Born in the cloud refers to a new breed of company unencumbered by legacy business models. These are companies that are set up from the start to build onto and in the cloud. Are these companies the way forward for the channel? What does this mean for established MSPs?

Jay McBain is an industry analyst for Forrester Research. He speaks and writes extensively about the shadow channel: emerging companies that don’t identify as MSPs, but are starting to encroach on the MSP space. These include born in the cloud companies, SaaS consultants, software vendors, and systems integrators.

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What’s Going On

[01:45] Karl has been working remotely and enjoying New Orleans. He’s also getting ready for his roadshow with Richard in a couple of days.

[02:00] Richard recently went to Edinburgh, Scotland for the Autotask & Datto First Look Tour.

[02:18] Last year Autotask and Datto had a huge merger, so now they are on the road explaining what the merger means.

[02:40] There are now 13,000+ MSP partners under their umbrella. They have 1,400 employees. They’re in 198 countries.

[03:05] What does this mean for MSP partners? Datto – Autotask are 100% MSP-focused. No direct sales.

[03:48] What does this giant merger mean for everybody else in the industry? There are companies that use one of the products or the other.

[04:21] Datto’s Rob Rae says the new company is committed to being an open organization that works with any technology.

[04:52] It’s their goal to make products that are easy to deploy, manage, and support. They want to make it as easy as possible for MSPs to choose their products.

[05:07] Karl says the merger was what Autotask needed to do. And for Datto, it definitely opens up new market opportunities beyond backup.

[05:59] In fact, Richard points out, Datto very clearly told partners at the event that they’re not a “backup” company. They are data protection and security company.

[06:30] At, you can choose your own disaster and get tools for marketing to clients.

[07:11] Datto and Autotask have combined their events into DattoCon. Karl points out that Automation Nation runs for the exact same dates as DattoCon, and this would not have been an accident.

[08:37] Microsoft is reorganizing and breaking up the Windows division.

[09:02] Now instead of Windows and devices, it will be Experience and devices, then cloud plus AI.

[09:58] Microsoft is making most of their money on the cloud. This reorg sends a very clear message to MSPs about where the company’s priorities—and market opportunities—lie.

[10:19] Azure is the moneymaker for Microsoft. Microsoft is leading in cloud revenue at $18.6 billion.

Interview with Jay McBain: How ‘Born in the Cloud’ Is Changing the MSP Business Model

Jay McBain, channel analyst, Forrester
Jay McBain, Forrester

[16:21] Jay has been in the channel for about 25 years. He works at Forrester now.

[16:52] What is ‘born in the cloud’? The born in the cloud model doesn’t rely on front or back-end margins.

[17:28] There’s a ton of downstream opportunity in the born in the cloud model.

[18:03] For every cloud deal, there’s a lot of integration, implementation, and other things that need to happen.

[18:29] The margin is around 40%, sometimes as high as 80%. It’s a lucrative business, and demand currently outstrips supply.

[19:23] Shadow channels go beyond born in the cloud. They aren’t part of the traditional channel.

[20:42] These are companies that aren’t traditional service providers, but they are competing in the deal.

[20:59] If you would like to see an example, go to Dreamforce, the biggest technology show in the world. This is the shadow channel.

[21:29] You won’t see these people at a traditional CompTIA or CRN event.

[21:40] Over 90% of these downstream opportunities are project-based. It’s not recurring revenue. It can look kind of like recurring revenue because stickiness is very high, but it’s not quite as predictable.

[22:38] 65% of tech decisions are made outside of IT today. And Forrester is seeing them hire shadow channel companies instead of their MSPs.

[23:20] Traditional MSPs have to change their business. You have to expand your reach beyond the IT department. Get in front of the line of business.

[23:57] You need five levels of specialization: the sub industry, line of business, geography, segment and tech stack.

[25:31] Some companies have started successful ‘born in the cloud’ segments to their business. Others have acquired or been acquired. For example, digital agencies and accounting firms are acquiring MSPs.

[26:31] Or you can establish partnerships. Set up a channel program and look like a vendor and have alliances. You can add value on the technology side that they don’t have.

[27:08] Traditional MSPs are not going to disappear but they will never grow to be a majority of the market.

[28:52] Parting advice: Understand the cloud service provider email. Hyperspecialize.

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