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Are you on the train or on the tracks?

January 16, 2018

 

Too many IT Channel Partners find themselves on the tracks!  The biggest reason is that getting on the train requires a serious commitment of time, energy and resources to begin the journey to the subscription-based economy. 

 

Oh yeah, this is the first time we’ve required a major business model change in this industry in my lifetime and I’ve been around this business for over three (3) decades. 

 

In short change is hard, and nobody ever wants to change without a serious catalyst.   

 

 

Well the catalyst is here – IT spend is shifting to subscription-based faster than any prognosticators anticipated and now it’s negatively affecting vendors and channel partners top and bottom line numbers ($). 

 

Three (3) Major Partner Outlooks

 

Many times, partners truly believe they are ready to create sustainable monthly recurring revenue – the only problem is that they’ve never defined what “ready” means, nor assessed what changes need to be made to compete and excel with a hybrid business model.

 

In almost equal numbers, partners who know they need to create a recurring revenue friendly business model requires change – simply don’t know where to start and what gaps need to be closed to become a high performing Digital Athlete.

 

Then there is a smaller number of partners, that is shrinking by the day, that simply believe that cloud and subscription-based business models will not affect or disrupt them – wow, really? 

 

Some in this group are 2 – 3 years from retirement and see that as ample justification for not acting…  Well, if you’re business exit represents your retirement nest egg – you’re f@#ked!

 

Valuations are being Impacted

 

Look at any credible work on business valuations in our world and product, professional services and T&M won’t get you much today.  Wait three (3) years and the valuation of your business may net out close to $0.

 

Also, being an MSP with annual recurring revenue (ARR) certainly has more value, but the reality is that having a business that shows consistent and sustained growth in subscription-based monthly recurring revenue will be the business that people will pay for and you’ll have leverage when it’s time to exit.

 

Oh, add some valuable intellectual property (IP) to the mix and it’s winner, winner chicken dinner!

 

Sorry I got a little “off track”, but in the end there’s always time to talk about cash flow and exit valuations.  Now back to our story…   

 

Cause and Effect

 

The good news is that most technology vendors and distributors are actively altering their business and operating models to address the subscription-based economy and are working to help their channel partners board the train. 

 

Ultimately the cause that has spurred the definitive catalyst has been the significant shift in IT spend that has negatively affected both vendor and partner revenue over the past several months.

 

The effect is straight-forward – businesses are being disrupted and headcount is being reduced as the “shift” occurs.  Below is just one real-life example of the effect, in a sea of examples…  ChannelE2E (@ChannelE2E) showcased IBM’s latest workforce reduction last week as proof positive that cloud and digital business models are upsetting the technology apple cart.

 

IBM plans to cut roughly 10,000 Global Technology Services (GTS) jobs as part of a plan to redeploy about 30 percent of the group’s 100,000 employees, according to The Register. An IBM spokesman declined comment about the report, according to Reuters.

 

If accurate, the report highlights ongoing stress in the IT services market — where IT consulting giants are rebalancing or outright reducing headcount amid massive shifts toward IT automation and cloud services”.

 

https://www.channele2e.com/news/ibm-layoffs-2018-10000-global-technology-services-job-cuts/?utm_medium=email&utm_source=sendpress&utm_campaign

 

Vendors and Distributors taking the Lead

 

Technology vendors and distributors are shifting their cultures and business models from “purchase and deployment” to “engagement and consumption”.  As you can imagine this is no easy task, however, it’s a business imperative essential to their long-term health and survival. 

 

So the data clearly shows that most Channel Partners are still on the tracks, yet most vendors and distributors are aggressively moving to get on the train and ensure they create sustainable monthly subscription-based business models that positively affects their business mix.

 

The allure of creating greater value and wealth by catering to the needs and wants of the marketplace cannot be ignored.  Face it, the IT technology buyer, your customer, is choosing to consume services on a monthly basis - ensure you’re there to meet that growing demand or somebody else will gladly step in to meet the need.

 

A Few Essential Steps

 

I’d recommend you take three (3) steps to ensure you’re ready to board the train.  First, leadership must commit to create a hybrid business model that focuses and incents the organization to create, drive and grow a significant monthly recurring revenue stream.

 

Next, assess your current subscription-based business readiness and identify the gaps that exist and be prepared to incrementally close those holes to ensure you can provide your customers what they want in the way they want to consume it – without turning yourself inside out trying to perform unnatural acts.

 

Lastly, partner with innovative vendors and distributors who have made the commitment to make their partners business models monthly recurring revenue ready. 

 

Here’s a hot tip - once you decide you’re going to board the train and make the journey, go with someone who’s made the trip and is vested in ensuring your journey is safe, successful and productive. 

 

The seasoned leaders mentioned below are battle tested and ready to invest and help you arrive at your destination stronger and healthier than you could ever imagine.

 

Some visionary leaders investing in their partner communities business transformation include Veeam (@veeam), Avaya (@Avaya), Westcon (@WestconComstor) and VMware (@VMwarevSphere).

 

Stay Calm and Cloud On…

 

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