A Hybrid Business Model is the Answer!
Now if you only knew the question! Well the question is – “what is the critical element required to create a more valuable and growth oriented value-added-reseller (VAR), IT Solution Provider (ITSP) or Managed Service Provider (MSP)”?
During the several days spent at Channel Partner Evolution 2017 (@Channel_Expo) a week ago, it became apparent that the reality of cloud computing, software-defined networking and the internet of things (IoT) is truly here. Revenue is moving from on-premise transactional to subscription-based offerings at an astounding rate.
The other reality that I found somewhat troubling - most organizations are looking at the move to the cloud and subscription-based monthly revenue as a technology issue to be solved rather than a business problem requiring a fundamental change to a hybrid business model, which would increase their enterprise value and allow them to effectively grow a solid recurring revenue line of business over both the both the short and long-term.
Without the proper business model, you end up in neutral and never truly shift into high-gear because you spend all of your time and energy thrashing about instead of moving forward as the fundamental differences and realities of subscription-based monthly recurring revenue un-fold in front of you. This is at odds with the business model we’ve all grown up on.
Even more troubling was the fact that most people I encountered believed that they were ready for the transition to cloud and monthly recurring revenue, So, I asked one fundamental question:
How do you know you’re ready?
When there was no easy answer forthcoming, I followed up with this question:
What changes have you made to your business to become monthly recurring revenue ready?
Crickets – then the answers came more slowly and essentially were formed around the fact they’d been in business many years and they were ready and didn’t really need to make adjustments – Wow!
Then, because I can never really help myself when I’m lucky enough to have one of these conversations, I had to ask another question that went something like this:
You said you were ready, how do you define and measure being recurring revenue ready?
Well, that question typically always gets me the 1,000-foot stare and quite frankly sometimes I’m not sure if I should ask my next question or run for the exit yelling – I’m only trying to help!
All organizations have to make adjustments and changes to their core business and operating model (we won’t even look at culture and your organizational issues this time around) to exploit the opportunity and create a business that has a large subscription-based monthly recurring revenue component. Imagine waking up the 1st of every month with 50%+ of your nit already in the bag – not a bad objective to have over the next twenty-four (24) months or so…
The Morale of the Story
So, if you are serious and committed to creating a business that will be more valuable three (3) years from now - you need to follow a structured and regimented approach that looks something like this:
Assess your current recurring readiness business composite…
Analyze the gaps that exist and determine which ones must be closed to begin driving sustainable results…
Create a plan that will allow you to make the changes without artificially eroding your core business. In fact, in the end all these moves will strengthen your entire business…
Based on our experience and that of our clients you’ll almost certainly need to focus on creating or altering these areas of your business:
Crafting a clear and concise Cloud Strategy (read: monthly recurring revenue business)
Developing a Cloud Business & Financial Plan
Altering your Sales Model and Compensation Plan
Creating a hybrid Marketing Model that includes both in-bound and out-bound capabilities
Fleshing out an Operating Model that is more regimented à including systems, tools and processes
Framing a Go-to-Market Plan à including packaging and pricing
The reality is that most organizations do have to assess and understand their current business state and then incrementally make the changes and improvements required to create a true hybrid business model.
This will allow them to provide customers with the right solutions, at the right time and in the way their customers want to buy and consume them - which will increasingly be on a monthly basis…
Stay Calm and Subscribe On & On & On…
My next blog piece will include a close look at Go-to-Market strategy and packaging and pricing which is where we see many of our customers struggle.