Part 2 - Crossing the Cloud & Subscription Chasm
In Part 1 – There is a Chasm to Cross, we outlined the importance of establishing the framework to create a subscription-based business model capable of extending value-added reseller (VAR), IT Solution Provider (ITSP) and managed service providers (MSP’) abilities to build solid cloud and digital service businesses.
By the way, the vendors and distributors we’ve come to rely upon most, were not founded as monthly subscription-based businesses, however, today many provide solid examples to follow in building out your own approach towards moving to a subscription-friendly business model.
In fact, many are creating programs to help their channel partners develop subscription-based business models designed to address the fundamental need to extend current transactional models and to ensure the fundamental differences that exist between a transaction model and a subscription model are addressed.
They have come to understand that diving too deeply into specific cloud and digital service sales and engineering enablement training programs too soon is unproductive and costly for both the channel partner and the vendor.
Simply stated – all the cloud solution-stack training in the world, no matter how good, will not overcome a business model not aligned with subscription business model principles.
So, there is a chasm that exists that must be crossed to create a solid, sustainable and growth-oriented subscription business, however, we believe we can help with the prescriptions outlined below.
Castor Oil or Prescription?
It’s a prescriptive approach, although the first few spoonful’s may taste like castor oil. Following the approaches prescribed is critically important and will help you create a healthy subscription business. We’ve compiled a solid list of the high-level recommendations that we believe you’ll be interested in reviewing to help you get started.
Our key prescriptive recommendations include:
Commission an assessment and performing the due diligence necessary to understand your true business readiness stature which can be used as your baseline for change.
Understanding the financial implications of moving into a cloud-based monthly recurring revenue model – having success quickly alters the very cash flow your looking to use to fund your entry into this business, so it’s imperative you understand the impact of shifts in revenue, gross profit and EBITDA.
Setting 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.
Taking an in-depth look at your current sales model and change it to ensure you don’t disrupt your current sales pipeline, all the while capturing net-new monthly recurring revenue deals.
Forming a dedicated sales team to go after the cloud and digital opportunity. This is less disruptive to your sales team and organization. A small focused team will always outmaneuver and outperform the legions of uncommitted sales professionals who will hit their on-target earnings (OTE), with or without cloud.
Creating and deploying a subscription-based monthly recurring revenue sales compensation plan that truly incents sales professionals to drive cloud service sales is critical.
Assessing your operational and system readiness to ensure you can effectively track monthly recurring revenue and pay your sales professionals appropriately is key – spreadsheets just can’t scale if you intend to really drive this business to be a significant portion of your overall business within the next 12 – 24 months.
Understanding one’s true subscription business 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 needed to ensure 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 distributors to link into their cloud enablement programs and you’ll be well on your way towards being productive and profitable in driving your new cloud subscription business for years to come.
Remember these are critical if you’re moving from a legacy business model that is highly transactional to that of a subscription-friendly model that wishes to leverage the power of compounding. Not changing, isn’t an option…
Thanks for taking the time to read this brief, we hope it provides a catalyst to act and join the subscription economy. Please join us next week for Part III – Moving past the Chasm to the Promised Land.