HOLLYWOOD, FLA. – For solution providers to get the most out of their cloud businesses, they will have to dump the tried-and-true way most of them do business and embrace a new cost model and new business models, Ingram Micro’s global cloud boss told attendees of the company’s Cloud Summit here Tuesday morning.
Renée Bergeron told solution providers in attendance that sticking with the familiar “cost plus” pricing model was holding back their cloud businesses, and that they must consider a new model to maximize profitability.
“In the cloud, if you’re using cost plus, you’re missing the boat. You’re leaving money on the table,” Bergeron said. “It’s time to start considering a new approach, value-based pricing, to significantly improve the profitability of your organization.”
Under the value-based model, solution provider price their cloud services based on the value customers receive from the offer, not the traditional margin markup dominant in the hardware-slinging world. There are a quite a few benefits to using this model in the cloud world, not the least of which is that it allows a solution provider to scale in a much more cloud fashion, by eliminating the need to match increases in revenue with increases in spending on resources to support that new revenue. The approach also opens the doors to solution providers selling to line of business and C-suite leaders, instead of to IT, a key consideration as marketing and other departments get greater control of IT-related spending.
“This is probably uncharted territory for many of you. It’s probably uncomfortable,” Bergeron told solution providers. “But when you start talking about value realization instead of features and functionality, you open up a whole new dialogue with customers, one that resonates with business leaders.”
To make the transition to the new pricing model, Bergeron urged solution providers to avoid selling piecemeal cloud offerings, instead creating vertically-focused and integrated bundles of cloud solutions that are repeatable, and attempt to answer clients’ needs in one clear offering. This “value stack” is backed up by the cloud solutions stack the distributor offers through its Ingram Micro Cloud business. It’s not unfamiliar territory to many solution providers in the on premise world, but for VARs just dabbling in the cloud, many have not have not made this important transition.
The distributor is also moving to support partners with different views on the cloud. Traditionally, its cloud partner program has been focused largely on traditional VARs who are migrating to a hybrid cloud/traditional business model. That program will remain in place, branded Ingram’s Cloud Reseller program. And later this year, it will be joined by two additional programs: a Cloud Referral program for solution providers who have yet to roll out a full-blown cloud practice and prefer to have Ingram handle support and services; and a Cloud Private Label program for partners who further down the hybrid journey, or the increasing number of “born in the cloud” partners. Bergeron said partners who meet the criteria for this program will be able to white label both the company’s cloud-related services, and its Cloud Marketplace portal.
Bergeron also made the case for partners to consider greater customer service before and after the sale of an offering. To support that, the distributor introduced three new “white glove” cloud services. Later this year, Ingram will debut technical sales engineers to help partners sell cloud solutions, migration and on-boarding support to help bring customers in, and level two service desk support customers. By focusing on the customer experience, Bergeron said solution providers can keep cloud services attrition low. Currently, the distributor says its resellers see less than five per cent customer attrition annually, compared to an annual rate of 15 per cent across the cloud market.
Those three service offerings will be made available on the company’s next generation Cloud Marketplace portal, due to launch later this year.
“Customer service starts during the sales cycle, but it needs to extend through the life of the business. The more [your customers] use the service you built for them, the more you make. It’s sell once, invoice forever,” Bergeron said.