(Part 2 of a 2 part series)
Luke Norris, CEO and Co-Founder of Peak
There is no question there is a fundamental shift going on in technology today. Businesses of all sizes are transforming its practices. Strategies for success involve a mix of new sales and marketing skills, revamped revenue models, and a decided shift from helping businesses make short-term IT investments to advising them on long-term business strategies.
In Part 1 of this 2 part series we took a look at the shift of VARs in leveraging cloud computing within their business. But how do you successfully transition from traditional Capex models to Opex?
Revamp revenue models
The VARs who have already made a successful transition did so by first building an operations group with its own P&L and sales metrics, separate from the Capex group. Sales compensation must be adjusted from one- time payouts on hardware sales to monthly payouts on recurring revenues for multi-year, service-based contracts.
Develop new sales and marketing skills
Sales execs will find their pitches about the pros and cons of vendor equipment falling on deaf ears. Instead, customers are looking for a consultative approach to help them understand the why’s and how’s of cloud services. This requires SEs to have an understanding of their customer’s business apps and business drivers; they’ll need to get to know the CIOs, CTOs, and VPs of finance, because what were once IT decisions are now business ones.
Think long term
VARs must build a strong consultancy-based practice and think like enterprise architects. Instead of devices and hardware, they need to move up the stack and become expert advisors on databases and business applications. Future sales will be won by VARs who can develop value propositions based upon an in-depth understanding of their customers’ business applications and ecosystems.
Making a successful transition is truly a do-or-die proposition for the VAR. Fortunately, they aren’t in it alone. In order to better support the VAR in the new cloud business model, Peak, as a 100% channel centric cloud provider, has worked with some of the largest distributors to help them develop comprehensive, sales enablement programs and cloud-service bundles (cloud services coupled with complementary products) that are ready-for- sale by their VARs.
GROWTH, PROFIT, AND THE CLOUD PARTNER
Distributors and channel-focused cloud partners will play a significant role in the future growth and profitability of the VAR. Large distributors, for their part, are pulling together tightly integrated service and hardware bundles so VARs can purchase complete cloud-enabled solutions with a single SKU. They are also taking care of invoicing and other back-end services on the VARs’ behalf. Most importantly, distributors have worked through the revenue kinks to ensure each touch point in the channel is receiving appropriate credit and revenue within this new consumption model.
For its part, Peak restructured its cloud infrastructure-as-a-service sales team into three tiers in order to support the high volume of VARs now moving through the stages of this critical transition. Peak has no direct sales force; it only sells through the channel, so helping VARs develop the knowledge base and unique cloud service offerings they need to go to market is among the company’s highest priorities.
QUESTIONS TO ASK POTENTIAL CLOUD PROVIDERS:
- Do you have a direct sales channel?
- Who owns the customer relationships?
- Who manages the contracts?
- Who takes Tier 1 sales calls?
- What restrictions are in place regarding tools and managed service providers?
- What sales training and sales support is provided?
WHITE-LABELING - THE FAST TRACK TO THE CLOUD
All indications point to a short three to five year window before traditional VAR sales slow to a trickle and dry up. But, this isn’t the end of the VAR story. In fact, VARs should consider this the beginning of a new era and capitalize on it now. Thanks to their tight, long-standing customer relationships, no other segment of the channel is better positioned to prosper in the cloud.
By scaling their business on top of Peak’s global cloud infrastructure, VARs expand their geographic footprint, take advantage of up-selling and cross-selling opportunities, and create recurring revenue streams on high margin cloud products. Cloud profit margins up to 75% are commonplace for Peak’s White-Label Program partners. What’s more, they achieve those profits without capital expenditure.
Visit the Avnet Cloud Ready website to learn more about the Avnet Cloud Accelerator Program Powered by Peak®.