Building a cloud business for IT organisations


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The cloud is a different kind of IT business: from how services are sold and delivered, to the way they are priced and billed. This whitepaper looks at the key issues for IT consultants to consider as they enter the marketplace for cloud services. It identifies opportunities, strategies and implications for them and their customers.

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Building a cloud business for IT organisations

  1. 1. White paper Building a cloud business for IT organisations
  2. 2. Global corporations, large enterprises, and small-and-medium-sized businesses (SMEs) have all heard of the cloud. But few have fully capitalised on the advantages. However, the landscape is changing fast. Even among SMEs, more than one third of companies are preparing to invest in cloud services in the near future. IT consultants, resellers and integrators who enjoy trusted relationships with SMEs are in a strong position to benefit from the cloud. They can expand their portfolios, strengthen relationships, win new business and delight their customers. In fact, their technological expertise, unique services and customer knowledge can give them the edge over much larger competitors. The cloud is a different kind of IT business: from how services are sold and delivered, to the way they are priced and billed. This whitepaper looks at the key issues for IT consultants to consider as they enter the marketplace for cloud services. It identifies opportunities, strategies and implications for them and their customers. 39% of SBMs with 2-250 employees expect to be paying for cloud services within three years – an increase of 34% Source: Edge Strategies Global Report, Contents 1. Cloud services can provide stability and grow revenues for IT consultants 3 2. Identify your niche market 4 3. What gives you the edge over larger competitors? 4 4. Going it alone or choosing a cloud partner 5 5. Essential checklist when choosing a cloud partner 5 6. Supporting the sales lifecycle, end to end 6 7. Conclusion 7 2
  3. 3. Cloud services can provide stability and grow revenues for IT consultants The same services, delivered in three different ways - in traditional ways by IT providers (in blue) and via the cloud (in red) As the graphic above shows, the cloud can be best described as IT as a service. Instead of purchasing hardware and software, customers pay for their IT on a subscription basis, often paying a predictable monthly fee based on the number of users (often called 'seats'). IT services are centralised and delivered to subscribers via their Internet connection. This is more efficient than companies relying on in-house IT teams. New services and updates can be rolled out faster, so customers benefit sooner. For IT solutions and services organisations (hereafter referred to as IT consultancies), the revenue model is different: one-off project fees are replaced by monthly recurring payments. In the short term, you miss out on lump-sum payments. But longer term, cloud-based services generate a steady, reliable revenue stream that will help you grow your business confidently without the sudden risk of famine during quieter months. In other words, you're more insulated against the troughs of market forces. Cloud services are ‘sticky’, which is more good news if financial stability is important to your business. Customers tend to stay with their cloud providers rather than always switching to the next deal. In fact, the ‘churn’ rate of cloud services is often as low as 0.5% per month. So if you provide cloud services to 200 users, then you may only lose one of these per month in the natural scheme of things. If you're adding customers all the time, then you can expect your cloud revenue to 'snowball' over time. 3
  4. 4. Identify your niche market Big players in the cloud marketplace are succeeding best with the smallest and the largest customers The graphic above may prompt a question from IT consultants: How can I possibly compete against Microsoft, Google, IBM and other IT giants? After all, few IT consultancies have marketing budgets or pricing freedom to outgun the world's biggest players. The way for IT consultancies to succeed is by targeting the right audience with a different proposition. SoHo businesses: Large cloud players are able to attract these tiny businesses by offering services they understand already, like web-based email and familiar office applications. Services may be free, cost little or offer little support. Enterprises: These companies are likely to demand the most advanced cloud services with substantial service support, beyond the scope of most IT consultants. SMEs: This is the best opportunity for IT consultants. Unlike many SoHos, these small and mid-sized businesses are looking for value-added services. They want the personal focus of a 'trusted advisor' rather than choosing the cheapest service, and they don't need to be at the cutting edge of cloud technology either. For these customers, a well-supported and moderately customised cloud service will be an attractive proposition. What gives you the edge over larger competitors? Moving to the cloud is about trust. Customers may be attracted to the idea of always getting the latest technology delivered to their desktops without having to rely on (and pay for) in-house IT resources. But with the cloud, they have to hand over some control to someone outside their organisation. That's a big 'ask'. Some of the IT giants we mention above have an advantage here. Their brands may be trusted by customers. But, even so, they lag behind IT consultancies that enjoy 'trusted advisor' status already with their customers. It’s difficult for your customer to find that level of trust anywhere else. No one knows the IT needs of your existing customers better than you. You have a unique relationship with your customers, often built up through years of developing relationships and getting an understanding of their business, with all its personalities, quirks, legacy systems and limitations. Crucially, you'll already understand the 'pain points' that your customer is experiencing: these may be around IT budgets, inflexibility, security or a whole range of other issues that hold them back. However, the cloud services you offer them may provide answers that have eluded everyone until now. Use cloud services to complement what you offer already. Rather than relaunch yourself as a 'cloud business', use cloud services to extend and enrich your current portfolio. This will safeguard your existing business and help customers to understand what you offer. Often, cloud services will complement managed IT services and add flexibility. It's also easier to up-sell/cross-sell cloud services or bundle several together as a kind of 'meal deal'. With no long term contracts, customers can experiment with new services at minimal expense. 4
  5. 5. Going it alone or choosing a cloud partner You could build your own cloud. Potentially, you can make most money this way. But you would need to cover enormous overheads, reach critical mass and move into profit. The up-front costs and risks are significant. You would need funds and skills to purchase and manage data centre space, hardware, software, platforms, security and much more. Deploying even a basic layer of services such as virtual machines from at least two data centres, providing 99.99% availability, could cost upwards of £300,000. And that's without adding anything special to attract customers away from competitors such as Amazon and Rackspace. You'd need a sales and marketing budget as well. What's more, expertise and investment would need to be maintained constantly to keep pace with a fast moving marketplace. You could go to market with a cloud partner. This reduces cost and risk dramatically. Cloud specialists provide the technology while you focus on marketing and service. However, risks remain. Choosing the wrong partner or signing up to poor engagement terms can have disastrous consequences and undermine your best efforts. There are two routes you can take. A partner could build you a private cloud where you are the sole tenant, using dedicated hardware and software resources for your customers. But building what you need can be expensive and take time, as can developing and bringing your proposition to market. And there are no certainties that you will succeed, something that may make potential customers very uneasy. Choosing a public cloud instead, means you still team up with a cloud partner. But your customers will, in effect, share computing resources with other resellers and their customers. On the plus side, there's certainty. Typically, these ‘turnkey’ cloud services have been developed, tested and proven to work - and attract customers already. What's more, you may benefit from your partner's trusted brand and marketing campaigns. This means you can focus even more on delivering added-value to your clients. However, because so many other companies may offer something similar, you don't want to appear as a 'me too' offering. The best approach is to add your own unique intellectual property or services to stand out from the crowd. Essential checklist when choosing a cloud partner Private and public clouds both carry the risk of putting your eggs in someone else’s basket. When choosing your cloud partner, you must be sure that:  Their services are backed by contractual service level agreements  The services are available within your country or region, meeting regulatory requirements  They have expert technical support, preferably available 24/7  They have high levels of security and resilience  They are financially stable  They have enough existing customers to have reached 'critical mass' and be viable as a long-term partner  They are committed to supporting channel partners This last point is key. Will a cloud partner merely see you as another revenue stream? Will they be committed to your success or sometimes compete for your customers and even undercut you if it suits them in future? A high-quality cloud partner will appreciate your objectives and support your success. They will help you to craft your proposition and go to market, even providing sales, pre-sales and technical expertise to help you to answer customers' questions and address their concerns as you win contracts. Ideally, your cloud partner will have designed their services especially so your business can 'overlay' its unique strengths on top in a seamless fashion. The right tools and plug-ins should be available so you can sell confidently and be sure your partner will deliver. The best cloud partners will provide you with integrated billing, provisioning, customer and internal controls, panel interfaces, customer record management and a range of other tools to ensure your solutions run smoothly, end to end. We'll talk more about this in the next section. 5
  6. 6. Supporting the sales lifecycle, end to end The cloud changes the way your customers consume IT. Switching to an 'IT as a service' model will affect your organisation. It's vital that you prepare for this. Otherwise, any new profits could be swallowed up by delays, misunderstandings and mistakes within your own team. Having a cloud vendor that understands this will make a huge difference. Ideally, you want a partner that will support your sales lifecycle, end to end. This will make any change less painful for you and minimise disruption for your customers. Take customer orders Having your own expert salespeople is ideal if you're selling more expensive, bespoke cloud solutions. However, a web store or online portal may be the best way to take orders for high-volume services. These could also provide a self-service way for customers to make changes whenever they wish. Provision services Ordering must be fast and efficient for a number of reasons:  The on-demand nature of cloud services means that customers expect services to be available instantaneously  Billing often starts at the point at which a service is provisioned, so you don't want to lose a moment's revenue. An efficient workflow is one of the keys to unlocking profit from the cloud. The ability to automate processes will allow you to increase efficiencies and profit. Order Communication Business intelligence Billing Provision Integration Support Integrate services When integrating or migrating your cloud services into a customer’s business, you want everything to go smoothly without costing you too much time and money. Having a standardised migration and integration process is the best way, while automating as much as you can. Support customers As cloud services are centralised and standardised, you can support your customers remotely without having to visit their premises. This represents a huge opportunity to cut costs and improve customer satisfaction. Cloud services are standardised too, reducing complexity. Ideally, you need support systems designed specifically for your cloud services. Bill customers At any time during any month, a customer may wish to buy a new service, scale up an existing service or cancel or downgrade subscriptions. Your billing system must be able to charge them accurately for usage by the day. It must also be able to keep complex records on multiple customers. Then there are discounts to be applied and other special customer arrangements. Your billing system must be dynamic, otherwise, your profits will drain away. On a separate note, getting customers to pay by credit card and use systems such as World Pay means your payments can arrive without a big administration overhead. Business intelligence You may be using business intelligence already for your noncloud customers via your accounting software. Similar data will also prove invaluable for your cloud business, where small, subtle changes in customer behaviour can point to a bigger picture of how the market is moving. Customer communication Traditionally, this is the business of sales and marketing teams. But it's possible to communicate directly with customers via the web store or portal they use for ordering and changing their services. This can be a convenient way to up-sell/cross-sell cloud services, announce scheduled maintenance, provide details about the services they use and enable access to their account details. Self-service can empower customers, improve their experience and reduce your administration costs. 6
  7. 7. Conclusion Going it alone and building your own cloud is a high-risk strategy with no guarantees. It requires core skills in data centres, hosting and software, as well as massive and sustained investment. In contrast, partnering with an experienced vendor via the public cloud can get you to market quickly with minimal cost and risk. The key to success is finding a partner that truly understands and supports your business. You can use a secure cloud partnership as a springboard for new services. You can take advantage of the hype surrounding cloud to open conversations with customers. But it's important to make your propositions meaningful in ways they can understand easily. The best approach is to identify customer 'pain points' and explain how cloud services can help. This is far better than simply trying to replace your traditional services with cloud alternatives, which may confuse customers an d put your existing revenues at risk. Cloud services often have an attractive simplicity about them: they complement each other, they are available from one provider (you), with unified support and one bill for everything. The 'sticky' nature of cloud services and the subscription payment model will help your revenues to 'snowball' over time and lead to deeper business relationships with customers. However, the customer experience will only be smooth if your own organisation has the right back-office processes in place. Everything must be streamlined, automated as much as possible and be able to scale easily to minimise overheads, especially if your cloud business takes off in a big way. Choosing the right vendor as your cloud partner is crucial. Ideally, you want a comprehensive set of tools and processes already waiting for you, provided by a partner that wants you to succeed. With everything in place, you can go to market confidently, knowing that your customers will experience cloud services at their very best. About Colt Colt is the information delivery platform, enabling its customers to deliver, share, process and store their vital business information. An established leader in delivering integrated computing and network services to major organisations, midsized businesses and wholesale customers, Colt operates a 22-country, 44,000km network that includes metropolitan area networks in 39 major European cities with direct fibre connections into 19,000 buildings and 20 carrier neutral Colt data centres. Information about Colt and its services can be found at Discuss or simply find out more To find out more, please contact us at or visit us at © 2014 Colt Technology Services Group Limited. The Colt name and logos are trademarks. All rights reserved. Other names, logos and trademarks belong to their respective owners.