Part I: There is a Chasm to Cross
We’ve uncovered some solid trends that I believe every business leader who runs a value-added reseller, IT Service Provider or Managed Solution Provider should know prior to creating a strategic cloud services business.
The single biggest realization we’ve come to is - this it’s all about creating a new business model that extends your current approach. If this were just another technology transition it would be easy, but, this is the first time most of us have had to significantly alter our underlying business model.
In addition, the single largest differentiator between those who thrive and those who barely survive is a solid commitment to create a strategic, significant and impactful subscription-based revenue stream.
Before you get too far down the road, it’s important to understand the value and impact of performing a foundational business assessment to ensure you clearly know the actual readiness and ability of your business in order to add or expand your subscription-based business capabilities.
This is an important first step prior to determining what strategic vendors you’ll partner with and what solution-stack(s) you’ll create and bring to market to develop a solid subscription-based cloud revenue stream.
Assess, Analyze and Act
It’s imperative you get your business ready and aligned prior to exposing your prospects and existing clients to your cloud services solutions. Moving too fast is just as bad as not moving at all.
The reasoning behind this approach is simple and straight-forward. Assess your current readiness and then producing the proper business framework and approach to business realignment for the subscription economy will keep you from making the mistakes many have made by jumping into the business opportunistically without a proper baseline, strategy and business plan.
We’ve seen too many channel partners waste time, money and cycles dealing with the differences that exist between their existing legacy business model and the new hybrid model required to drive a successful subscription business.
There are numerous intricacies and nuances that exist in developing a subscription-friendly business model that all too often go unchecked that impede the progress of building a new revenue stream that is both powerful and valuable.
We’ve developed some compelling insights on the obstacles that value added resellers (VAR’), IT Service Providers (ITSP’) and Managed Service Providers (MSP’) face in creating or expanding a cloud services business.
Food for Thought
The commonalities and issues facing most VAR’s, IT Service Providers and MSP’ in creating a truly sustainable subscription-based line of business (LOB) is best represented by some of the key statistics that are emanating from our SaaS-based assessment platform. The key findings include:
89% of channel partner businesses need to alter their current business model to deal with cloud-based recurring revenue.
84% of channel partner businesses have not effectively determined the revenue, gross profit and cash flow impact caused by altering their business mix & model.
78% of channel partner 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 monthly recurring revenue opportunities.
74% of businesses financial systems can’t affectively automatically manage & track monthly recurring revenue.
87% of businesses don’t have a sales compensation system that can track subscription and consumption-based recurring revenue sales – the approach is mainly to utilize Excel spreadsheets.
This information combined with other leading indicators and countless other findings allow us to deeply understand the impediments that have caused many VAR’, Managed Service Providers, 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’, Solution Providers and MSP businesses must first assess their current subscription business readiness prior to altering and realigning their business, marketing, sales and operating models.
With your assessment roadmap in hand and some specific tools identified, the journey to subscription readiness is much easier and more productive. In the end this is all about making the changes necessary and performing the heavy lifting that will get you to profitable revenue generation in the shortest time possible.
Thanks for consuming Part I, we hope it provides a catalyst to act and join the subscription economy. Please join us next week for Part II - Crossing the Subscription Chasm.