Quick! List one common concern that both customers and partners share.
Did you just say cloud? If you did, then rest assured, you have plenty of company. Mistrust of the cloud is one of those rare instances when customer and partner tend to agree, albeit for their own individual reasons! We’ve come a long way since the launch of Microsoft’s first cloud offering, the Business Productivity Online Suite (BPOS) in October 2008. This launch was at a time when the term cloud was used only in a weather related conversation, and was far ahead of industry peers, some of whom have only recently, and reluctantly adopted a cloud based business model. Eight years later, and even in a “cloud first, mobile first” world, partners still harbour a number of misconceptions about the cloud.
From a partner view point, among other fallacies related to the cloud, it has often been seen as a wave that would sweep away profitable contracts, erode top lines and worse, provide a convenient route for the vendor to take over customer relationships. What most partners fail to realize is that the cloud actually affords the greatest potential to achieve the holy grail – a profitable, long lasting and trusted advisor relationship with their customers.
Let’s start by dispelling some of the common misconceptions that partners have about transitioning to a cloud based business model. Here goes:
Myth #1: Moving business to the cloud means a loss of top line
This one seems true, at least on the surface. The cloud business is annuity driven, and moves away from the upfront, top line heavy revenues. However, look further, and you will find that cloud revenues quickly add up and within 2 – 3 years, cloud annuity revenues will make up for the initial dip in top line. And what do you gain? Predictable revenue streams and the comfort of knowing that you have a minimum banked revenue at the start of every fiscal. Bottom lines are much healthier, and ongoing customer relationships lead to multiple cross sell and upsell opportunities. Sales cycles are shorter, and you can reach out to more customers. The not so secret sauce? Gradually transition your business from on-premises to the cloud, and you will be able to reap the benefits of your current cash cows while securing your future business model.
Myth #2: The cloud model weakens my customer relationships
This one is probably one of the most profound fears that a lot of partners have. But ask yourself this question – do you want to be a technology provider selling solutions and services at competitive prices to your customers? Or do you want to be a trusted advisor, one who can speak the language of business? By moving the focus away from deployment, the cloud allows you to focus on helping your customers adopt and leverage technology for business gains. This means deep, profitable customer relationships, and a win-win for you and your customer.
Myth #3: We cannot sell high value, profitable services as in the on-premises model
Yes, you cannot sell expensive services for complex, on-premises deployments in the cloud world. That is, if you remain focussed on providing pure technology services. On the other hand, if you elevate your customer engagements to provide business focussed services, you can quickly move up the value chain. Even in the case of technology services, by adopting a template based model, you can serve more customers with the same number of resources. A single project manager can now handle multiple customers without impacting the quality of service delivery. A well-structured team will have a much higher delivery bandwidth on the cloud than on the traditional on-premise business models. By combining a process driven services model and business focussed services such as adoption and integration, you will be able to drive much more profitable and long lasting services relationships.
Myth #4: My sales team, used to landing big deals, will not be interested in selling low value annual contracts
Selling cloud services requires a fundamental reset of the way your sales people think. Upfront, large deals sure bring the dollars in, but they also come with large sales cycles and complex, lengthy deployment cycles. The cloud allows for shorter sales cycles, increased deal velocity and higher volumes. This automatically translates into better incentives for your sales team as well. Tweak your compensation models a bit more by incentivizing on the full 12 month value of an annuity contract upfront. With higher incentives on the cloud, you will be able to drive the behavioural change in your sales team.
Myth #5: Selling lower value contracts, even with increased volumes, will erode my profitability
This one can come true, if you are just focussed on reselling cloud contracts. Do not build a business model solely based on today’s channel incentives. While channel incentives are a welcome benefit, sustainability in the long term will come only if you can deliver high value services to your customers. With annuity based relationships, you are in touch with your customer more regularly. Translate this into cross sell and upsell opportunities and you will quickly see your profitability increase. And as mentioned earlier, moving the focus away from deployment related services to business focussed services will accelerate the growth in profitability.
Change is never easy, and almost always painful. But in the words of Edwards Deming, “It is not necessary to change. Survival is not mandatory”. Focussing on the end results makes the transition worth it. Would you say no to the following?
- Increased new customer acquisition
- Deeper customer relationships
- Increased sales velocity
- Profitable & recurring engagements
- Efficient team utilization
- A richer and expanding services bouquet
- Predictable revenues
This list of myths is by no means exhaustive, and with the range of business models in the channel, you’re sure to come across your own unique challenges. But we will all do well to realize that the cloud as an IT delivery model is here to stay. By embracing change and staying ahead of the curve, we can ensure that we continue to be relevant to our customers and business partners, while growing revenues and profits.