Cloud Service Business Obstacles Revealed
While performing automated Cloud Readiness Assessments for value added resellers (VAR’) and Solution Providers utilizing an innovative Software-as-a-Service (SaaS) decision support platform we’ve uncovered some solid trends that I believe every business leader should know prior to creating a strategic cloud services business within their existing business.
It is important to understand the intent of our activities are to clearly know the actual readiness and ability of the VAR’ or Solution Providers business to add or expand their cloud services capabilities prior to determining what solution-stack(s) they’ll create and provide out to the marketplace.
In short, our approach is to ensure you get your business aligned prior to exposing the virtues of the cloud to net-new prospects and your existing client base.
Now back to the story - we have fifty-two (52) clients who’ve interacted with our SaaS-based platform and over the brief time we’ve been live we’ve seen compelling insights on the obstacles VAR’ and Solution Providers face in creating or expanding a cloud services business. In fact, the commonalities in the issues that most VAR’ and Solution Providers face in entering a new recurring revenue based cloud services business is best represented by some of the key statistics that are emanating from the platform. The key findings include:
· 72% of businesses need to alter their current business model to deal with cloud-based recurring revenue.
· 84% of businesses have not effectively determined the revenue, gross profit and cash flow impact caused by altering their business mix.
· 78% of businesses need to alter their sales model to capture cloud-based recurring revenue opportunities.
· 97% of businesses need to change their sales compensation plans to grow cloud-based recurring revenue opportunities.
· 74% of businesses financial systems can’t affectively manage & track recurring revenue.
· 87% of businesses don’t have a sales compensation system that can track recurring revenue sales – the approach is mainly to utilize Excel spreadsheets.
Although the sampling size is small, these leading indicators and countless other findings are allowing us to more deeply understand the impediments that have caused many VAR’, Solution Provider, Distributors and Vendors to reassess why all of the enablement activities being performed are not generating the desired outcomes and business results expected based on the enormous market opportunities that exist today.
The key understandings that have emerged is that the VAR’ and Solution Providers businesses must first be altered and realigned prior to diving deeply into a specific vendor sales and engineering enablement regimen.
We’ve seen firsthand the value of vendor enablement programs from Microsoft (@microsoft, @azure), Cisco (@CiscoCloud, @Cisco), Red Hat (@redhatnews, @openshift), Veeam (@veeam), VMware (@VMwarevSphere) and Westcon Comstor (@WestconcomstorC) – by the way none of these folk’s started as a recurring revenue machine, however, they provide a solid example to follow in building out your own approach towards moving to that model.
As you can imagine, all of these providers have solid programs that deliver the sales and technology enablement required to craft solid cloud services for your clients. The only problem is that if you have not addressed the fundamental structural issues holding you back, all of the investment made by you, your distributor and the vendor goes to waste.
In short, the gaps identified and key prescriptive advice produced by the platform provide the following high-level recommendations:
· Businesses need to perform the due diligence necessary to understand their true readiness stature that can be used as a baseline.
· Businesses need to understand the financial implications of moving into a cloud-based recurring revenue model – having success quickly alters the very cash flow your looking to use to fund your entry into the cloud business.
· Businesses need to set aside investment dollars to ensure that they can successfully make the transition – 84% say they’ll use existing cash flow to fund cloud service business investments.
· Businesses need to truly look at their current sales model and change it to ensure they don’t disrupt their current sales pipeline, all the while capturing net-new recurring revenue deals.
· Businesses need to create recurring revenue sales plans that incent sales professionals to drive cloud services sales.
· Businesses need to assess their operational and system readiness to ensure they can effectively track recurring revenue and pay their sales professionals appropriately – spreadsheets just can’t scale if you intend to really drive this business.
As stated earlier, the sampling size is small at this point, however, we continue to see the same trends build and be reinforced as we on-board new customers on a weekly basis. Understanding ones true readiness posture, seeing the gaps that exist and actively executing the activities necessary to close those gaps prior to launching or expanding a cloud services business is the remedy to ensuring a productive and lucrative cloud services practice that will be good for you, your customers and your vendor partners.
Once your business is positioned and in shape – work with your key strategic vendors and link into their cloud enablement program(s) and you’ll be well on your way towards being productive and profitable in driving your new cloud business.
Keep Calm and Cloud On…
Hope you found this brief insightful and as always I’d be interested in your feedback. Please stay tuned for my next brief on the importance of decision making and using alternate approaches to making solid decisions.