I have now been to quite a few events in my first month at Purple Cow and regardless of what the event is about, there is always one word that comes up (can you guess what it is?).
That’s right – THE CLOUD!
I’ve been thinking a lot about what is being said at the moment, so have collated my random thoughts below, which are aimed at organisations thinking about adopting a Cloud strategy, so hope you enjoy the read…
Do I need a Cloud strategy?
There is no mistaking it that Cloud is the big talking point of the moment and is here to stay. Although Cloud has been around for a long time in many shapes and forms, it is really coming to the forefront, especially with customers looking to reduce their IT spend.
You will probably already have customers asking you about Cloud services, so in all likelihood it is something you cannot ignore, as you may face the risk of losing the customer. You may not even lose your customer to a direct competitor but to an organisation that already has an established Cloud strategy and game plan.
There are lots of things to consider when entering into a Cloud model, which will be addressed further down, but the main things to consider is what will happen to my business if I don’t look at Cloud seriously and can I continue my current business model and remain a success. The answer is sometimes not so simple and can depend on, for example, whether you are a lifestyle business or you have some big growth plans.
Regardless, Cloud needs to be discussed within your organisation, even to see if it the right fit for you.
Do my customers need Cloud?
Most people will say yes they do but this isn’t always the right approach. As with selling anything, the main question you need to ask is “What exactly does my customer need?” Solutions need to be sold on the business benefits to the customer, rather than the technical specs or functionalities or even the method it will be delivered.
Therefore, sometimes the Cloud isn’t always the right solution. Take for example, a customer who is in an area where the Broadband services doesn’t allow the bandwidth for a Cloud solution. Would you sell them a service that doesn’t meet their needs, simply because they ask for it or the industry is telling you to?
I also don’t think that on-premise services are dead and buried, as it is dependent on lots of factors. Cloud services equate to around 15% of IT spend but everyone is forgetting about the 85% that isn’t. Last time I checked 85% was still bigger than 15%!
Although the shift to Cloud services is increasing, there are still other options available to your customers.
If you can propose an on-premise solution and services to a customer based on meeting their business needs and you can justify the spend and ROI to the customer, then any sensible MD, IT or Finance Director should take you seriously.
There will though be instances where a Cloud or hybrid solution, will be best option for the customer, at which point you have to look at how you can deliver.
How will it affect my business?
Cloud is a way of both delivering and selling a service that is very different from the traditional model. To be successful you will have to change the way you do business significantly and is the first hurdle most organisations face.
A change in mind-set is needed from the top down and if it is a direction the organisations is taking, then you need people who both understand and are on-board with the idea.
There’s is no doubt that it will affect your profit and loss, as upfront investment is needed in terms of training and marketing but also in terms of what you get back. Cloud is a long term, volume sell and it may be that you don’t see the returns until up to a year down the line.
How will it enhance my business?
Having Cloud offerings will mean you are meeting an obvious demand in the market. Not having one, could run the risk of losing customers and business to other organisations but should it be the core of your business or an additional service?
It could be an additional service, as there is still money to be made from other services but it should make an organisation feel more comfortable and secure in knowing they can deliver Cloud solutions, on top of their other service offerings.
Having a Cloud offering can open up new avenues for an organisation, in terms of winning new business and making new partnerships, within the Channel.
The important question to ask is “How I am different from all the others now offering a Cloud solution?”
How will it affect my bottom line?
There is no question that initially it will affect your bottom line. You will have to invest in training your internal staff, marketing your new offerings, buying or renting the necessary equipment, which could all prove to be a significant cost.
Also, most organisations are used to getting all the money upfront. With that they pay the wages, the bills and other overheads. The accountants know how much money is coming in and out, and are happy (well as happy as an accountant can get!)
Moving to a Cloud model, changes that completely. You will have to wait several months to get a return on the investment, but at which point your outgoings haven’t changed.
If an organisation wants to enter into the Cloud model, they will need a nice chunk of money in the bank to cover the initial disruption to the business.
How will I compensate my sales staff?
This is a very big question amongst Sales Directors and often a difficult one to address. As a former Sales Manager at Microsoft, I used to get my account managers to take the cost for a month and multiply it by 12 for the year, to get the value on which I would pay them.
Was that the right way? Difficult to say, as the risk with this method was that the customer could downscale at any point, which means the value goes down but you have already paid the account manager already.
Other solutions would be to do it on a monthly basis but the problem here is that the size of a hosted solution is relatively small and at Microsoft, we didn’t track such small opportunities. Also, there is the admin overhead of the sales person adding a new opportunity every month into the CRM tool.
Taking this method, does mean that the sales person will constantly have to find new business each month, to ensure the size of their bonus increases with each monthly annuity. The risk here is at the point where they have enough customers paying monthly; they could then get lazy to hunt new business.
Also, if you have sales people, who are used to selling a service where they get paid up front, where is the incentive for them to push a Cloud solution? One way to overcome this would be to have two sales teams, one still pushing traditional offerings and one pushing Cloud ones, but you may have some internal competition and conflict.
What will be my go-to-market strategy?
This is quite an important factor to consider. Do I go to my current customer base and offer them my new and exciting Cloud proposition? Yes, if it’s right for them but it may affect your business in terms of current support contracts or on-going projects.
You may also encounter some dissatisfaction with recent customers, where you have just sold a solution and now you are pushing a different method, so you need to be clear about who you are targeting, potentially customers who haven’t done any business with you in while.
The other question is how do you win new business? This goes back to how you will differentiate yourself from the other Cloud players. What will be your USP? That could be the knowledge or skills you can wrap around the services, it could be on price or on what business challenges you can solve for the customer, and therefore how you deliver it doesn’t matter.
Who will I partner with?
Some of the things you need to consider with regards to Cloud are, will I offer the services myself or will I use a hosting partner.
The cost of having data centres (and having more than one is needed for redundancy) is a big cost and on-going overhead, so needs to be considered carefully.
Most times, working with a Partner is the easiest way to go, although it will affect your bottom line in what you have to pay that Partner. However, if you are starting out, then that cost will outweigh the complications of doing it yourself.
How do I sustain it long term?
The important way to sustain it long term is pretty obvious – grow your sales. The more customers that you have paying monthly, the more it will allow you maintain your business. The risk is, with Cloud, customers can be fickle and can change provider at the drop of a hat, usually based on price.
The other important thing to remember is not to ignore the other parts of your business, as this can still be your bread and butter and I believe there will (for now) still be a place in the market for both on-premise and Cloud solutions.
(Credits to Richard Tubb, as some of my thinking has spun out from his excellents presentations. Check him out here – http://www.tubblog.co.uk/)