Cloud computing and the selling of managed services represents a fundamental shift in the hardware partner models and gives some power back to the customer. Today, traditional VARs are selling hardware infrastructure to accommodate the demands of their customers. As on-demand cloud computing becomes more prevalent and relevant, the utility billing model (billing customers only for what they are using) moves the buying power, in the form of unused capacity, back to the customer. This shift in power and business paradigm has resulted in a change in the VAR’s business model and how they go to market.
Shifting the Business Paradigm to Cloud
Cloud shifts the partner revenue and cash flow and, at least today, initially has lower margins and return on investment capital. It’s important to note that most cloud providers do not start turning a profit until the end of the first year of doing business. However, over time, the recurring payments tied to cloud computing can be significantly more than what is earned from a one-time hardware transaction. Successfully reaching that break-even point and moving beyond to achieve consistent profitability while also continuing to add new customers and build revenue streams is both an opportunity and a challenge.
As VARs, managed service providers and others recognize the need to begin selling cloud effectively to take advantage of this new opportunity, they will need to align their go-to-market strategy for long-term success. This should include:
- Focusing their energy on the right customer
- Creating solution bundles that are relevant to their market and price them competitively
- Develop programs that consistently focus on acquiring new target prospects
- Cross-sell and up-sell to existing customers
Building stable growth requires a stable foundation; therefore, VARs should focus their energy on the right type of customers to start laying that groundwork. This is especially critical to VARs as they begin their transition to a cloud practice and begin developing recurring revenue streams. It is also critical to MSPs that want to pursue new markets and also significantly grow their revenue streams.
The selling and marketing costs of cloud models can be higher than those of on-premises models – at least as a percentage of the initial revenue. As a result, it’s critical to have a solid go-to-market plan… one that’s focused on sales growth and customer acquisition and retention.
How Effective Is Your Sales Team?
All of this ultimately leads to the underlying question that should be on everyone’s mind: “Can my existing sales team be effective?” If you are a VAR or an MSP, here are a few questions to ask yourself:
- Is my current sales team a group of order takers and that’s all they want to be?
- Or do they have the necessary support, training, skills and confidence to be a solution sales person?
- Do they have the drive to acquire the needed skills to be successful in that type of sales role?
- What kind of solution selling skills do they have and/or need to move forward and make themselves and the business successful?
There are a lot of questions here, but in the end, the cloud sales team needs to have the proper skill set needed to identify the right customer targets, build a rapport with them, gain their trust and, ultimately, become their customers’ trusted advisor for all their IT needs.
Solution Selling Cloud
Today, it is more critical than ever to equip the sales team with the proper foundation of “how to solution sell cloud.” The goal should be to shift from just being an order taker competing on price to being able to recognize and assess a customer’s needs and pain points, and then suggest a fitting solution, thus building a “customer for life.”
True solution selling has become a lost art in the world of IT, and there is significant opportunity for those who can truly solve customer’s problems and build strong customer relationships.
If you have any questions about selling cloud, contact your Arrow representative today.
By Kirk Bohn | Arrow ECS
Last modified: November 6, 2019