No time to talk…
This was the week of truncated calls and meetings as everyone, including myself, was fixated on driving every potential deal to closure. After all its vitally important to ensure a strong Q1 (calendar) close.
Most people I spoke with lead and run highly transactional VAR, IT Solution Provider (ITSP) and Managed Service Provider (MSP) businesses and don’t really have any subscription-based monthly recurring revenue, to speak of, so the pressure is always on to re-fill the revenue bucket.
Several years ago, I ran an ITSP with a fairly nice managed service provider business. Unfortunately, all the revenue was essentially transactional as we only looked for and closed annual contracts back then. Monthly recurring revenue (MRR) was a financial function to be dealt with, not a business model or way of life…
Essentially, we measured everything on a month-to-month basis - so in our case the sun rose and set in thirty (30) day increments.
Fill the sales pail, empty the sales pail – rinse and repeat month-in-month-out. One hell of a vicious cycle when you go to $0 every 30 days. The same is true if your time horizon is quarterly.
So, it got me to thinking. How much easier would life be if these folks had 10%, 25%, 38%, or more than 50% of their revenue already in the bank every month?
Spoiler Alert - a lot friggin’ easier…
But as in all things in life, it’s a lot easier to talk about a monthly recurring friendly business model than it is to actually create a diversified revenue mix and add a healthy dose of subscription-based monthly recurring revenue.
Shoot, that’s change and change is hard… It’s work to morph and become an organization with a solid hybrid business model.
The push is on across many industries to create subscription-based monthly recurring revenue streams as organizations look to digitize their businesses. The information technology industry is no different, technology vendors and distributors are making the shift and their channel partners are beginning to explore making the changes to their business models as well.
The market forces are just too strong to resist any longer. More and more, customers just want to buy and consume IT services by the drink and pay monthly.
Then it dawned on me – I need to really look at who’s already on the road to creating a solid subscription-based monthly recurring revenue business and what is there to learn from them.
I was introduced to Linvio (@Linvio) who has a solid monthly recurring revenue business. These folk’s live, eat and breath subscription-based revenue. They focus on helping customers in multiple industries, including technology services, automatically track monthly recurring revenue and associated sales commissions, perform payment management and reduce cycle times with their quoting and invoicing functionality.
Linvio is tightly integrated with Salesforce.com (@salesforce) as a bolt-on and for those of you who are Salesforce.com (SFDC) users and are beginning your journey to the cloud and look to grow your monthly subscription-based services business – it’s the solid solution that is priced right.
Linvio only has to climb a small mountain every quarter as the majority of their revenue is subscription-based.
Well on their Way
Now let’s look at Microsoft (@Azure). They’re pivoting from a purely transactional based model to that of a true subscription-based monthly recurring revenue machine. It’s commercial cloud revenue will hit a $20B run-rate as they exit fiscal year 2018.
hink about it – it’s one thing to execute and make that significant shift in your business mix when you’re a small to mid-sized business (SMB). It’s beyond impressive when you look at the size and complexity of Microsoft’s business. This is an enormous pivot, but they’re executing the hell out of it.
But what’s even more impressive and hopefully will resonate with any business leader - is that on or about August 1, 2018 Microsoft will begin fiscal year 2019 with $20B as a starting point to continue building its massive commercial cloud business, not $0.
That’s not only truly impressive, it places Microsoft at the forefront of evolving ones business to a better place that makes them more relevant, more sustainable and by far more valuable than they were just a few years ago.
They still have a sizable mountain to climb every month, however, they are well prepared and they definitely have the right destination in mind.
Starting the Journey
I’ve also been watching with great interest how BitTitan (@BitTitan) is evolving their solution-stack by building out a service delivery platform called MSPComplete that will solidify channel partner’s ability to automate many of their mundane and manual functions that suck the life out of them.
With the release of MSPComplete, BitTitan will most likely begin evolving their business model to that of a monthly subscription-based business. Their current business is solid as a rock and they’re making the move at the right time, as it will take approximately twelve (12) months to make the journey.
However, BitTitan like Microsoft is an execution centric organization and they’ll make the shift and create a very strong subscription-based business. There is no doubt based on their track record that they’ll form a well thought out strategy and compile a comprehensive business plan to become monthly recurring revenue centric, over-time..
Their approach towards service automation will truly move the profitability needle in the right direction. Take a look at ModernMSP (@ModernMsp ) for some solid thought leadership pieces on the subject.
With a solid transactional business today, they stand on firm ground in making the move to determine the mountain and set the appropriate time for the journey.
Slow and Steady
So, as you race towards yet another end of quarter – start to imagine what your world would look like if you had a larger chunk of your overall revenue showing up on a monthly basis.
Look to some of the organizations that are already paving the way to a solid hybrid business model and learn from them. My guess is that you’re partnering with at least one of them today – you’re in the tent…
In fact, if you can arrive at a place where all of your operating expenses are covered each and every month by your subscription-based recurring revenue you’ll be in a fantastic place.
And of course, the larger you can build your monthly recurring revenue business the more sustainable and valuable your business will become.
The rat race of chasing a monthly or quarterly number will never go away, however, if you have 50% of your nut already in the bank each month - you may actually be able to sit down and have a nice sales conversation with Kloudreadiness even at the end of the quarter 😊
Stay Calm and Subscription On… be able to sit down and have a nice sales conversation with Kloudreadiness even at the end of the quarter 😊 Stay Calm and Subscription On…Calm and Subscription On…