A big inhibitor to cloud adoption in the channel is that businesses struggle to adjust to managing the flow of small but steady and recurring units of income as opposed to very large, if intermittent, deals.
In the past, I was well accustomed to the deal treadmill and the insatiable hunger of the services engine. The faster deals were closed, the more people were brought in for delivery. The more people, the more expenses, and the faster the deals needed to be closed. It was a vicious cycle.
Today with our partners, I see the same treadmill, and the solution is annuity revenue. The challenge is to build small, steady increments of revenue into a massive stack of monthly income. The faster the revenue is increased, the faster the escape from the interminable deal treadmill.
Rather than asking whether a company should be embracing cloud and the revenue change it presents, look at remodelling the organisation to take advantage of the long-term annuity revenue opportunity. Or stay on the deal treadmill and get left behind.
If you don't believe me, talk to your clients. They will be looking at the cloud more seriously from now on.
Idea number one - Take the lead:
Bandwidth is more prevalent, and the support drain of on-premise capability can only increase. If a company actively educates its customers about the cloud and its impact on their businesses, it will position itself as a leader, not a follower.
If customers undertake this research themselves, they could conclude transactions with a vendor or competing channel player directly and remove the company from the equation. Traditional on-premise deployments with the associated lumpy revenue will be diminishing - by helping customers navigate the process, a company will secure the annuity income.
Idea number two - Focus on customer retention:
Cloud computing is here to stay.
Grant Hodgkinson is channel and alliances director at Mimecast SA.
Many organisations still engage in shelfware transactions - nice lumpy revenue but with no long-term adoption and often coupled with customer unhappiness. Customers will look to the cloud, as this level of short-term thinking becomes a thing of the past.
In the cloud, partners need to be active in ensuring adoption of solutions, such as assisting the client in changing its users' behaviour, and making sure the technology really delivers.
Having technology adopted by users means long-term utilisation and 'stickiness' - more incremental revenue potential in the future as more people use more features.
Cloud-based shelfware doesn't earn revenue, so position the company as an expert in guiding customers through the adoption process. To do this, a company will need to understand what makes users tick, and how to change their behaviour.
Idea number three - Incentivise salespeople creatively:
Salespeople respond to commission, so working with small units of annuity income can be awkward. It's difficult to remunerate a salesperson meaningfully now on the back of a small monthly payment that could grow into something substantial in future. While it is possible to bankroll commission upfront based on future revenue earning, it's not always practical or possible.
To find the balance between incentive and cash flow:
Explore a combination of upfront earnings and long-term growth potential: The salesperson's smaller upfront commission cheque can be offset by the commission potential from the same customer over a period of, say, three years. This aligns salespeople to the long-term adoption imperative.
Incentivise a better or larger spread of customers: As salespeople achieve more new customers and get closer to their quarterly or annual targets, the commission rate goes up. A company might need to get more aggressive in the sales arena, which is possibly not a bad thing for business.
If the customer-facing team is split into hunters and farmers, hunters should be incentivised for customer acquisition or helping to move into the cloud quickly. The immediate cash-flow implications should be balanced with confidence in customer retention capability.
Incentivise creative retention services: This motivates salespeople to go beyond the mere 'technology sell'. In the longer term, it means happier customers and more annuity revenue. Look at what it takes to 'give the technology away', and get creative about driving adoption in customers.
Bet on customer happiness: If a company has built a reputation for better service than its competitors, adoption or stickiness should not be a problem. Investing in the customer relationship upfront by forwarding some or all rebates to the salesperson who closed the deal might create the right behaviour in the sales force. The company might take a knock in the first quarter, but the longer term, annuity revenue will speak louder to shareholders. Of course, if the company has its customers committed to a long-term contract, this becomes very easy to do.
Cloud computing is here to stay. While changing business models and compensation scenarios is never comfortable, companies need to adjust to stay in the game. Coming out of the delirium of the deal treadmill and into the slow but steady pace of repeating revenue will be a shock for many, but until channel organisations adjust to this way of doing business, they cannot be sure of delivering meaningful value to their salespeople or customers. The market is looking for cloud. Are you going to be there to provide it?
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