The Cloud opportunity is ripe – but we mustn’t ignore the challenges
Published 04/09/2018 by Janette Martin, Managing Director, Strategic Partnerships and Alliances
Cloud technology has been around for some time, but the reality is that many businesses are still behind when it comes to adoption. Ultimately, the Cloud requires a change in business model so it’s often not a decision that can be taken lightly. This is where the channel comes in – a collective of technology expert organisations that can together support end-user customers in their digital transformation.
But what if the channel is holding back in the Cloud? And why the hesitation? Surely this consequently holds vendors like Advanced back from supporting and leading customers into the digital future?
The reality is that fear of change is often the biggest challenge for resellers on their journey to the Cloud. This includes a fear of change of the revenue model. Selling a subscription vs a perpetual licence, for example, will often mean a lower margin in year one, but a higher margin for every year thereafter and will ultimately lead to a stronger business for the reseller in the long run.
It’s this move away from big, up front margins that is difficult for many resellers to adapt to. To be successful, resellers must consider their longer-term business plan and how they can manage the transition in the short term to minimise risks.
This is especially true around cash flow. It is better for resellers to sell a Cloud-based proposition on an annual basis in advance rather than monthly, as this will make a significant difference to cash flow and make the transition to selling the Cloud much easier.
In addition, resellers shouldn’t only think about Cloud for winning new customers. If partners have a base of customers that are using a dated, on-premise solution and that are paying an amount in annual support and maintenance, then resellers should consider what the uplift to their total recurring revenues could be if they were moved over to a new Cloud-based subscription solution.
At Advanced, we have modelled a number of our partners and have identified that they could double their annual recurring margins by migrating their customers to our Cloud-based proposition from their current on-premise solutions.
Believe it or not, customers are more open to the Cloud than we imagine. Often we think they are happy with their current solutions and, consequently, wouldn’t consider newer systems or payment models. But in reality, the organisations not talking to customers about this will likely lose them to those that are. Our advice to resellers is: don’t be afraid of speaking to your customers about the huge benefits and potential of taking their critical business systems to the Cloud – be their trusted advisor who helps guide the way – and make sure you have the right partnerships in place with Cloud-first vendors.
After all, it’s not just resellers that need to rethink their approach to the Cloud. It’s down to vendors as well as distributors too. Support on the business side of things is important and they could do more to help resellers sell a Cloud service to their customers.
Large software developers like Advanced have highly experienced CFOs and teams of finance analysts to help them plan and navigate the transition to Cloud. In comparison, smaller resellers may not have this level of resource, so providing support on business planning to identify the upside is critical.
Resellers generate revenue from delivering services around the implementation of solutions. As such, vendors must ensure they have strong training and onboarding support for their reseller partners, with the focus on aiding the reseller to become self-sufficient as quickly as they can while delivering quality services that reflect well on the vendor solution and reseller services.
The sooner we can eliminate the fear of the Cloud among resellers, the sooner this game-changing technology will come into its own. If you’re a reseller and want to discuss your transition to the Cloud, find out about our TruePartner programme and talk to us here.