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The Changing Channel

Microsoft Partners Cannot Live by Fees Alone

Selling cloud service subscriptions isn't a bad strategy -- as long as you use them to set the stage for sales of your own suite of services.

Commissions, finder's fees, referral fees, partner-of-record fees. Whatever the cloud provider partners you work with call them, they're not enough to drive your business profitability.

Think about it. The big selling point is reduced cost: "Only X dollars per head per month." That may sound great to a customer, but think about what less than 10 percent of X means to you. Not much. How many "heads" do you need to be getting paid on for that fee to be meaningful? How many months or years will it take to amass that many "heads"? Can you really wait that long?

For most channel partners, the answer to that is a resounding "no." Monthly recurring revenue (MRR) has been the mantra of managed services for many years, but it only works when the revenue is reasonable, such as when you're creating the services yourself or receiving a substantial portion of the monthly fee.

Is Selling Cloud Services a Bad Idea?
All that doesn't mean selling cloud service subscriptions is a bad strategy! It's a great strategy, if you use cloud services subscriptions to set the stage for sales of your own suite of services wrapped around them.

If channel partners have learned anything over the years, it's that anything you sell needs to be wrapped in services:

  • Attached services such as configuration, specification, preparation, testing, installation, implementation and integration.

  • Transitional services such as data migration, files and settings migration, application migration and more.

  • User services such as new platform training and ongoing user support.

  • Data and network security services, including firewalls, intrusion prevention, security incident and event management, authentication and encryption, as well as business continuity, data backup, and disaster recovery provisioning.

  • Managed services, including cloud services monitoring and management, network management, systems management, performance monitoring, and capacity planning.

Cloud services, in particular, open up a whole new discipline of service integration connecting various cloud services from various providers to each other to work seamlessly together.

Now start attaching some numbers to these categories and services. Start to list out your own services around each of these needs and price them according to your own scale. You'll quickly find they add up to a substantial engagement for which your customer will readily see the need.

Pay special attention to two particular items -- ongoing support and managed services. These are additional MRR opportunities, but unlike the cloud services subscriptions, they return 100 percent gross profit directly to you. You may quickly find that your own MRR services pay you more than the cloud subscription services you wrap them around. Sounds like hardware, no?

What's the Difference?
Underlying all the financial reasons to wrap your own services around cloud subscription sales is an even more important reality.

Why should customers buy cloud services from you? If you're not asking this question, you can bet your customers are. Once they realize they can buy these cloud services from many outlets, customers start to wonder the same thing: Where can they get the best deal?

It's a reasonable question. Why should they buy the same service from you that they can buy directly from most cloud providers? What value do you add to their purchase? Answering this question does not mean what value they get for free. Customers are willing to pay. They're willing to pay for convenience, for faster time-to-value, for the best implementation of their investment to assure they get the most out of it.

Get in front of that question. Show your customers that you sell cloud services that are well thought out, well planned, well deployed and well supported. This is what our channel has always been about, and -- guess what -- cloud has not changed that. You, the channel partner, make all the difference.

More Columns by Howard Cohen:

About the Author

Howard M. Cohen is a consultant to IT vendors and channel partner companies and a board member of the U.S. chapter of the IAMCP. Reach him at hmc@hmcwritenow.com.

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