Recurring Revenue Makes Cloud Compelling

By now, we can safely say that cloud computing won’t be going the way of pet rocks or mood rings; cloud is most assuredly here to stay. That’s because it provides such an assortment of benefits to companies big and small – agility, flexibility and reduced capital .. Continue

Recurring Revenue Makes Cloud Compelling
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Michele P. Warren

By now, we can safely say that cloud computing won’t be going the way of pet rocks or mood rings; cloud is most assuredly here to stay. That’s because it provides such an assortment of benefits to companies big and small – agility, flexibility and reduced capital expenses, to name just a few.

The upshot: Solution providers can’t afford to close their eyes and wait for the clouds to pass overhead (pun intended). They really will have to sideline their transactional mindset and gear up for a services-centric, recurring-revenue business model. And that’s not a bad thing in the long run.

In fact, recurring revenue is a prime motivator for solution providers considering whether to embrace cloud computing. In the latest State of the Cloud survey, a joint effort by The 2112 Group, Microsoft and Ingram Micro Cloud, more than 80% of partner respondents said that building and sustaining recurring revenue is their main reason for expanding into cloud services.

That shouldn’t come as a surprise, considering the multiple benefits of recurring revenue. Having a predictable, ongoing stream of income not only allows you to plan and budget, it also improves the overall valuation of your business, making it more viable and stable.

Of course, solution providers cite other reasons for taking on the cloud. For 72% of solution providers, increased sales are their primary motivation, while 54% said protecting their customer base is what drives them into the cloud.

The opportunities for solution providers to make money in the cloud are legion. They can wear their trusted advisor hats by consulting with clients on why, when and how to transition to the cloud, and by helping clients select specific cloud offerings and providers. They can sell discrete cloud services themselves, integrate cloud services to deliver end-to-end solutions, and manage, monitor and support those solutions once they’ve been put in place.

Those with enough ambition – and sufficient capacity – can do all of the above. One caveat: If your bread-and-butter has long been tangible products and one-off transactions, moving to the cloud will most likely disrupt your business model and ledger accounts as you adjust to the idea of money trickling in at set intervals versus pouring in from time to time in spates. So heed an old saying and don’t bite off more than you can chew. Transitioning to the cloud and a recurring-revenue model is best done incrementally with full awareness and a checklist of considerations like these:

Assess Your Skills. When getting into the cloud business, it’s a good idea to start with what you know and grow from there. Think adjacencies. If you’re a backup and storage expert, get the ball rolling by offering cloud services in that vein. If a specific vertical is your game, sell cloud offerings that cater to that market. As for sales skills, it’s highly likely you’ll have to brush up on these, bearing in mind that relationship-building, not box-selling, is your focus from now on. Don’t be afraid to take advantage of training from vendors and distributors.

Take Stock of the Competition. Don’t forget to take a look at what competitors are doing in the cloud space. Part of being successful there is differentiating yourself from others. This differentiation might stem initially from your niche (see prior consideration), but if not, make sure you can put a unique spin on what you’re offering to customers. And while it’s OK to start out selling basic cloud services such as backup (90% of solution providers do), you’ll want to branch out into more advanced offerings over time (say BPO).

Consider Partnerships and Alliances. No solution provider is an island. When it comes to the cloud, it’s important to pick the right vendors to work with whose goals align with yours—and who give you the tools to be as productive and profitable as possible. You might even consider a co-selling arrangement with one or more cloud vendors to help fill gaps in expertise or capacity. It’s wise to take advantage of distributors, too; many offer ample cloud enablement and support tools (think training, marketing, market intelligence, etc.).

Plan, Plan, Plan. Moving into any new business venture without a plan is never a good idea. Planning is simply good business. What’s more, it’ll give you a leg up on the competition because solution providers are notorious for not planning. 2112 research reveals that 46% of partners don’t have business plans; two-thirds don’t have cloud sales goals; and more than half (57%) don’t have strategic growth plans. Having a financial plan in place can be especially helpful to solution providers venturing into the cloud since they can find themselves cash-strapped for a year or more when making the transition to a recurring-revenue model.

Get (Very) Comfortable With Metrics. Adopting a recurring-revenue model and achieving success with one means knowing what and how to measure. It’s time to learn all about churn rate, customer lifetime value (CLT), monthly recurring revenue (MRR) and customer acquisition costs. Again, the key is building relationships, not making one-off sales.

Invest In Your Business and Be Patient. It takes money to make money, so don’t hesitate to pour (or dribble, as the case may be) some resources back into your business when you can. Building your expertise can thin your wallet for a short time, but it’ll pay dividends in the long run by increasing your customer base and expanding your profitability. Just don’t expect overnight success. Building a cloud business, like everything else, takes time.

To learn more, please contact your Ingram Micro Cloud sales representative or visit the Ingram Micro Cloud Marketplace: