9 Ways To Measure Your Company's Cloud Success
The transition to the cloud is a huge challenge for most business models. Here are nine key performance indicators for tracking your company's cloud progress.
- By Keith Lubner
- September 01, 2011
Over the last several months, I've explored different key performance indicators (KPIs) for you to track for your business. In particular, I emphasized indicators related to productivity and efficiency. This month, I'll elaborate on KPIs that are extraordinarily important to measure for your cloud practice. Mind you, these are only a sampling, but they should at least get you started.
Cloud Leads vs. On-Premises Leads. If any KPI is a notch higher in importance than other KPIs, it's this one. Studies have shown that resellers will need upward of five times the amount of cloud opportunities for every one on-premises opportunity. This is because the cloud opportunities spread the revenue out over time -- and consequently give you more-even revenue flow -- while the on-premises opportunities allow you to see the bulk of the revenue immediately. Over time, cloud is a much better business model, but in the beginning you need to build the business and that requires leads. Therefore, make sure you have a much greater ratio of cloud leads coming in than on-premises leads. Each company ratio is different (based on vertical expertise, geographical focus and more), so only you can determine the magic number that you need to get to.
Cloud Opportunities from Cloud Leads. Once you're able to track the appropriate ratios of the leads coming in, and you can adjust accordingly, you then need to be able to track actual opportunities and revenue from cloud leads. Very simply put -- and very different from just tracking leads (which is quantity focused) -- you're tracking quality here. Fine-tune this and you start to become laser-focused on your execution.
Aggregate Cloud Seat Count. Once you get the cloud opportunities, the tracking and metrics don't stop. For your cloud business, you truly need to have a total cloud seat goal in mind, for each cloud service you represent. Therefore, as each deal becomes an opportunity, you can see how close you're getting to your overall seat-count goal. My recommendation is to segment this out according to cloud service and then roll up all seats to a company goal. This way, you can track your individual contribution (and productivity) by cloud service and then by the cloud practice overall.
Average Revenue per Seat. Now that you have an idea of seat counts, you then should be analyzing the average revenue per seat that you're acquiring. To me, this metric is very telling, as it reveals where you're making the money. First, figure out what you need to make per seat and apply a profitability percentage to the number. This is your goal. Next, start measuring on a deal-by-deal basis what the revenue is per seat. Whichever way you start trending, adjust accordingly by either adding services, increasing or decreasing marketing, and so on.
Cloud Revenue vs. Traditional Revenue. You may be asking yourselves, "Why is he even mentioning this metric? It's so obvious!" Truth be told, I've met with a lot of resellers, and very few are actually tracking their overall cloud revenue versus their traditional revenue. As more investment occurs in the cloud area with your businesses, you need to be able to justify the investment as it relates to profitability. In the beginning, you'll be more "accepting" of lower thresholds of revenue, but over time you must increase. Segmenting out cloud revenue from overall total revenue will let you easily track the revenue curve. Sounds simple. Not a lot of folks are doing this, so take the lead and start measuring this indicator.
Additionally, I'd recommend tracking things such as:
- Leads from existing customers
- Revenue per lead from existing customers
- Net new leads vs. leads from existing customers
- Revenue from marketing campaigns
Actually, I could on and on, but you get the point. The transition to the cloud is a huge business-model challenge to absorb. Make sure you're using KPIs that measure your progress toward your cloud goals.
Next Time: Back to Channel-Creation Basics
Keith Lubner is managing partner of Channel Consulting Corp., a N.J.-based global consulting organization focused on channel strategy, design, enablement, outsourcing and training for growing companies.