Welcome To The Strategic Service Provider Era

Cloud computing, increased commoditization, global competition, and customers residing outside the IT department have all converged over the past half-decade, forcing solution providers to adopt a new business model in order to survive.

Simon Dudley, CEO of Austin, Texas-based Excession Events, told XChange Solution Provider 2016 attendees that the very nature of what a solution provider is has changed thanks to the impact of cloud. CRN has described these next-generation partners as strategic service providers, capable of driving business outcomes with an emphasis on cloud and managed services delivered via a recurring revenue model.

Kevin Goodman, managing director and partner at Cleveland-based BlueBridge, agreed. "What used to work yesterday doesn't work today," he said.

Here are 10 things Dudley said in his keynote address Wednesday that solution providers must do to thrive in this new era.

10. Drop The Notion Of Getting Rich Quickly

As a young man, Dudley dreamed of making a product sale with such large margins that he would be able to retire off the proceeds. But in the world of cloud computing, good things will only come to those who wait.

"Cloud means we have to move away from the concept of getting rich quickly," Dudley said.

Solution providers sometimes attempt to cut their losses too quickly, Dudley said, with some pulling back from the cloud after just six months because they haven't yet made any money.

"The cost of acquisition in the cloud space is higher than the revenue you make from a client in the first year," Dudley said.

9. Don't Quit Your Old Business Until The New One Pays

Dudley said solution providers are sometimes a little too eager to make the plunge into next-generation technologies and kill off their legacy hardware business before even launching a cloud practice.

"Make sure you're on the beach before burning the boats," Dudley said. "It's going to take a long time to get your cloud business off the ground."

Cloud also rewards solution providers who focus on forming deep, sticky relationships with existing customers more so than those focused primarily on broadening their customer base.

"Cloud is a very good way of getting rich long term," Dudley said. "You actually have a business that's worth something to someone else without you being in it."

8. Leverage What Makes Your Business Unique

Building a distinctive business earns companies a devoted following who are less sensitive to changes in price, according to Dudley.

"If you get involved with clients at a business level and you help one of your clients have a closer relationship with their customers and their suppliers, then you become a cohesive part of their overall business strategy," he said.

If a customer considers you an integral part of their supply chain, Dudley said they're far less likely to switch to a different solution provider just because a competitor is offering a lower price.

And once those existing customers become dedicated fans, solution providers should leverage their loyalty and encourage them to tell people how great your company is.

7. Recognize That Competition Can Come From Anywhere In The World

The shift toward off-premise computing means that competitors no longer need to have a brick-and-mortar presence in a region to woo customers.

"Geography is, I would argue, to a very large exten, dead," Dudley said.

Dudley said this is particularly true for solution providers clinging to a notion that they don't need to change their business model if they're the last or only hardware guy in town. Dudley cautioned that those with this mind-set could soon find that their customers switching over to Amazon.

"The cloud is as big to the IT industry today as the electrification of the country was 120 years ago," Dudley said.

6. Build A Web And Social Presence So That People Find You

With 60 percent of the sales cycle having already taken place by the time a solution provider becomes aware of the potential client, solution providers must have information that customers can easily access early in their research process.

"You need to give it [the information] all away to the extent that when the client then finds it, they go, ’Well, he's a good chap and they'll be the one I go to,'" Dudley said.

Dudley also urged solution providers to create a forum similar to Amazon or Uber where customers can rate their experience using a star system.

"The wisdom of groups matter," Dudley said. "Allow people to judge you publicly."

5. Reinvent Your Sales Organization

Dudley said solution providers must transform their sales departments from a group of solitary gunslingers to a team of interdependent Navy SEALs, willing to organize in advance, use whatever weapon is required and change tactics on a dime.

"You don't need a world-class sales organization," Dudley said. "You need a disciplined sales organization that works with the rest of the team."

Dudley cautioned, though, that it is both time-consuming and expensive to retrain salespeople so that they can thrive in a relationship-based rather than transactional setting.

4. Reduce Turnover Among Sales Associates

The average salesperson lasts only 22 months with a business, according to Dudley, while the average sales manager lasts just 19 months.

This didn't matter much in a legacy IT world, Dudley said, where a reseller might sell a telephony or wireless solution to a customer and not interact with them for another five years until it needed to be replaced.

But in a cloud world, where solution providers are selling to the same customers on an annual, quarterly or even monthly basis, they must do better at retaining their sales talent.

According to BlueBridge's Goodman, that has been an area of focus for the company and it is emphasizing "fit" to ensure salespeople stick around longer.

3. Work Smarter, Not Harder

Due to the tremendous advances in computing power, Dudley said today's solution providers are expected to deliver exponential rather than incremental gains, meaning the traditional remedy of a manager pushing his or her team to sell 10 percent more than they did the year prior will no longer work.

Dudley likened efforts to outwork tectonic technological shifts to an ant attempting to push a boulder up a hill – it simply isn't going to work.

"You have to be 10X better because if you're not, the competition will be," Dudley said. "And you can't work harder at what you do today and be 10X better at it."

2. Solve Business Problems, Not Technology Problems

Half of customers' technology purchases today are made outside the IT department, and Dudley said chief marketing officers will have a larger technology budget than IT departments within just a few years.

Since solution providers will spend more of their time speaking with businesspeople, Dudley said they need to focus on addressing business problems and treat the IT behind the solution as simply an implementation issue.

As the channel moves from being seen less as a technology supplier and more as an indispensable business partner, Dudley said end users will focus less on the cost of the services and far more on their return on investment.

More than half of BlueBridge's cloud and managed services sales are outside the IT department, Goodman said.

1. As Accepted Facts Within IT Change, So Must Your Strategy

All of the accepted wisdom or norms currently within IT are based only on the information available today and could change as new information is uncovered.

"All facts do not live in one universe," Dudley said. "They live in multiple universes, because over time, they erode."

For instance, Pluto was considered a planet until 2006, when objects of greater mass were discovered in the solar system.

"All of the decisions you make will be based on a fact in time," Dudley said. "Remember, they change over time."