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Selling cloud services: why aren’t people doing it better?

One of the surprise findings of the 2018 CONTEXT ChannelWatch report was that 55% of resellers surveyed had not sold any cloud services in the previous six months – a higher percentage than in 2017. Moreover, across Europe, resellers see more growth opportunities in traditional services than cloud services, with maintenance and support (49%) and installation/technical assistance (39%) identified as having more revenue potential than SaaS (23%), Desktop as a Service (20%) and Workspace as a Service (27%). With this in mind, Technology Reseller asked UK resellers about their experience of selling cloud services.

Q: What difficulties did you encounter/are you encountering in selling cloud services and growing your cloud business?

Dean McGlone, Director, Advanced, the UK’s third largest provider of software and services.

Dean McGlone

“Fear of change is often the biggest challenge for sellers, vendors and resellers on their journey to the cloud. This includes a fear of change in the revenue model, such as subscription over perpetual, which holds us back from supporting and leading customers into the digital future. Selling a subscription vs. a perpetual licence will often mean a lower margin in year one, but a higher margin for every year thereafter, creating a stronger business for the reseller in the long run.

“It’s that 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, especially around cash flow.”

 

Tim Mercer, CEO, Vapour Cloud, a cloud-first provider of secure network connectivity, voice communications and data storage. As well as selling directly to end user businesses, Vapour Cloud delivers solutions in partnership with other channel organisations.

“For me, growing cloud business is an education process, for clients and providers. As providers, we should be giving the correct advice, not the advice to get a sale. Unfortunately, there are some resellers who focus purely on targets, knowing they’re proposing something that might not be best for the client. For clients, cloud is one part of the digital transformation journey, and it’s important they look for a provider who can manage a full end-to-end solution.

“There are two distinctions in cloud services – data and voice. Moving and storing data in the cloud has been possible for a lot longer and is more mainstream, although it is not without its issues. Much depends on the application being run and where that best fits the business using it. For example, if you are a housing developer/architect using large files, then having those in a cloud solution with limited bandwidth into the business is going to cause problems. This is a scenario where it may be better to sit on-premise with a back-up service in a cloud environment.

“In other words, there isn’t a one size fits all. The whole solution must be considered, including internet bandwidth, the applications being delivered, the number of other applications being used and where they reside, the number of users and whether there is a back-up network service, if you are moving to the cloud.

“On the cloud data side, business is growing steadily month on month. Our partners are looking for automation for simple services, whilst also seeking a full managed service in a hybrid model. A typical example is: how do we move these applications and services to the cloud while keeping these servers on site? Can you help lift and shift, and support all services?

“Voice is a different animal: it is time sensitive and therefore the network, security policies, firewalls, back-up service and LAN environment have to be voice-ready. Otherwise, there are likely to be issues. What we do see is that if this service is implemented correctly there are many positives for customers, including mobile/home working, mobile app calling, resiliency and flexibility. Growing or reducing headcount is simple and the fixed/guaranteed charge to the business (which runs the cost as an Opex) is a help to most.

“Our cloud voice business has exploded over the last 12 months. Manufacturers have all moved to a cloud-only model and providers with experience are being sought – clients don’t want to take a punt. We’ve been cloud-first since we were founded in 2013. It was a little too early then, but it’s paying dividends now.”

 

Richard Blundell, IT Services Divisional Director, Commercial Group. Commercial provides a broad range of business services, including IT services delivered on-premise and in the private, public or hybrid cloud.

“Customers are still suspicious of the Cloud and many like to ‘see their tin’ either on premise or in a data centre. This is particularly true of more traditional businesses in Legal and Education. The Cloud is often seen as the preserve of more cutting edge, Software-as-a-Service businesses that, by definition, are more agile and light on their feet.

“Many businesses see the Cloud as a destination – somewhere they’d like to get to at some point, but which they are still not ready for. These businesses would like to have a three-year roadmap showing them the route from the Ground to the Cloud.”

 

Gareth Meyer

Gareth Meyer, Director, Ultima, a leading provider of on-premise and cloud IT infrastructure and managed service solutions.

“Technology transition and investment in cloud technologies is always going to be difficult when you have a successful, proven strategy in delivering on premise solutions. Traditional IT resellers have invested substantially in people, partner relations, vendor technical accreditations and systems delivering customer solutions. Then, on the customer side, Cloud was such a buzzword that clients became fatigued in receiving messaging around purchasing Cloud Services, even though their business demanded the benefits of these types of solution.

“We’ve been able to migrate clients to the Cloud by focusing on truly innovative solutions, such as Intelligent Automation and Intelligent Venues, and by delivering transformative solutions, concentrating on outcomes rather than just focusing the conversation on moving from on premise to Cloud.”

 

Q: What has your experience of selling cloud services taught you and what advice would you give to other businesses thinking of going down this route?

Dean McGlone, Director, Advanced.

“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. In reality, any organisation that doesn’t talk to customers about the Cloud is likely to lose them to those that will.

“Our advice 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 providers.

“For resellers, it’s important to consider cash flow. It is better for partners 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 should avoid focusing heavily on new customer acquisition. If partners have a base of customers that are using dated, on-premise solutions and paying an amount in annual support and maintenance, 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. We have modelled a number of our partners and identified that they could double their annual recurring margins by migrating customers to our cloud-based proposition from their current on-premise solutions.”

 

Gareth Meyer, Director, Ultima.

“Enablement and platforms to support cloud services are key, not only for Resellers to sell and manage cloud deployments, but also to deliver customers real-time management information and reliable platforms.

“Ultima is a real example of how Cloud systems enable smarter real-time information. Previously, our business was reliant on multiple sources to supply the information required, from which we would try to get some usable information. Now, the transition to Data Warehousing in the cloud and the use of BI tools enables us to deliver Sales and Marketing information back to the sales teams, as well as critical forecasting that allows our Professional Services and Managed Services divisions to plan and allocate resources for successful customer engagements.”

 

Richard Blundell

Richard Blundell, IT Services Divisional Director, Commercial Group.

“Experience has taught us that Amazon, Google and Microsoft, the Big 3 public Cloud players, are enormous organisations that are hard to approach and even harder to get hold of when support is needed. This puts many businesses off heading to the Cloud.

“Our advice would be that the Cloud has many advantages and must form part of a three-year technology roadmap, but that it is important to go at a pace that is comfortable for your organisation – don’t rush this. Go at a sensible pace, making sure all stakeholders are comfortable and brought in along the way.”

Mark Bamford, General Manager, Hollis Technology, a provider of IT solutions to public sector and commercial organisations across the UK.

“As an early adopter, Hollis Technology quickly recognised the importance of understanding how customers worked, in order to recommend the most appropriate cloud solutions for the greatest benefit. Resellers need to move from selling hardware to services, which in turn can generate greater revenue opportunities from activities such as migrating customers to the cloud. They must also be prepared for the changes in support workload, the responsibility for which shifts from the reseller to the cloud supplier.”

 

Tim Mercer, CEO, Vapour Cloud.

Tim Mercer

“Clients need to work with a provider that has experience in understanding all the technologies or one that has fantastic partnerships to deliver the services required. They should be looking for Proof of Concepts, taking into account previous case studies, and for partners that are working on future-proofing their business with next-generation technologies.

“Providers should showcase new technologies to their clients and be clear on future roadmaps that can help clients move forwards, e.g. do they want to look at AI, will it help, what about video, how will allowing mobile working impact the business and how will you deliver applications to team members working from home?

“BYOD and security policies are all services that need to be thought about before the move is signed off at board level – simple elements that are sometimes overlooked.”

 

Q: Could vendors and distributors do more to help resellers sell Cloud services and, if so, what?

Richard Blundell, IT Services Divisional Director, Commercial Group.

“Oh yes, so much more. They need to get over their giant monolith image and find more effective ways to engage with core VARs. We still struggle to get their attention despite being a rapidly expanding Managed Services player. The Cloud is a scary and daunting environment for some businesses to engage with, and they need to offer comfort.

“There’s probably also still some concern from businesses about how secure their data is in the public Cloud – that needs looking at too.”

 

Dean McGlone, Director, Advanced.

“Support on the business side of things is important. Large software developers 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. For this reason, vendors must ensure they have strong training and onboarding support for their 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.”

 

Gareth Meyer, Director, Ultima.

“Training and Enablement is required across the channel. While some resellers are taking advantage of the sales and technical collateral available, these offerings are not widely known about and more could be done by both Vendors and Distribution to promote them. Account mapping sessions are extremely beneficial; vendors could do more of these focusing on building relationships with reseller sales teams to better identify the opportunities in existing accounts to deliver cloud services specific to industry demands.”

 

Mark Bamford, General Manager, Hollis Technology.

Mark Bamford

“It is important that manufacturers and distributors are set up to deliver fast and responsive technical support to resellers and their end-user customers that rely on cloud services to operate key business processes.”

 

Tim Mercer, CEO, Vapour Cloud.

“Of course they could. In the world of data and hardware sales, there should be a more proactive solution with network providers, which is why we are working hard with Dell/EMC on a solution for our partners that includes the hardware, software and network sale, all managed in a way outlined in answer to the first question.

“There are also considerations to make surrounding how we pay salespeople selling the service. Unless salespeople are commissioned differently, they will always sell the product most likely to earn them more commission. Bold, but true.

“This goes back to the education piece I mentioned earlier, and the need to focus on what’s best for the client. In essence, we should be working harder with both vendors and distributors to deliver the right solution, with a focus on outcomes. To truly deliver that right solution, you must first understand what a business wants and when and why they need to change. We have a role to advise on whether the change is right for the business and which piece of the jigsaw to complete first.“

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2018