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Overview
📖 AWS re:Invent 2025 - Next-gen MSPs: From service providers to strategic partners. (PEX102)
In this video, AWS explains how partners can evolve from basic resellers to strategic MSPs through a five-stage maturity model: Early, Emerging, Established, Market Leader, and Strategic. The presentation details how full-stack MSPs achieve higher profitability, with Next-Gen MSPs earning $4.90 revenue multiplier and 55% gross profit versus $2.50 and 25-30% for Generalist MSPs. Key growth drivers include automation, industry specialization, and compliance services. BCG analysis shows 3-4x ROI over 5 years with 2-3 year payback periods. The session concludes with three action steps: assess current state, build investment plans, and connect with the AWS MSP team for resources like the Accelerated MSP Build Workshop.
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Main Part
Understanding Managed Services and Customer Needs: From Definition to Workload Growth
Thank you very much. We'll be talking about next-generation MSPs and how partners can move from being just a reseller or service provider all the way to becoming strategic partners. If we go ahead and move to the next slide here, we can see the agenda. We'll be going through a few high-level things at the beginning like the definition and maturity model, but we'll also have some calls to action as well.
Let's start with the basics. This is how AWS defines managed services. It's an engagement where the partner is actively managing AWS accounts, services, and workloads on the customer's behalf and providing them with 24/7 management and support. When we look at most of our partners across the industry, we see lots of different partners break into different areas. We have the full-stack managed service provider, but we also have the generalist managed service provider. Usually when we see these full-stack managed service providers, they started at that generalist level. Then they started adding one, two, or three things in the full-stack area. Then all of a sudden they can do everything at the full-stack level, and they still maintain what they say at the generalist level, which basically becomes table stakes. It's just something they have to do, and they don't even really talk about it anymore. They're talking about their differentiated offerings, their industry offerings, their sustainability offerings.
This ties directly with our customer needs. When we look at what customers say, they're looking for trusted advisors. By generating these long-term agreements with your customers and really building trust, you as an MSP become that trusted advisor. They also build everything secure from the very beginning. Everything is scalable from the very beginning. They have the technical mastery so that customers can ask them any questions and they'll quickly get an answer. Finally, they provide that comprehensive protection that can keep customers for a long period of time and allow them to actually come to you and feel comfortable asking for and getting improvements and changes.
When we look specifically at workloads on the MSP front, we see a drastic change and growth when it comes to those workloads. First, an MSP joins the picture. There's a brief stabilization period that you can see at the beginning, where maybe the MSP reconfigures things and finds out the customer bought wrong things or things might not have been configured correctly. After that, that's the first period of earning trust with that customer. We now see a period of growth that can be okay, now let's scale things up, let's get new workloads. Then they'll go and continuously optimize. Once again, there's another reduction in spend from that customer standpoint, so they can earn trust once again with that customer. Then they reach an operationalized steady state where now ideally they're spending the exact right amount, and now they can go and win another workload at that same customer. They continually do this, continually improving these customers' organizations, basically one workload at a time.
The MSP Maturity Model: Five Stages from Basic Cloud Reseller to Strategic Partner
When we look at our MSP Maturity Model, it's a structured framework that will assess and benchmark the capabilities and performance of the partner. It's really important because it allows us to create curated enablement. We've worked with lots of different leaders across the organization. We've worked with lots of technical folks to create dedicated enablement for partners in the different stages. We also can clearly align benefits to each one of these stages, and it helps us more easily validate partners, ideally identify where they are, and provide them with the just-in-time resources that they need.
When we look at the maturity model stages, there are five of them. It starts with the early basic cloud reseller, and it goes all the way to the strategic partners and GSIs who are focused on that digital transformation and consulting. We'll dive a little bit deeper into each one of these, with the first being that early or that basic cloud reseller. They have that ability to do capacity resale. They do basic account management and billing support. They don't have any pure play managed services. They probably do resold support. Maybe they have one person on the support side that can answer questions for them.
Really what they're looking for to move to that next stage is they need to start creating that business plan. Train your team, build a cloud operations team, finalize your support offerings on top of resale. Start hiring a couple of people that can answer those questions. Define what your actual target segment and positioning is because then that will help you with all of these different areas. All of these different maturity stages that you'll see are defined and broken down into really these four areas that you can focus on as a business.
When looking at key performance indicators that early stage partners should track to move to the emerging stage, there are several metrics you can define and measure. First is your ACE engagement rate. You need to build and maintain your opportunity pipeline. As you create new offerings, make sure those new offerings are in AWS. Launch those opportunities and share those details because then you'll start coming up for more service level engagements rather than just the resell engagements. As a company, you should also be looking at the number of customers you have transitioned. Have you got them on some sort of basic support package? Have you got them on basic managed services? From a customer satisfaction standpoint, what we see as partners go up this maturity model is their satisfaction rates go up and their retention rates go up. So it's very important that you're tracking these as well to ensure that you're doing the right things.
The next stage is emerging. This is really the reseller that has support services or lightweight services. Of course, they still have that capability to do the resell, but now they've gone as far as getting a service offering foundational technical review approved. So they have that validation from AWS. They have limited support services, primarily we see it around backup, disaster recovery, and firewall security. It becomes about a transaction-based relationship. We're going to bring you on board, we'll get you everything set up, and now we're going to stand back and let you call us if any problems actually come up.
What we want to see as you're moving up to the next stage is actually expanding to a horizontal support model, actually going and starting to build some automation and tooling. If you don't build the automation tooling at this level, you're going to continually struggle as you move up the stack. As you get more customers and more complicated customers, you are going to struggle being able to handle that number of tickets that you'll get or those solutions that need to be done. Then continue with the staff development. Maybe those people in the beginning were just doing those level one tickets. This is an opportunity that you can begin upskilling them. We have an AWS managed services training course now with a badge that partners can take and use to upskill their teams and have them grow to be ready to provide those extra levels of services.
When we're looking at KPIs from this standpoint, we start looking at what your managed services revenue looks like. What sort of customers do you have on a recurring revenue stream instead of maybe a yearly revenue stream? What sort of service adoption and coverage do you have? Are you upselling customers from maybe your basic package to now your services package? Then of course, maintain the operational side of the business so you're prepared as you continue to gain more customers. If your SLAs start to suffer, you need to figure that process out. You need to automate more things. So it's very important that all of these different levers are balanced so you're prepared to continually grow your business.
Then we move to the established stage, and the established partners are services partners with a horizontal based managed services offering that works across all industries, primarily focused on infrastructure. This is when customers start feeling like the MSP is their own IT shop. You are an extension of their business, and this is where we really start seeing the retention rates increase. They have well-defined automation and well-defined ITSM processes. These are the partners that we look for that are in our managed service provider program today.
As you're moving up, this is what we're looking for. We're looking for partners to start adding things like generative AI, data, and analytics. We want them to deepen their automation. We want them to start thinking about industry vertical solutions. Where is your customer base that you've acquired so far? Double down, triple down in those areas and start developing specific offerings for that. Then also specialize in industry regulations. Industry regulations are very complicated, and depending on the segment that you're working with, this can be an extremely large value add to help them navigate that regulatory environment and then ultimately offer compliance as a service to those customers.
When we move into this area, we're looking at how you can expand the service portfolio, how much you're leveraging AI and automation, and how well you're upskilling your talent. Because at this level, you want to continually upskill so you're always on the forefront of technology.
The last thing that you want is when you're building that trusted advisor relationship with your customers, something new comes out, they call and they want it and you say, we don't know how to do that. That's the last thing that you want because now that customer will start going and looking for someone that can, and then that can be a slippery slope where they start moving everything to them. So that upskilling of talent is extremely, extremely important.
And the final one is the Market Leader. The Market Leader typically goes to market with a solution-based approach. They have cloud native development, they do management of business applications, and they can fully handle Governance, Risk, and Compliance. And so they really are transforming into a full level or full-stack MSP where they can create tailored solutions for industries. They co-innovate with AWS. They really shape the industry direction with AWS and they even start moving into areas like sustainability, green IT solutions, and they continue to push their market leadership through those white papers and best practices.
For the Market Leader partners, we're looking at them to go and show us their digital transformation impact. How many strategic digital projects have you done? What does your industry and vertical solution strategy and specialization look like? And also we're looking at innovation and IP creation. How much are you reinvesting as a company to go and develop new solutions, new areas, new modernization techniques, and new AI techniques?
Then, I actually have one more, the Strategic. The Strategic is the industry technology partners or the GSIs who go a step further in that industry thought leadership, and they have a global reach and global delivery capabilities. They focus on outcome-based engagements rather than just one-to-one or service level baseline engagements. They actually go above and beyond and establish these innovation labs. They invest heavily in R&D. They partner directly with the C-suite to guide the transformation strategy, and they maintain a robust pipeline of customer case studies across all of the different industries. And this is all important because what we see is we see that profitability increases as you move up each of these stages. So MSP revenue really does grow with this advancement.
Financial Benefits and Action Steps: ROI Analysis and Accelerating Your MSP Journey
So starting with that baseline Generalist, we actually see about a $2.50 revenue multiplier for those Generalist MSPs, and they earn about 25 to 30% gross profit. As you move up to that Next-Gen MSP, we now see them start unlocking a $4.90 revenue multiplier or 55% gross profit. So going and moving up that stack is very, very integral for your business to be able to provide you that foundation to say this is what we're working toward and tell business leaders this is what we're going to unlock once we have these capabilities, and this is why we should invest in there.
And we actually partnered with BCG Consulting Group and we created an ROI assessment tool that can help partners like yourself determine where you are, and this data comes from them on why investing in AWS MSP capabilities is one of the most financially attractive opportunities for partners in the services market. Our analysis shows that participants received about a 3 to 4 times return on investment over 5 years. So that ROI was really driven because of the recurring revenue streams that they unlocked, the automation efficiencies that they unlocked. And what's particularly attractive is the 2 to 3 year payback period, meaning that you'll see positive returns well before the 5 year mark.
And so as you can see here, we also see long-term value created, we see the valuation range, so we have lots of good data that all can be leveraged when you're having those C-level conversations about why we need to invest and change and grow into an MSP partner. And to couple that, like I mentioned, we have an analysis tool that can also help you with this.
Let me leave you with 3 concrete steps to accelerate your MSP journey with AWS. First, go ahead and assess your current state. Whether you're just starting out or you're already established, you need to clearly understand exactly where you are in your MSP journey. This isn't about just checking boxes. It's not about lying or cheating on the test to make yourself look better for your C-level. It's about understanding clearly where you are so you have a place to go in the future.
Next, invest in the future. Once you identify what your stage is, build an investment plan. Decide how much we're going to invest, where we want to be in 3 to 5 years, and we can help you on that journey as well on what different components we need to help you. We can provide you resources, and it could mean anything from developing new capabilities, upskilling your current team, hiring new people, but every dollar invested should align with your growth strategy.
Then finally, connect with the AWS MSP team. We have things like Accelerated MSP Build Workshop. We have other resources that you can leverage. I'm here. Bapa is back there, our technical lead, so we're both here that we can help out with any questions that you might have. Thank you very much and I'll be around as well for any other questions that you might have.
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