January is always a great time to reflect on what we want for the New Year – you are likely doing this for your personal and professional goals right now. However, have you considered how capitalizing on the cloud may help you accomplish your company’s revenue targets for the year and aspirations for the future?
No matter where you are in your cloud journey, you may want to take a moment to consider your cloud plan as we kick off 2015. IDC has recently updated their forecast on Public IT Cloud Services spending to reach $127 billion in 2018 as the market enters a critical innovation stage. How can you capture a portion of the $127 billion? Many successful partners have reported that holding a business transformation planning offsite or having dedicated meetings each week to reflect on their company’s transition to the cloud was an excellent way to get started and continue their momentum. Here are some other ideas to consider as you plan for 2015.
Evaluate your current offerings
If you are just now considering your transition to the cloud, it’s not too late. According to IDC Successful Cloud Partners 2.0 eBook, cloud-oriented partners (with > 50% cloud revenue) have been in the cloud an average of 3.5 years versus 2.3 years for the rest. There is only a little over a one year gap between cloud leaders and followers. It is certainly not too late to catch up! Sustainable profitability is coming from the unique value and differentiated offerings that partners deliver with online services. If you are looking at your cloud plan for the first time, it is important to determine how you are making your money now and where you can make your money in the cloud. I would encourage you to take a look at the Partner Profitability Learning path, which offers several short modules on how to look at transforming your business to optimize for the cloud.
Look for recurring revenue opportunities in long-term relationships
If you are already selling cloud services, but you think you have an opportunity to grow more, you are probably right. You may be selling some cloud solutions, but are you creating profitable recurring revenue opportunities with it? You may want to hone in your focus on your ARPU, or average revenue per user. According to IDC analysts, it is important to nurture your new, long-term customer relationships to create a solid book of business.
It is important to remember that in the on-premises days, a partner would work on an account for months to land a very large deal. Once the deal was done and the project was executed, the engagement was over and the partner would focus on their next big deal. In contrast, the conclusion of a cloud sale is only the beginning of that client relationship. And while cloud solutions are transforming vendor-to-customer relationships to always-on, customer expectations of our partners are for continuous engagement. Take advantage of this continuous engagement to cultivate the client relationship, drive adoption, and grow your ARPU.
Build unique IP in the cloud
If you have already had success in selling cloud solutions, you may want to consider the most profitable revenue model, Intellectual Property (IP) services. Some partners are packaging their own IP up for commercial sale, while some are creating applications internally that allow them to create efficiencies in their service engagements. A business module built on IP services is centered on IP creation and the sales of that packaged IP. Development of IP in the cloud is much easier to do now than in the past, and the barriers to entry are much lower. A partner’s unique IP enables it to create valuation, which, combined with both project-based and managed services, offers a potentially powerful combination. We have seen many partners create IP in a specific industry and then create their own niche offering to a specific market. According to IDC research, prepaid, one-year contracts are the most popular pricing offering along with per-user per-month options. These types of pricing structures are great for building high-margin, contractually recurring revenue streams.
No matter where you are in your cloud journey, Microsoft is committed to helping you reach your goals. I am excited to announce the launch of our new Cloud Partner Profitability series which will air on the Microsoft Virtual Academy every Wednesday morning at 8:30 PST. During the webcast, you can chat live with profitability experts. You’ll also have the opportunity to watch all of the episodes on-demand after the show airs.
I wish you prosperity and success in 2015!