soon as possible.
Stand up an ITSM knowledge base and learn from customer tickets. If you find there are recurring incidents and
problems, automate those issues out of the business.
Learn from customers and measure against customer satisfaction (CSAT). As a service provider, good service
should be your mantra.
Figure out what matters most to customers and to your business. From there, establish the right key performance
indicators (KPI) to measure your organization against that definition of success.
And remember, as you continue to learn and mature your services, be sure to develop a documented and well-
structured process for ensuring continued learning across your organization. This push needs to come from
leadership, but should be a value that extends to every part of the business. Continuous learning and evolution of
a cloud MSP’s knowledge base is paramount for a successful practice.
42

7. Get certified
43
Beyond the Microsoft certifications mentioned previously, SI partners should look to
get certified against industry standards by independent and accredited entities. This
will add validity to the new cloud MSP practice and credibility among customers.
Many partners we talk to have accreditations—SOC 1/SOC 2 to name a couple. Some
have also invested in tools to enforce standards such as HIPPA, PCI, FedRamp, etc.
Compliance can be a differentiator for partners who have a deep understanding of
the regulatory landscape in their local markets and is a space that is garnering more
and more attention every year. With greater consideration being paid to customer
data protection and privacy rights—example: GDPR—partners are in an excellent
position to get in front of the market and address these concerns for their clientele.
It is also worth noting that Microsoft has the most compliance accreditations of
any major public cloud player. Partners automatically inherit this credibility for any
customer workloads running in Azure through their partnership with Microsoft.
Check out Microsoft’s Trust Center to learn how you can pass this peace of mind on to
your customers.

8. Go to market
44
You’ve assessed the market and identified your niche. You’ve determined what investments to
make to build an offer. You crunched the numbers and set the price. You build a mechanism
for continuous learning and improvement. You’ve added credibility to your practice through
compliance accreditations and certifications. Now, it’s time to enable the salesforce and bring it
all to market.
Marketing—inbound and outbound—is about increasing awareness and generating leads.
Sales enablement is about training the salesforce on the new messaging and positioning so
they can pursue those leads—even ones from an existing customer base. Even if you intend to
launch your Azure MSP offering with a subset of your sellers, it is important to have some kind
of readiness planned for your core solution sellers and technical sales reps. Be sure to engage
in Microsoft sales training so sellers feel competent telling a cloud-oriented story and can
adequately position your organization’s services on top of Azure’s cloud platform. Prepared with
the proper materials, they will be able to deftly answer customer questions on the new offerings
and speak to the competitive differentiators your practice boasts.
• 49% of partners work with other channel partners in an effort to offer a more complete
solution, an IDC study concludes. IDC recommends having a dedicated salesforce trained in
consultative selling.
Remember, a new practice means that only a small portion of your marketing assets can be
leveraged moving forward. After developing your offer, you’ll need to reinvent your value
proposition for any go-to-market (GTM) efforts as part of your cloud MSP marketing engine.
Many SI partners will need to implement 180-degree changes to their marketing and sales
muscles. Furthermore, in addition to clearly promoting your added value as a cloud MSP, your
marketing materials will need to align closely to Azure, making sure to mention not only your
value proposition but also the value of Azure’s industry-leading cloud platform.

45
The marketing and sales enablement activities begin before the offer
is formally launched in the market. Below is a checklist comprising
common marketing/sales enablement practices that often come
before or accompany a wide, public market launch:
PRODUCT MARKETING
• Identify customer and buyer personas
• Define value prop, messaging, and positioning for each persona
• Outline core offer for each persona
• Create pricing structure
• Build a customer-facing pitch deck
SALES ENABLEMENT: READINESS AND TRAININGS
• Assess Inside-sales/Tele-sales readiness
• Ensure customer care team readiness
• Guarantee solution seller readiness
• Ready your Solution Architect
• Prepare your Partner/Channel
• Announce your offering internally, company-wide
• Create a sales toolkit

46
LAUNCH PLANNING
• Create your digital assets—website copy and design, landing pages, offer pages,
pricing, testimonials, call to action
• Engage in search engine optimization (SEO) and search engine marketing (SEM)
• Market via social media platforms such as LinkedIn to promote thought leadership
and leverage contacts
• Write blogs and white papers
• Generate press releases
• Host a launch event and conferences
POST-LAUNCH DEMAND GENERATION
• Create banner ads
• Engage in Tele-sales campaigns
• Host webinars
• Begin email campaigns
• Attend industry roadshows and conferences
• Document customers case studies and success stories
But don’t stop your marketing activities here. Become a thought leader. Don’t
spend all your time talking about yourself to customers. Create engaging content
that isn’t a sales pitch. This will establish credibility, position you as a market leader,
and improve your standing as a trusted advisor. Some partners create podcasts.
Some partners draft magazines and eBooks. Whatever your flavor, ensure it’s
unique. This will help you stand out amongst the crowd and demonstrate your
expertise to the buyers who matter.
If in doubt, always reach out to Microsoft. We are here to help our partners
wherever possible on this cloud managed services journey.
Microsoft got us in contact
with a technology marketing
firm in the Netherlands to
help us workout a new web-
site, new leaflets, new market-
ing materials, new marketing
campaigns, all fully based on
being an MSP
.
“

MSP_Playbook_SI_070817_v2.pdf

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