Nearly every enterprise has at least one relationship with a managed service provider today and it’s very likely that relationship has evolved over the years. Get ready, it’s changing again and very much to the advantage of the enterprise.

Managed services has its origins in the beginning of the tech market when companies would turn to a reseller to not only integrate but manage the finished solution. Reselling begot hosting in the late 1990s as the Internet began to crossover from government system to the foundation of our lives, as it exists today. Hosters played two key roles: granting individuals and companies access to the Internet and renting server rack space so corporate applications (mostly web sites) could have a point of presence (POP) on the Internet. This business evolved from rack hoster to rentable IT admins, who took on the tasks of managing the hardware, OS and increasingly the middleware and applications that ran on those servers.

The hosting market was a lucrative and relatively well protected space until cloud computing came along. With the introduction of Software as a Service, applications could now be delivered and managed directly by the software provider themselves. Salesforce led this new market disruption in typical innovator fashion by targeting smaller firms, with lower enterprise-grade expectations and line of business budgets. By the time SaaS started penetrating the enterprise market, its multitenant, highly scalable deployment model and new pay-per-user business model was hard for hosters to match and the fight was on.

Public cloud platforms added to the competitive threat by extending the SaaS basics to hosted applications. Now both application outsourcing and the core business of hosting were under threat.

A surface examination of these developments might lead you to conclude that the days of the MSP were looking pretty gloomy but that’s actually far from the case. It’s simply another evolutionary point in the business lifecycle. While the volume of traditional hosting and application outsourcing opportunities diminish as more applications shift to SaaS or cloud platforms, we aren’t making a binary shift and nor are we getting a free ride from a management and monitoring perspective.

Look a little deeper and you’ll find that a large percent of corporate workloads don’t easily fit onto cloud platforms, can’t be cleanly replaced by SaaS and won’t go through such a binary change. In fact the definition of an application is shifting and, for most businesses, already have. Take, for example, the common business process of ecommerce. Is that a single application? For most companies, absolutely not. It’s a workflow that blends together multiple applications including ERP, CRM, commerce, machine learning, mobile and web, content management and many other elements. And if your company has been around more than 10 years it’s highly likely you have some pretty customized elements in that mix. And it’s a workflow we are constantly refining to stay competitive, improve customer satisfaction with and adapt as end users shift from web-centric to device-centric.

So given the changes we are seeing in applications and the shift to cloud that is taking place, what is the end result – a highly blended mix where certain elements are shifted to SaaS, others moved to cloud platforms and others that can’t make the move but must continue as part of the mix. According to Gartner, Inc., by 2018, more than 40% of enterprises will have implemented hybrid data centers, up from 10% today.[i].

Given that we need to accelerate the evolution of this blended model to keep pace both competitively and with our ever-changing customers, what’s the best use of your limited development and IT staff resources? You will pick up some bandwidth as the management of SaaS apps shifts to the SaaS provider and of the infrastructure below the elements you can shift to cloud platforms. But the integration, evolution, security and need for more agile UX improvements all remain. And whether you put your applications on hyper-scale public clouds like Azure or on more localized offerings such as those provided by most MSPs, you still have to manage the Cloud Handshake.

Looking at your task list and cross-correlating this with your IT staff bandwidth, you’ll likely draw the conclusion that managing the Cloud Handshake falls low on the priority list. And this is exactly where the MSP can add the most value. And exactly where their business models are evolving.

As pointed out in this white paper from Hosting.com, the future of the MSP is in managing the blended IT environment. The reality is that your deployment portfolio is evolving to a mix of in-house, hosted, SaaS and multiple cloud platforms. And managing this mix isn’t your core competency and needent be your priority.

MSPs including Datapipe, Rackspace, Tieto and many others are evolving their business models towards managing this mix so you can focus on the things that are unique to your business. Datapipe, one of the pioneers of this business model moved early in the cloud market to embrace the change that was taking place. A traditional hoster with racks to fill and traditional business model to protect, shifted its positioning in the market to one who managed your workloads running on the hyperscale public cloud. The collective response from the MSP community: huh? That’s suicide.

Far from it. In fact, the prescient move was well crafted in an understanding that cloud infrastructures were best suited to modern application architectures and there were a lot of enterprise apps that didn’t fit this model. By positioning themselves as experts on hyperscale public clouds, they were in a position of credibility to help customer move the right apps over and shift the wrong ones to their traditional hosted and localized cloud offerings. While they arguably gave up some lucrative workloads to a disruptive competitor, they secured their traditional hosting business in a blended world. And earlier this year, Datapipe expanded this business model to Azure.

This pioneering move is now becoming a groundswell among the MSP community as leading hosters shift their business models to blended hosting, supporting not just the leading public cloud platforms but helping you manage the Cloud Handshake with SaaS as well.

We’re lending a hand with this transition by providing tools and services for you and MSPs to manage this blended reality. Our Operations Management Suite, Azure Stack, newest version of SQL Server, Azure Active Directory Premium, Visual Studio Online and StorSimple are all natively heterogeneous solutions that give you consistency and manageability across blended deployments, making native hybrid application design, advancement and delivery, simpler and more productive.

So the question to ask yourself now is how are you allocating your precious internal IT resources and how are you leveraging your MSPs partners? Are these relationships optimized for the evolution both you and the MSP market are going through? If not, it might be time to start revisiting your model.

Next month at our Worldwide Partner Conference in Orlando, we’ll be evolving our partner program to help empower this shift and help you get even more value out of your Microsoft investments — both our services and the people who help you leverage them – our partners. If you are a partner or considering becoming one, now is the time to register for this important event. I’ll be leading a session that will go into more depth about this evolving business model and you can read my prior research on the topic, by visiting the Forrester Research web site.

It’s an exciting time for everyone involved in the shift to modern apps and the role of the MSP has never  been more important.

[i] Gartner, Use Hybrid Data Centers and IT Service Continuity to Enable Digital Business, June 9, 2015. John P Morency, David J. Cappuccio and Rakesh Kumar