3 min read

Bruce Stuart: Selecting a cloud business strategy

Cloud

Channelcorp’s research and experience tells us that reselling business have six strategic options to select from in making a corporate strategy decision vis a vis their investment in cloud computing and SaaS.

The strategic option that you eventually select will be driven by your corporate strategy heritage and the business skills and experience of your management team.  The path you select will be impacted by your financial condition and in many cases even the specific characteristic of your service, support, training and consulting business.  The sales and marketing talent base of your organization will also impact the option that you select, as will the characteristics of your installed base and management’s propensity to invest in growth.  Part of your business planning needs to include a classic strengths, weaknesses, opportunities, threats assessment (SWOT).

Type A-Born traditional Reseller…stay traditional Reseller-this is likely to be a slow liquidation strategy unless you are by far the best reseller of on premise software solutions, or printer and toner in your market.  This will be a successful strategy as long as you manage to build a portfolio of alliances in a rich opportunity laden ecosystem populated by key providers of cloud/SaaS solutions.  As cloud/SaaS capabilities become table stakes in your market you will likely be continuously worried about client retention and consideration by your installed base even with strong selling and technical alliances in place.  Most of the available market data suggest that cloud/IaaS capabilities are likely to become “must have “capabilities for traditional sellers of on premise solutions in the next 12-36 months.  Be careful with this strategy.

Type B-Born traditional Reseller…complement with cloud/SaaS business-this hybrid strategy is in line with market trends and properly funded and executed will produce a winning corporate strategy based on a traditional software/hardware/peripheral reselling business model.  This strategy starts as a maintain strategy focused on client retention driven by lost sale analysis. The original strategy then transitions to a growth strategy once the installed base begins to turn towards your cloud/SaaS offerings.  Your success in your maintaining the cash generation dynamics of your installed base creates reference accounts to help acquire new clients, and finances the build up of new cloud/SaaS focused capabilities.

Type C-Born traditional Reseller…full transition to cloud/SaaS-this is a dramatic business and corporate strategy transition that is executed over a 24 to 36 month period.  A plan is made to harvest and then exit the legacy, transaction centric on premise business in order to align the strategy and investment around emerging opportunities in the recurring revenue centric cloud and SaaS marketplace.  This is an “all in, bet the company strategy”(Adobe has done this in the vendor space) that will win big, or lose big…it all depends on your investment capability (how much, how long, how much) and execution skills.  This is a corporate strategy decision based on generating return on invested capital and your desire to dramatically increase the value of your business, perhaps for eventual sale. The capital required to execute this corporate strategy is substantial and it must be both intelligent and patient.  Investment will likely need to come from external sources of debt or equity even tough some of the required capital will need to be generated internally by current operating profits and/or by the sale of your on premise installed base to another organization.

As you do your business planning to guide your transition to a recurring revenue future, do your homework.  Use you vendors and distributors to Seek out other resellers that have begun the transition to make sure you have a clear understanding of where the crucial investments are, how much the sums are and most crucial how long conversion takes.

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About Channelcorp

Margaret and Bruce Stuart founded Channelcorp in 1989.  The firm is a global leader in the assistance of reseller, distributor and vendor clients. Channelcorp specializes in the business model transformation that is required in the face of the structural changes to recurring revenue driven business models in the worldwide IT business (www.channelcorp.com/services.php).  Channelcorp publishes and sells four industry- leading books and 12 white papers (www.channelcorp.com/publications.php).  This independent firm has delivered consulting and executive education to vendor, reseller and distribution clients in more then 40 emerging, developing and mature markets around the world. (www.channelcorp.com/workshops.php).  More than 25,000 channel professionals from around the world subscribe to the newsletter Channelcorp intelligence (www.channelcorp.com/newsletter.php).