It’s common knowledge that margins on IT hardware aren’t nearly as profitable as they once were, which is why many successful channel companies have migrated to on-premises software- and services-based sales. However, with the explosion of cloud computing, those profitable sources are now in jeopardy, too.
Gartner estimates that the global public cloud services market accounted for $131 billion in revenue in 2013, an 18.5% increase from 2012. This includes direct spending on the three primary cloud models (public, private, and hybrid) as well as indirect spending on business process outsourcing offered from a cloud foundation. Microsoft’s decision to stop supporting its Small Business Server and to focus on Microsoft 365 and Azure are two additional confirmations that that the future of IT is going to be in the cloud.
Determining where the cloud fits in with your business can be a daunting task. Many public cloud providers don’t have formal channel programs and often work directly with end customers. Also, some VARs and MSPs treat the cloud as a loss leader — but how sustainable is that as a business model?
Considering the massive adoption of cloud services among businesses, this represents a great source of recurring revenue for VARs and MSPs that can figure out how to bundle the right cloud services with other IT offerings at a price that’s attractive to end users. Of course, if it was that simple, cloud services would account for a larger percentage of most channel IT companies’ revenue.
In a 2013 channel survey of 350 IT service professionals, research firm “The 2112 Group” uncovered some insights into this dilemma. Among other startling findings, the survey revealed that 44% of technology firms depend on breaches, downtime, and client concerns about unprotected data rather than taking a proactive approach to marketing and selling cloud backup and cloud-based security services. Another notable insight from the study was that 56% of respondents indicated that backup and recovery was their best-selling cloud service.
There are dozens of cloud services that VARs and MSPs can sell. For resellers having trouble figuring out where to start, consider the following two as starting points.
• Backup and Disaster Recovery (BDR) as a service. Most business owners understand they need life insurance, health insurance, car insurance, and homeowner’s insurance to provide financial protection from accidents, disasters, and tragedies. But according to Forrester Research, nearly 44% of small businesses with fewer than 100 employees have no business continuity or disaster recovery plan in place.
Selling BDR as a service is the same insurance concept applied to your customers’ businesses and the data it depends on. Not only does it represent one of the easiest cloud-based services to cost justify, but it should be the foundation upon which all other services are built. According to a study from Price Waterhouse Coopers, 70% of small firms that experience a major data loss go out of business within a year. That’s a startling fact that should at minimum get the conversation started with a client or prospect.
When small businesses try to figure out off-site backup on their own, a number of pitfalls can pop up. Here are a few:
- Not encrypting data properly
- Storing data in a cloud data center that doesn’t meet industry requirements
- Not considering how data would actually be retrieved so that the business could recover following a disaster
These reasons make BDR as a service the number-one cloud service that VARs and MSPs should be selling their customers.
• Security as a service. Rather than citing the myriad studies showing that SMBs represent the most targeted group among cyber-criminals, let’s start with the premise that end-users understand the importance of security. Perhaps they’re already using antivirus software on their computers, and they have a firewall, too. The question becomes, “Why is it better for them and for the VAR/MSP to move from the traditional licensing model to a cloud-based subscription service?”
One reason is that it makes security license renewals less of an ordeal. If a reseller offers traditional security software licenses, the burden is on the reseller to keep track of when each customer is up for renewal, which could be every 12 or 24 months. The reseller then needs to schedule a meeting with its customer weeks or months before the deadline to ensure its licenses don’t expire.
Some MSPs treat these meetings simply as scheduled tasks, while others, like CMIT, view them as perfect opportunities to create and implement customized solutions that fit our customers’ requirements and provide them with security and control. We bundle in “sticky” services to offer a whole package around the deployment of cloud solutions, and we find that our small business clients prefer to partner with one firm like this that can guide them through the entire process — and not just sell them a storage solution. Consider it an umbrella for your business’ rainy day.
Another problem resellers can run into with traditional security software licenses is competing against their software vendor. Like their channel partners, many security vendors have difficulty managing which of their customers are buying their products direct vs. through their channel partners, and it can be confusing to partners and vendors when they are both trying to renew clients’ software licenses. Moving security software licensing to a subscription-based cloud model eliminates these scenarios and replaces them with a small, ongoing monthly fee customers pay for security without interruptions.
Cloud-based backup and security are two foundational IT services that customers need — and they both serve as viable litmus tests to confirm customers’ attitudes about making the move to the cloud. Once a customer realizes the convenience and effectiveness of the cloud-based business model, it will become easier to add incremental services over time as the customer’s business grows and evolves. In the cloud services model, you’re no longer asking for a huge outlay of capital — you’re simply identifying additional business needs and adding an incremental increase to an existing expense. Start small, play it smart, and lead with two cloud services that no SMB should be without: backup and security.
CMIT Solutions is interested in awarding the Affiliate opportunity to intelligent, growth-minded owners of independent IT companies and managed service providers who wish to take their business to the next level. For more information, email John Byron at email@example.com or call 1.800.710.CMIT.