The Demand for Cloud is Real
Cloud Services have a lot of hype – from the days of ASP, then “BPOS”, then SaaS but we know that Cloud is beyond just a buzz word. It’s a way of operating. And now there are several variations that have developed – public, private, and even hybrid. While definitions vary – one thing is for sure – every company CEO is asking how to use the cloud.
The Transition to Selling Cloud is Hard
Changing a VAR, MSP business model to support cloud isn’t easy. Particularly if the business has been deriving most of its revenue from transaction based product sales. Probably the most difficult aspect of the transition is the sales force transformation.
Sales Reps are Averse to Cloud
Sales reps must understand many facets of the cloud – because it is a technology convergence, they must understand and explain many components of the technology and present it as a broader solution. This might impact a quick transaction and extend the sales cycle. The deferred commission cycle is also a hard pill to swallow for many account executives. Instead of closing a deal and recognizing immediate gross profit and a payout, commissions for cloud services extend over months and possibly years.
This mindset holds back many in sales from pursuing cloud – even though it is more lucrative in the long run for both themselves and their companies.
Let’s do the Math
Let’s say there is a server being sold to a customer on a transaction and it comes out to $30,000. Let’s say we have the fortune to get deal-reg so there are double digit margins and some volume incentives kicked in. The rep might get paid out $700 in commission. On the flip-side, the recurring margin, paid as a percent of sales for the commission could exceed $1,000 just in the first year.
For those that do the math – the choice for selling cloud is clear. It pays more, and it is recurring – so every month, you get a paycheck. In the product world, it is back to $0 on the first of every month.
Cloud Deals Grow Revenue
Selling a cloud deal is complex – there is no mistaking that. But there is a lot of upside – where there is complexity, there is opportunity. When rolling out a cloud service, partners have an opportunity to help customers with assessments and this can lead to networking optimization. It might also mean upgrading end points such as phones, laptops, etc. But most importantly, to go along with the recurring subscription model are the managed services that even the largest of Fortune companies want to have someone else do for them. Providing managed services increases revenue and margin opportunities for partners. If you only sell cloud and not the managed services, you are leaving money on the table.
Cloud Makes You More Relevant
We go into many joint sales calls with our partners, and time and again – we ask if they had met these contacts before. Often time, partners have only had exposure to procurement or a limited group of technologists at their customers. With cloud, your value and relevance is elevated to an unprecedented level. It isn’t uncommon to have C-levels involved not just in the meetings, but staying for the entire duration of long working sessions! Why? Because CEO’s, CIO’s, CFO’s understand that cloud is transformational, and they want to understand for themselves how it can help their business.
So if you have been on the fence about cloud – you need to get off and move quickly. If you’ve been dabbling in the cloud – it’s time to dive in with both feet.
While the pot of gold at the end of the rainbow has been elusive, cloud is that recurring revenue, sticky business that not only will increase your margins, but it will make your company more valuable. So you won’t need to go looking for that pot of gold – because you are sitting on it.
