TL;DR: Rising rates make multi-year hardware refreshes harder for customers to approve and harder for MSPs to finance. For MSPs relying on hardware resale, that puts pressure on a margin model that resets every three to four years. A wholesale, consumption-priced cloud reseller model shifts infrastructure revenue toward recurring monthly margin without the hardware capex.
Why rising rates are putting pressure on MSP hardware margins
On September 16, 2026, the Federal Reserve raised its overnight lending rate for the first time in three years, pushing the 10-year Treasury yield past 5%, its highest level since 2007, according to CNBC.
For an MSP selling hardware, the impact is straightforward. A three-to-four-year refresh cycle depends on a customer being willing and able to approve a significant capital purchase. Higher borrowing costs make that approval harder, particularly when the customer’s CFO is already looking for ways to manage capital spending.
Deloitte’s Q1 2026 CFO Signals survey found that 46% of CFOs are redirecting capital expenditure investments because of cost management pressure. In its related Finance Trends 2026 survey, 51% of finance leaders identified cloud investment as their preferred cost-management lever.
For MSPs, that creates a problem with the traditional hardware-resale model. The customer can defer the refresh, reduce the scope of the purchase or look for a lower-capital alternative. In each case, the MSP’s hardware margin is delayed or reduced.
What happens to MSP margin when customers defer hardware refreshes?
Hardware resale earns its margin at the point of sale. The MSP sells the equipment, earns its margin and waits for the next refresh cycle to create another opportunity.
That works when customers continue to approve three-to-four-year hardware purchases on schedule. It becomes less attractive when higher financing costs make those purchases harder to justify.
The margin also has to be rebuilt from scratch at every refresh. The MSP is negotiating against the customer’s current budget, current financing environment and current hardware requirements each time.
A recurring cloud model changes that structure. Instead of waiting for the next hardware refresh, an MSP can resell cloud storage and infrastructure as an ongoing service. Revenue and margin recur with the customer’s monthly consumption rather than resetting when the next hardware purchase is approved.
Why does a cloud reseller model change the margin equation?
A wholesale cloud reseller model separates the MSP’s infrastructure revenue from the capital required to own and refresh the underlying hardware.
The MSP buys capacity at a negotiated wholesale rate and sets its own customer pricing. There is no hardware purchase sitting on the MSP’s balance sheet and no three-to-four-year refresh cycle required to re-establish the margin.
That creates a different economic model:
- Hardware resale earns margin once at the point of sale.
- Wholesale cloud margin recurs with each billing cycle.
- Hardware resale requires the customer to approve a capital purchase.
- Consumption-priced cloud infrastructure moves the cost into an ongoing operating expense.
- Hardware resale creates a new margin negotiation at each refresh.
- A locked wholesale rate can protect the MSP’s margin over a multi-year term.
For an MSP evaluating a cloud storage reseller model, the important question is therefore not simply what the underlying storage costs. It is how the wholesale cost, customer pricing and renewal structure affect the margin the MSP can retain over time.
What should an MSP look for in a cloud storage reseller?
The infrastructure itself is only part of the equation. The commercial relationship determines how much of the recurring revenue opportunity stays with the MSP.
Three questions should come first.
- Is the wholesale rate locked?
A cloud reseller needs a predictable cost basis to build sustainable customer pricing. If wholesale rates can change materially at every renewal, the MSP carries the risk of having to reprice its customers or absorb the difference.
A multi-year price guarantee removes that uncertainty from the margin calculation for the agreed term.
- Does the provider compete for the customer?
A channel-only model means the infrastructure provider does not sell directly to the MSP’s customer.
That matters because the MSP owns the customer relationship, controls the commercial conversation and keeps the opportunity to expand the account. The provider supplies the infrastructure without becoming another sales channel competing for the same customer.
- Who controls the renewal?
The MSP should know whether it owns the renewal conversation or whether the infrastructure provider can use the renewal to introduce new pricing, products or direct-sales opportunities.
For a recurring cloud model to work commercially, the MSP needs control of the customer relationship and a clear understanding of its wholesale cost over the term.
What does it mean to resell cloud storage without carrying hardware capex?
The distinction between capex and opex is central to the model.
A hardware refresh requires a significant capital purchase that is financed, depreciated and eventually replaced. The MSP or customer carries that hardware investment while waiting for the next refresh cycle.
A consumption-priced cloud model treats infrastructure as an ongoing operating expense. The MSP pays for the capacity it uses under its wholesale agreement and incorporates that cost into the price it charges its customer.
That lets an MSP resell cloud storage without owning the physical infrastructure required to deliver it.
The result is a different relationship between growth and capital. Adding customers does not require the MSP to purchase another fleet of storage hardware before the revenue arrives.
Hardware-resale refresh vs. wholesale cloud reseller
A side-by-side on where the margin math actually diverges:
| Factor | Hardware-resale refresh | Wholesale cloud reseller (channel-only) |
| Margin timing | Earned once, at the point of sale | Recurs every billing cycle |
| Typical margin | ~10–15 points, reset each refresh | ~30 points, held under a locked structure |
| Capital exposure | MSP/customer carries hardware capex | No hardware capex to carry |
| Rate sensitivity | Financing cost rises with interest rates | No financing cost built into the model |
| Customer relationship | Renegotiated at each refresh cycle | Continuous, no forced renegotiation |
| Vendor conflict | Hardware vendors can sell direct | Channel-only: vendor never competes for the customer |
| Renewal risk | Re-priced at market each cycle | Locked under a multi-year price guarantee |
What are the key benefits of becoming a cloud reseller?
Becoming a cloud reseller helps MSPs build recurring revenue, protect margins, reduce hardware capex and expand services without owning infrastructure.
A cloud reseller model lets MSPs sell cloud infrastructure without purchasing, maintaining or refreshing the underlying hardware. MSPs can create recurring revenue from ongoing customer consumption, use wholesale pricing to establish their own margins and reduce exposure to hardware refresh cycles and customer capex constraints. A channel-only provider can also let the MSP retain the customer relationship and control the renewal conversation.
See how the margin math works for your book of business
A rate environment like this one rewards partners who’ve already moved to a wholesale, channel-only structure — and it’s a good moment to check the math for MSPs who haven’t. Talk to ThinkOn’s partner team about what a locked, multi-year wholesale rate would do to your margin under today’s cost of capital.
The numbers at a glance
- 10-year Treasury yield: 5.016% as of September 16, 2026 — highest since 2007 (CNBC)
- Fed’s overnight lending rate: raised to 3.75%–4%, first hike in three years (CNBC)
- 46% of CFOs redirecting capex investments due to cost management; 51% of finance leaders name cloud as their preferred redirection (Deloitte CFO Signals / Finance Trends, Q1 2026)
- Best-in-class IT solution providers: 19%+ adjusted EBITDA for the sixth consecutive year (ConnectWise Service Leadership Index, 2026 Annual Report)
- MSP revenue growth rebounded to 9.6% in 2025 (from 7.1%); adjusted EBITDA grew 17.1% (ConnectWise SLI, 2026)
