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The drive towards more operational expenditure (opex) driven purchases as part of customers’ business transformation strategies is forcing suppliers to rethink their business models to ensure they stay relevant.
Rather than simply providing a host of technologies as part of the traditional reselling business model, customers are demanding greater value and the delivery of specific outcomes, reinforcing the need for suppliers to shift their focus to a managed service offering – either completely or as a complementary part of their existing portfolio.
Eager to make the change, channel businesses aren’t short of enthusiasm. However, many are finding it hard to get off the starting block or they’re stalling at the first hurdle. But why? It may sound simple, but it’s often because they’re lacking a credible execution plan.
A fundamental first step is appreciating that this type of transformation is akin to starting the business from scratch. In some respect, it’s harder because of the inertia and traditional habits that have been built over the years of being a value-added reseller (VAR) business – rewiring those behaviours isn’t easy.
Ten or 20 years ago when the market was buoyant, many business owners may have been in an enviable position where they were able to set up their business without a plan.
However, today, it’s a very different business landscape – both fast paced and hypercompetitive. Transforming the business takes energy, effort and planning. If businesses don’t have a plan, then they’re clearly not serious.
But what makes an execution plan credible? The key is for it to be realistic.
For example, if a business is currently 100% VAR, to say that 50% of the business will be aligned with the managed service provider (MSP) model this time next year is probably wishful thinking. That is, not unless the business owner has identified some very specific and definitive steps as to they are going to achieve this and answered questions, such as:
- Is that % based on switching all existing customers?
- Is the business confident that all those existing customers will want to switch?
- Is it realistic?
- Does the business have the funds and resources in place to make this happen?
- Does the business already have a track record?
With time ticking and competition hot on the heels, the more detailed the business plan is, the more likely owners will make their dream a reality.
Engineering a solution
Part of any robust plan should also outline the type of MSP service the business wants to deliver. Successful solutions, products or services, start with good design. Businesses need to draw on their strengths and understand what their niche market is and engineer a service to match.
This isn’t about building a solution for everyone – it needs to be centred around a service offering that stands out from the crowd, rather than simply being a me-too product in a crowded space, whether that be a vertical focus, cloud specialisation, or something else. Other fundamental questions that need to be answered are:
- How do we differentiate our anything-as-a-service (XaaS) offer?
- How do we price our XaaS offer?
- What do we put in our XaaS offer and what do we leave out?
- How much of the XaaS offer will be software and how much will be high-value service?
- If providing high-value services, who and how will they be delivered?
All too often, MSPs try to build services that cater for everyone and they think appealing to the biggest possible market is the route to success. It’s critical that businesses define their target market and establish a position in a field that is crowded. Heinz may have “57 varieties”, but can you name more than 5?
Another fundamental part is defining the go-to-market strategy. How will the business attract new customers and engage them with the unique offering? Will the business focus on those existing customers or look at targeting new prospects?
More importantly, what will be the makeup of the sales team – will the business use existing sales people and get them to focus on XaaS or will there be a different, extended team?
If the leadership team decides to use the existing sales force, a fundamental part of the plan must address the thorny issue of commission. Big upfront deals versus a recurring revenue model – the commission paybacks can be very different, therefore, a decision needs to be made as to how it will compensate the sales team for expected future revenues.
My advice to any business? Find the money to do just that. Only then will the business guarantee its sales team are fully bought and engaged with the new business model.
Look out for part 2 of this series where Alistair will take a closer look at the importance of a strong culture and highlights why marketing should no longer be viewed as an afterthought.