Managed service providers (MSPs) typically see margins from just 3 to 7% reselling cloud services — but there is always potential to increase that number. MSPs and resellers should ask themselves how they can optimize these margins and what potential they have for growth.
Beyond growing Amazon Web Services (AWS) margins, MSPs may be able to scale volume or add services for their customers. Understanding the most critical drivers of margins for MSPs and resellers will enable maximum returns and also improve business growth. MSPs can review business processes and determine where they can become more cost- and time-efficient.
Growing AWS Margins: How Do You Get Started?
Billing structure is at the core of the AWS reseller experience. This is an ideal place for MSPs to start when looking to optimize margins. Cost allocation and management is one of the biggest opportunities for resellers and end users to recognize cost savings, but it is also one of the most complicated pieces to manage.
As AWS resellers consolidate billing for multiple accounts within their management console, the task of passing appropriate costs along to end customers creates an interesting challenge. While grouping accounts ensures everyone pays the lowest rate possible, it also means individual accounts can end up with lower rates than they should — which is less than ideal for resellers and MSPs.
Optimize Your Margins with Cloud Management
A cloud management platform like CloudCheckr CMx can help make cost allocation easy. “List Pricing” ensures that a single AWS account will pay for its fair share of AWS resources while enabling MSPs and resellers to maximize their margins. Blended and unblended rates also create a lot of complications in this area.
Here are four key factors that can help you optimize your AWS margins as well as what CloudCheckr offers in each area:
1. Pro Forma Cost
Knowing what your customer usage costs would have been if they weren’t incorporated within Consolidated Billing Families should affect how you bill them. List Cost visibility and control within CloudCheckr enables MSPs and resellers to factor in custom variables that ensure fair costs for customers, while allowing them to realize cost savings for account families.
2. Reserved Instance Unsharing
Reserved Instance unsharing can help resellers manage and optimize Reserved Instances across payee accounts. As a result, this facilitates RI allocation to account families based on customers, to minimize the potential for unused or wasted instances. Properly allocating RIs within payee accounts ensures that MSPs achieve the benefits of discounted rates.
3. Pricing Tier Uncompression
Pricing for AWS services like S3, EC2 Data Transfer, CloudFront, and others are tiered, decreasing in price as additional accounts are purchased. Although savings of scale (as additional accounts are added) are unlikely to cause large increases in margins for uncompressing service fees, business support cost uncompression is where MSPs and resellers can really see greater opportunity for growing margins. Because they must buy AWS business support for an entire consolidated billing family at cost for all accounts, uncompressing support charges can help resellers see the greatest amount of increase in margins. Custom Charges within CloudCheckr enable resellers to bill payees for the appropriate amount, while increasing margins.
4. Opportunistic RI Purchasing
Anticipating end customer needs can also facilitate opportunities for MSPs to buy RIs for their payee accounts in advance. Buying RIs at the payer level for a portion of anticipated account usage, while calculating pro forma cost for end users, can enable higher reseller margins. Historical usage data and purchase recommendations within CloudCheckr can help MSPs make more informed decisions about buying instances safely and efficiently.
Grow Margins and Increase Profitability with CloudCheckr
CloudCheckr CMx enables MSPs and resellers to pull in their Detailed Billing Report at the master account level to gain visibility and control across their environment, and end customers’ environments. Flexibility in billing through custom cost capabilities ensures accurate and fair costs for end users and enables increases in margins for MSPs as well.
Comprehensive reporting within the CloudCheckr CMx dashboard offers many perspectives on how exactly MSPs and resellers benefit from things like pro forma list price, RI unsharing, cost uncompression, and opportunistic RI purchasing. Monthly Summary, List Cost Analysis, and Savings Analysis reports make it easy for MSPs to see and share results quickly.
Ready to Bring New Cloud Services to Market?
Managed service providers and resellers are uniquely poised to help enterprises grow their cloud practice. However, the market for managed cloud is competitive, and service providers need to find ways to stand out from their peers.
Now you have an idea of how to grow margins on the cost allocation side of things. But what services can you give customers that will add value to their experience and increase their loyalty?
Our latest eBook, 36 Managed Cloud Services That You Can Bring to Market, breaks down the cloud services MSPs can offer to meet each and every customer where they are. You’ll learn how to:
- Optimize customers’ cloud costs and resources
- Provide customers with more accurate and transparent billing
- Deliver comprehensive security and compliance monitoring
- And more!
Download the eBook to learn how to bring these services to market and what tools of the trade you need to improve operations and increase customer loyalty.
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