Monday, January 31, 2011

The CSP (Cloud Services Provider) Technology Vendors GTMP

Here they come in droves, the newly (and typically very well) funded CSP Technology Vendors looking to grab land. First, what is a CSP Technology Vendor? They are akin to the MSP (Managed Services Provider)  Technology Vendor starting 10 years ago that developed software  platforms (i.e. RMM)  for a VAR to become an MSP to deliver their managed services. The CSP Technology Vendor is a software company developing a platform for the MSP (now called CSP?) to deliver their cloud services. Make sense? Good, because there is no doubt in my mind that it’s going to be huge. In fact I believe it already is. So what’s the challenge? These CSP Technology Vendors need to find and create CSPs. Actually better said find an MSP that wants to be a good CSP. No problem? Think again. It’s a similar (but larger) challenge that the MSP Technology Vendors have been struggling with for over 10 years now (only recently being hugely successful), finding good VARs that will be good MSPs. There are an estimated 100,000 VARs in N. America (another 100,000 outside N. America?) ranging in size to IBM GS to your next door neighbor and his dog. And there are an estimated 10,000+ MSPs in N. America (again approx. the same number or less outside N. America) ranging in about the same size. The CSP Technology Vendor needs to troll through the 1,000’s of MSPs, find the good (i.e. successful) ones, sell them the proverbial starter kit and then “make them a successful CSP” so they buy more than the $10k starter kit. Why not the VAR vs. the MSP? The VAR has yet to transition their business model to recurring revenue. The CSP technology Vendor doesn’t want to get caught up in that. So, how’s it work? The good old fashioned way, national/international and regional trade shows, industry association events, partnerships, PPK, advertising, inside sales cold calling, webinars etc. Actually webinars seem to be very much in vogue for finding good MSPs these days. Most of the top RMM players (including the big dog) have used educational based webinars to attract good MSPs into their net. Develop an interesting educational title and content targeted at your DNA MSP, outreach to 1,000’s of prospects via an industry association database, have several hundred attend each webinar and do the sales math. So now you have a newly signed MSP to be a CSP (with $10k in your pocket) now what? Immediately provide them with a business building on-boarding program. Why (other than the obvious)? First, going backwards a bit, telling your MSP/CSP prospect in the sales/recruiting process that you have a comprehensive and professional business building on-boarding program once they sign bolsters your value prop tremendously by showing them that you are not just a software company trying to shove software down their throat, but will help them build a business. These MSPs aren’t great sales and marketing folks, sorry they just aren’t (and most of them know that). For you to get past the $10k starter kit you’ll need to teach them how to develop their cloud services vale prop, pricing/packaging, identify target markets, how to find leads, develop a sales process and the tools needed to execute on it etc. etc. etc. Remember, the CSP is now the vendor responsible for creating, marketing and selling “their” (SaaS, IaaS, etc.) solution. They’ve never had to do that before to this extent. The most successful MSP RMM technology vendors have done the on-boarding very well and are now enjoying a healthy add-on business from their MSPs. The CSP Technology Vendor must follow suit.

Thursday, January 27, 2011

The interconnects (voice VAR) path to recurring revenue

I’ve spent the last 15 years in the managed services business (yes even before MSP was an acronym) on the data side of managed services as well as the voice/VoIP side. And before that I was in the voice world as a PBX tech at ROLM then sold Fujitsu PBXs. One thing I’ve been very, very curious about is “Why so few interconnects transition to recurring revenue managed services?” A vast percentage of all interconnects’  businesses have been suffering greatly for quite a long time now and they all see managed services taking over but why the resistance?   

First, let’s get this out of the way, what is the definition of managed services (ie what does a MSP do)? “Remotely provide technology and services to customers, on a recurring revenue basis, via long term agreements.”
Ok so what have I seen as the challenges?
1.       Just like data VARs, the leadership/owner at interconnects have a long technology heritage. Most of the interconnect owners have been in the business since the early TDM days. They find it extremely daunting to transition their business model from a product/technology and break/fix model to a recurring revenue managed services model.
2.       Many interconnects have only entered the data world recently (and some have yet to). A vast percentage of managed services are data focused including the tools used to deliver these services. Although it is possible to offer voice/VoIP only managed services the interconnect must also have data expertise to survive in the long term.
3.       We all like instant gratification. Unfortunately I see too many interconnects attempt to become recurring revenue MSPs but give up too quickly. Making this transition is not for the faint of heart and requires a marathon runner, not a sprinter.
4.       Time is our enemy. And in the case of the interconnect it’s potentially life threatening. To this day I still see interconnects (and data VARs as well) “hope” the old way of business will come back, it's not. If the interconnect doesn’t make this transition they will eventually go out of business, it’s only a matter of time. The interconnect that is making this transition now, great!, but do it right competition is only increasing.

Here are the 5 steps. I could write a book on these 5 steps (oh, actually I did), here are the foot notes. And no, you don’t need your MBA from Harvard to do these.
1.       Create  formal strategic plan
- involve everyone in your organization as everyone will be affected
- create a SWOT analysis
- define the type of MSP you will be best at, define target markets you will best serve and develop your inward and outward facing value proposition
2.       Create a profitable business model
- create a business value based pricing/packaging schedule
- create a 12 month sales model, bookings and revenue, conservative and upside
- create a 12 month cost model, conservative and upside
3.       Create an effective marketing formula
- business value focused compelling content and programs
- low cost lead gen programs focused on a quantity of quality
- a lead qualification process focused chasing real leads 
4.       Create a Predictable Sales Process
- professional looking business value focused sales tools/presentations etc
- well defined and repeatable sales process and simple pipeline mgt system/metrics
- sales people and activities mgt metrics and processes
5.       Continuous Success Measurement
- simple marketing metrics-that-matter you analyze frequently to measure success
- simple sales metrics-that-matter you analyze frequently to measure success
- simple business-level metrics-that-matter you analyze frequently to measure success

I hope this helps.
Todd Hussey
Partner and Co-Founder