Four Stages of Cloud Services: How to Maximize Revenues, Minimize Churn
When it comes to building a cloud services business, channel partners must embark on a four-step journey, Senior VP Renee Bergeron told Ingram Micro Cloud Summit attendees this morning in Boca Raton, Florida.
On the one hand, VARs and MSPs have flooded into the cloud market. But on the other hand, most of those partners have immature, first-stage cloud businesses, according to Ingram’s analysis. So how can partners move forward, grow recurring revenues, and minimize customer churn?
The effort requires partners to embrace the four stages of a cloud services business development, according to Bergeron. They are as follows…
Stage 1 – Build: Here, partners typically offer manual provisioning, reactive/opportunistic sales strategies and one to three cloud offerings, Bergeron says. ChannelE2E suspects those offerings are typically Office 365 or Hosted Exchange, plus some basic backup, storage or security services. Partner Status: Roughly 60 percent of Ingram Micro Cloud partners are in Stage One of the cloud journey, Bergeron estimates.
Stage 2 – Breadth: Here, partners begin to leverage digital marketing, automated provisioning, and cross-selling. The typical partner at this stage offers four to 10 cloud solutions. Partners that focus on cross-selling to existing customers typically have a 4X lower cost of sale vs. partners that sell mainly to new customers, she estimates. Plus, cross-selling leads to faster and stickier engagements, and annual churn rates drop below 15 percent when you’re focused on cross-sell, she says. Partner Status: Roughly 30 percent of Ingram Micro Cloud partners are at Stage Two of the cloud journey, she estimates.
Stage 3 – Depth: Here, partners begin to embrace a hybrid catalog and they pursue integrated digital marketing. The checklist for this stage also includes automated provisioning, more cross-selling, and 10 or more cloud offerings. Among the most important additions at this stage: Partners embrace IaaS as a revenue opportunity. And IaaS, Bergeron says, is likely the biggest and most frequently overlooked opportunity for partners. Partner Status: Roughly 9 percent of Ingram Micro Cloud Partners are at Stage Three of the cloud journey, she estimates.
Stage 4 – Scale: At this stage, partners such additional capabilities as an outsourced catalog and self-service capabilities on their websites. That’s right. It sounds like self-service capabilities — which allow customers to easily fetch and activate cloud services from a partner — is the end-game, according to Bergeron’s four-stage blueprint. Partner Status: Simple math says only one percent of partners have reached this stage.
Cloud Partner Recurring Revenue Outcomes
If you follow all of the steps above, partners can transform contracts with customers from a $2,000/annual recurring revenue opportunity to a $50,000/annual recurring revenue engagement, Bergeron estimates. I believe the estimate involved a customer with roughly 40 to 50 seats, but I’ll double check with her later today during an open Q&A with Ingram.