Sunday, May 13, 2012

The Virtual Peer Group is Introduced to the Cloud Alliance for Google Apps

During our most recent VPG session, we heard from a guest speaker, David Politas, who is the founder of the Cloud Alliance for Google Apps and also the CEO of BetterCloud. David introduced us to the Cloud Alliance – its mission, membership and value to Google Apps Resellers. The presentation provided us with a very good understanding of this timely initiative and also got us thinking about how to navigate through the hundreds of applications available in the Google Marketplace.

David raised some great points during his presentation. One of them was to point out that the success of early Google Apps resellers was enabled by their position as “first market movers”. Now that there are more than 4,000 Google Apps Resellers world-wide with the majority of them in North America, the first market mover advantage is a thing of the past. So how can a reseller differentiate from the competition? The obvious answer is by offering a broader array of cloud services and/or providing a deeper level of integration/customization/business value than other resellers – to offer real solutions based on a combination of services as opposed to reselling and installing off-the-shelf GAPPS licenses. So selecting the right complementary cloud services will be critical to building a differentiated value proposition upon which to base your CSP business.

Todd and I have always felt that the two most critical questions to address in building a successful CSP business are (1) what hosted services should be packaged into cloud solutions for your target customer set and (2) what business model will generate the highest level of recurring revenue at the highest margin based on those services.

So the Cloud Alliance is an initiative that is addressing the first of these key questions and it represents an important step in filtering the overwhelming number of choices from the Google Marketplace on behalf of the Google Reseller community. The second question is a fundamental goal of our Cloud Solutions Provider Program.

As I think about the two key questions posed above, I can list at least 10 criteria that could and should be applied to a cloud service under consideration for your own Cloud Solutions Ecosystem. See if you agree with my 10 criteria and feel free to comment or offer some additional criteria of your own.

10 Criteria for Selecting Apps for a Cloud Solutions Ecosystem:

1. How completely is the app integrated with the Google Apps suite?

As David pointed out in his presentation, some apps in the Google marketplace are very loosely integrated while others are much more tightly integrated. Building on Google Apps as a messaging and collaboration platform is far more compelling when there is total integration (data, operational, and functional) between the Google Apps suite and a complementary app from the marketplace.

2. Does the app have the right features & functions?

Clearly you will want to evaluate a potential new service offering from the standpoint of its functionality. You want to hitch your wagon to a technology that will offer the most complete feature set in order to support a diverse set of requirements from your customers and avoid losing deals to a competitive offering that has more or better capabilities.

3. Is the solution customizable?

In order to enhance business value and to separate yourself from competitors, you are not interested in simply selling or referring off-the-shelf apps. You want to look for apps that can be customized to address the specific needs of your target customers. Is the app customizable? What technical expertise does this require? What customer problems can you solve - and what business value can you create – as a result of this customization?

4. Does the ISV and the app have brand recognition?

Perhaps this is not the most critical of the top 10 criteria, but as you establish your own brand identity in the marketplace, it can be helpful to hitch your wagon to the brand awareness of a very popular app. It can also be important to your current and future customers to view your ecosystem as a best-in-class portfolio of services containing established and recognized leaders in a variety of technologies and applications. Your ecosystem is a direct reflection of you company, representing the choices you have made on behalf of your customers to provide them with the best cloud-based IT service platform to run their business.

5. What is the cost of the solution?

The cost of the app is an important criterion because it is a direct source of revenue and margin for you and it also directly influences your customer’s buying decision. The price points for apps available in the Google market place vary significantly from virtually free to well over $100 per user per month. In the CRM space for example, is $65 to $125 per user per month while Insightly is under $10 per user per month and the first 3 users are free. And, of course, these two ISVs have their own pros and cons with regard to feature/function, brand identity, ease of use and the level of Google Apps integration.

6. What is the end-user market focus?

At the core of understanding and positioning the value of every app in the marketplace is the end user market focus. Ask yourself what problem the app is trying to solve and who typically has this problem? Is it a business or consumer focused solution? If it’s truly a business-class application, does this sound like your target customer? Make sure there is a direct match so that each new app added to your own ecosystem complements other apps and contributes to the synergy of your total cloud solutions portfolio.

7. What is the ISV’s commitment to the channel?

The Google Marketplace tends to be a superstore of apps for anyone who wants to shop there – both customers and resellers. As a result, it can be hard to distinguish between ISVs and their applications from a “wholesale” versus “retail” perspective. As a CSP, you want ISV partners who are committed to building their business via the indirect channel and not simply a source of referrals for expanding their direct business. An ISV committed to the channel will have a reseller program with training, support, sales enablement tools and help in marketing the app or generating new leads. You want a business partner, not a vendor relationship.

8.  What is the revenue sharing model?

David Politas did a nice job of explaining the ways ISVs approach the concept of revenue sharing with Google Apps Resellers: Referrals, in which resellers are informally compensated for referring clients to ISVs, Commission-based, in which the reseller is paid a commission for selling the product, but the ISV handles the billing and shares in ownership of the customer relationship, and Wholesale, in which the ISV sells the product to the reseller at a specified price and the reseller sells the product at a markup to clients while assuming responsibility most, if not all, of the customer relationship (e.g. billing, first line support, etc.). Each model has different implications for your revenue and margin potential, cost of service delivery and customer loyalty.

9. What is the revenue enablement potential?

The revenue enablement potential is the incremental revenue value of an app beyond the direct licensing business. In other words, what value added services can you wrap around the app to generate more business? As stated above, if the app is customizable, then you can charge more for tailoring the app to meet the business needs of your customer and charge a greater deployment fee up-front. If the app is customized, then you are the best choice for providing ongoing services like help desk support or cross selling other hosted services, like backup and recovery for the application database or single sign-on for enhanced application security. Look for apps that maximize the incremental revenue potential.

10. Does the technology fit your business & delivery model?

Last, but not least, be sure that you clearly understand how you will deliver and support this app as you scale your CSP business. Do you have the resources to integrate, customize and support the app to realize its full revenue potential? What will be the true cost of service delivery to your business and what level of gross margin will a typical deal generate based on service fees you generate and service costs you incur for a typical customer engagement. This is where the modeling tools in the CSP Service Pricing Blueprint will come in handy.

A Structured Approach to Building Your Ecosystem 

Clearly not every app you add to your ecosystem will require this level of analysis and due diligence, but for those apps that will become your core services, these are the criteria that will drive the best choices for establishing and expanding your own cloud solutions ecosystem. The Cloud Alliance is an important step towards using a structured approach for maximizing the business value of your service portfolio. As a group, lets try to further refine this structured approach and use it for the most appropriate apps to add to your Cloud Solutions Provider business.

Tuesday, May 8, 2012

What are the most effective lead generation programs?

In a recent meeting of our Virtual Peer Group we discussed the effectiveness of a broad spectrum of lead generation programs including:
  • Webinars & ground seminars 
  • Outbound telemarketing 
  • Event marketing (exhibits, conferences) 
  • Email marketing (news letters, promotional offers) 
  • Internet Marketing (SEO, PPC, Banner ads, etc.) 
  • Social Media Marketing 
  • Referral Programs 
We compared and contrasted the pros and cons for each type of lead gen program and talked about the value of combining them into an integrated marketing program. We also talked about the importance of basing your lead gen program on compelling content that includes your well-defined value proposition and how well it is tailored to your the business issues that are most important to your target market. 

Your value proposition must be (a) differentiated, (b) address the top problems/concerns of your target customer set, (c) articulate cloud solutions that address those problems, and (d) demonstrate the business value that you deliver to your customers. Then we talked about the importance of the “call-to-action” as a key ingredient that will convert the interest created by your compelling content into action taken by your prospects.

We concluded the session with a discussion of metrics that measure lead gen effectiveness with a focus on conversion rates and their role in setting targets for lead gen volume, their impact on pipeline activity and revenue value as well as their impact on the cost per lead and the cost of customer acquisition. There is a lead gen effectiveness measurement template in the CSP Program’s Performance Management Blueprint.

Here are some questions to consider for your own lead gen initiatives:

1. Which lead gen programs have been most effective for you?
2. What are their response rates? Qualification rates? Average cost per lead?
3. What percentage of your leads covert to your sales opportunity pipeline?
4. Do you have a well-defined value proposition that meets the above criteria? 
5. Do your lead gen programs articulate that value proposition? What is your call-to-action?

Making the Transformation to Monthly Recurring Revenue

I thought I would share an interesting topic held during one of our Virtual Peer Group sessions. We discussed the opportunities and challenges associated with making a transformation to a Monthly Recurring Revenue (MRR) business. There are significant business benefits associated with the MRR model including:

  • Higher total revenue and margin for the average customer engagement
  • Consistent revenue levels and a predictable long term revenue stream 
  • Higher valuation for your business during a future M&A event

The MRR model is also attractive to your customers and prospects as it removes the heavy up-front cost of IT deployment and replaces it with an affordable monthly operating expense that can be budgeted on a per employee basis. Market acceptance for the MRR pricing model has been well-established by the MSP community and is the perfect approach for CSPs as they introduce managed cloud services as an alternative to premise-based IT services.

We then compared the revenue value of a typical 25 employee deal and found that just during the first year of a managed services contract, a recurring revenue deal generated 2 to 4 times the revenue value when compared to a project based deal.

So having established the many benefits of recurring revenue, we turned our attention to some strategies for how to move from $50/user/year to $50/user/month. In general terms, the strategy is to wrap chargeable services around Google Apps, then add more cloud services using the same service wrap-around strategy, then layer premium offerings such as virtual CIO services on top of your service portfolio and finally, use these enhanced solutions, and a highly efficient sales process, to accelerate customer acquisition.

To go a bit deeper, we looked at some of the tools found in the Go-To-Market blueprint, including examples of chargeable one-time and recurring services. We also looked at a comprehensive 3-year revenue model that projects total accumulated revenue and margin against the cost of service delivery and cost of customer acquisition. We concluded the session with some ideas for how to survive the first year of the recurring revenue transformation where maintaining positive cash flow to fund the business during the early phase of the revenue ramp can be a challenge.

Here are some questions we considered as the group:

1. Are you considering making this transformation?
2. Have you already begun this transition?
3. What are your biggest concerns?
4. Where do you need the most help?
5. How can the VPG community or MSPexcellence provide assistance?

If you are not a VPG member and would like to get a sense for one of our VPG meetings, we have posted a recording of this session here.

Essential Tools for the CSP Sales Process

Our second VPG session was devoted to a discussion of the sales enablement tools included with the Sales Process Blueprint. The Sales Process Blueprint is the third blueprint in a four-part lifecycle of Cloud Service Provider Blueprints provided by the CSP program and it guides the CSP through managing an efficient, scalable and repeatable solutions sales process.

During our session, we talked about the ideal structure for the solutions sales process breaking down the key objectives for a solutions sales rep to accomplish before holding the first appointment, then what to focus on during the first and/or second appointment and finally how to close the deal during the second and/or third appointment.

Prior to the First Appointment:
  • Preliminary qualification (use a standard lead qualification process) 
  • Pain level, solution fit, business value, decision process & timeframe 
  • Sales Tools:   Sales Guide, Quick Reference, Lead Qualification Scorecard 
During the First or Second Appointment
  • Establish your value proposition and build trust 
  • Fill in the gaps from the preliminary qualification process
  • Begin the discovery process & needs analysis tied to business benefits
  • Identify decision makers and understand the approval process 
  • Sales Tools:  Sales Presentation, Lead Qualif. Scorecard, Quick Reference 
During the Second or Third Appointment
  • Present your quotation, the cloud solutions their business benefits 
  • Prepare/deliver ROI analysis if appropriate 
  • Schedule a proof of concept if necessary and only with success criteria 
  • Identify all open issues, finalize pricing & contract terms, close the deal 
  • Sales Tools:  Quotation Builder, ROI Calculator 

After this overview of the sales process, we had a discussion with some VPG members about the importance of qualifying prospects, gearing your discovery questions to ferret out customer needs based on your cloud solutions (e.g., understanding the risk of accidental data loss assuming that you can address this concern with a cloud backup service) and defining the business value your solutions will deliver (e.g., save money, make money, reduce risk, improve productivity, etc.).

We concluded the session with a brief introduction to the sales tools contained in the Sales Process Blueprint including a standard cloud solutions sales presentation, a quick reference guide, a lead qualification scorecard, a quotation builder and an ROI calculator. The group was encourage to review the tools and ask us for help if you have any questions on how and when to use them or suggestions for how to improve them.

Here are some discussion topics taken up by the group:

1. Do you have a standard lead qualification process?
2. What do you think are the most important discovery questions to ask?
3. Where does your sales process encounter the most resistance?
4. What are the most valuable sales tools that you have or would like to see?
5. Do conduct formal sales training for your reps and sales agents?

The Benefits of Google Apps Scripts

One topic from the technology track of our recently launched Virtual Peer Group sessions focused on the benefits of using Google Apps Scripts to automate workflow and create more customized and differentiated cloud solutions for your customers. I see two major forms of benefit this technology has to offer – one is the customer benefit and the other is the CSP benefit.

As for customer benefit, Google scripts can be used to automate workflow and business processes. This creates greater efficiency when utilizing off-the-shelf apps for discrete business applications - simplifying the user interface by reducing repetitive tasks and consolidating complex processes into a single key click has to increase employee productivity and satisfaction while reducing end-user support. Using scripts, data can be validated and integrated with other back-end, data-driven applications such as the company's CRM. This customized overlay can be branded to represent the customer's unique business focus. Here is an example I found online today...

As for CSP benefit, scripts go to the heart of turning generic apps into customer solutions. This will differentiate your business from your competitors in a big way. More importantly, they can represent a new revenue stream for your cloud solutions business. Custom script development can be a source of one-time consulting revenues as well as a source of ongoing recurring revenue (especially if you productize the app and re-market it to other customers).

Finally, customized cloud solutions will make your relationship with the customer "sticky". And once you start the recurring revenue wheel spinning, you never want it to stop. Some of the questions we will continue to explore as a group are:

1. What are the compelling applications for Google Apps Scripts?
2. Where to find the resources necessary for the CSP to develop them?
3. How to most effectively monetize the result - as either one-time or recurring revenue solutions?