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Backup vendors target a growing MSP market

MSPs aren't just a way for backup vendors to reach SMB customers, as enterprises are finding good reasons to outsource IT functions to third-party providers.

Backup vendors are capitalizing on customers' preference for Opex over Capex by leaning hard on managed service providers.

This year, multiple backup vendors have called out MSPs as a market they are specifically targeting. While not end customers themselves, MSPs consume vendors' products in order to provide IT functions such as backup, infrastructure and security as services to other businesses. Enterprise IT vendors in general -- not just those involved with data protection -- are seeing growth in this market segment and seizing the opportunity.

Kaseya's 2021 IT Operations Survey found that 59% of organizations outsource some IT functions to MSPs. Backup management was the most popular, with 21% of respondents saying they pay an MSP to handle it. Cloud infrastructure management came in second with 19%, and IT security and network monitoring each came in at 17%.

The survey had a total of 943 participants from company sizes ranging from less than 50 employees to more than 3,000 employees. More than half of respondents (56%) worked at companies of 500 or fewer employees.

This month, AvePoint will launch a partner program to incentivize MSP customers, something that has been long overdue, said CEO TJ Jiang. AvePoint, which focuses on data migration and protection for Office 365, announced its intent to merge with special-purpose acquisition company Apex Technology Acquisition Corporation in November.

It expected the deal to close in the first quarter of 2021, but regulatory review delayed it until the end of June. With that resolved, Jiang said he can finally move forward with his plan to tap into an important market.

"We're targeting managed service providers as a key partner and buyer in the market. There's opportunity to accelerate that through acquisition," Jiang said.

XenData, which provides LTO active archive products, also made an MSP move this month by launching an S3 interface and the ability to consolidate data across multiple archives into a single pool. XenData has mostly media and entertainment customers and very few MSP customers, according to CEO Phil Storey. This upgrade can open up that market by providing MSPs a way to offer archive as a service.

Earlier this month, Acronis founder and CEO Serguei Beloussov voluntarily stepped down to allow Patrick Pulvermueller, the former president of GoDaddy's partners business, to take his place. One of Pulvermueller's objectives as the new CEO is to expand Acronis' partnership program and capture more service provider customers.

Not just for SMBs

Data protection vendors that focus on service providers is nothing new, said Christophe Bertrand, senior analyst at Enterprise Strategy Group, a division of TechTarget. Some vendors, such as StorageCraft, are "channel-only" and do not sell their products directly to end customers. When Arcserve merged with StorageCraft in February, one of the main incentives of the deal was the extensive network of partners and MSPs StorageCraft had built. Veeam and Commvault are two other examples of data protection vendors with strong reseller incentives, Bertrand added.

"Look at Veeam's strategy: It has a strong service provider program and toolset. It's a cloud service provider and managed service provider product, to an extent," Bertrand said.

However, there is a sense of urgency to push harder into the MSP market now, said Marc Staimer, president of Dragon Slayer Consulting. Common knowledge used to dictate that SMBs, which had fewer IT resources than enterprises, would turn to MSPs. That's still mostly true, but enterprises are now embracing MSPs as well, Staimer said.

It's a defensive move for vendors. They're losing market share to the cloud.
Marc StaimerPresident, Dragon Slayer Consulting

The reason for this is the Opex model made popular by the cloud, Staimer said. Cloud services allow organizations to pay just for what they use and incur charges on a regular basis. This simplicity and lack of upfront cost has pushed customers to seek similar consumption models for other IT functions, even if it ultimately costs them more. Storage vendors such as Infinidat and Pure Storage have introduced storage hardware-as-a-service offerings to address this demand.

Using storage as an example, the cheapest option is to buy your own, followed by storage as a service, then followed by storage in the cloud, Staimer said. Organizations are leaning toward the latter two options now because the extra cost is worth being able to avoid overprovisioning storage capacity and hardware refreshes, Staimer said.

Additionally, it's much easier for a new company to start in the cloud and tap MSPs for IT than to make the upfront investment for a data center, Staimer said. Backup is the most common IT function customers outsource, and demand for database, disaster recovery and data warehouse services are also growing rapidly, he added.

"It's a defensive move for vendors. They're losing market share to the cloud," Staimer said.

Another important factor pushing customer demand for IT services is the desire to reduce IT burden, according to Staimer. There's a shortage of people with IT administration skills or knowledge of legacy languages and architecture. As people with these skills retire, more and more organizations are finding that offloading backup, security, networking and infrastructure management to a third party makes more sense than paying highly competitive salaries to replace them, Staimer said.

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