Keynote - Cloud Transformation, Guus Krabbenborg


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  • Please do not delete thisslide – On Screen whenpresentationended.
  • Microsoft Dynamics Partner Academy Roles  Leadership Academy: financial/business management, sales management, organizational management  Marketing Academy: marketing planning, marketing execution  Sales Academy: solution selling, industry selling, competitive selling  Presales Academy: solution selling, demos  Project Management Academy: change management, project management, methodology Consultant Academy: industry processes, application functionality, methodology, communication  Developer Academy: development tools, “stack” technology, methodology FY11 Dynamics Partner Readiness Priorities Below is a list of the key Dynamics partner readiness focus areas for FY11, all are described in detail in later sections: • Certifying/accrediting partners to meet the new MPN requirements enforced in Q2/Q3 • Improving partners’ business and sales skills through the Microsoft Dynamics Partner Academy • Readying partners for the “cloud”, notably the international launch of CRM Online in H2 • Preparing the channel for successful launches of Microsoft Dynamics AX 6, CRM 5 and SL 8 • Driving partner adoption of NAV Role-Tailored Client (RTC) and GP10 certifications • Recruiting, training and certifying Net New Specialists to prevent a capacity shortfall in H2 and beyond • Increasing partners’ ability to upgrade customers to increase customer loyalty and protect BREP/SA revenue
  • Purpose:Purpose of this slide is to show the partner community current performance as of September 2010 and to draw conclusions as to the partner community’s economic health. It is important/critical that we keep the partner focused on net-new perpetual customer adds to facilitate and finance the transition to cloud. Key Points:It is imperative that we link current performance to the ability to transition. The move to the cloud is more like starting a new business than it is like adding a new service line.It will require investment and cash flow to finance this transition. Highlight and focus on the EBITDA percentage, specifically, the fact that as an average it is exceptionally low. Link “Average Annual Hours Billed, per billable resource” and “Realized BMUR” as contributors to the low profit. The root cause of this lies in paying too much for consulting resources, then billing them out at too low a price, and not often enough. Comments:Add your own personal experience to support these numbers. The unfortunate fact is, that most partner businesses are unhealthy and are about to enter a period of significant change.
  • PurposeSegue to the next sections; the definitions and drivers of cloud.
  • Purpose:Call out the key attributes of the what and why. Key Points:“What” as highlighted on the slide (underlined and bold segments)“Why” as highlighted on slide. (underlined and bold segments)Comments:
  • Purpose:Ensure partners are contextually on the same page and share a common vision and view of cloud computing terminology and concepts.Key Points:1. Define the differences between the three options available to customers today. Most people confuse hosting (perpetual licensing ) with cloud solutions (pay as you go subscription services) Comments:Today, most customers host their data and applications on-premises. Some customers rent machines from a hosting partner in an effort to outsource the costs associated with datacenter services.Cloud computing functionality can be purchased from a ‘public’ cloud provider like Microsoft, or run as a ‘private cloud’ environment either on-premises or hosted at a third party datacenter.Microsoft is in a unique position in its ability to provide the underlying technology for any of these scenarios. Microsoft competitors provide solutions in only one of these three areas, and in many cases their solutions are limited to a subset of the overall technology stack customers need to meet their business needs.
  • Purpose:Show the 3 models and the potential impact cloud will have on them.Key Points:Applications can to developed and delivered much faster than before. Hardware usage in the cloud is substantially more efficient.These two evolutions result in an operating model with “scale of magnitude” lower operating cost. This outcome will drive decision makers that are currently reluctant to move to the cloud, to instead enthusiastically embrace it with open arms. Comments:While there will certainly be debate about the magnitude of the savings and efficiencies, the cloud opportunity will inevitably drive a to the bottom from a cost perspective as large players invest to capture long term market share.
  • Purpose:Explain what customers are looking for (and demanding) in a Cloud-based solution.Key Points:Fundamentally, the primary driver in the customer’s buying rationale for a Cloud-based solution is preservation of capital (Cloud-consumed applications are operating expenses)It also reduces the risk of making a decision that ties up scarce capital for a 3-5 year period, during which business needs will inevitably change. It is easier to switch a Cloud supplier (in principle at least) than it is to buy and implement an entirely new on-premise solution, when, 2 years down the road, business needs have changed through unanticipated merger/acquisition activity, accelerated growth, major industry shifts, etc.Cloud solutions are inherently “all in”. Ongoing software enhancements are available and applied automatically as part of the subscription price. Gone are the days of enhancements that cost money but don’t necessarily increase the functionality or utility of the software.Cloud solutions rid organizations of the need to maintain (expensive) infrastructure in-house, as hardware and software technicians are no longer required.You pay only for what you use, and can scale users up and down as needed.The Cloud buyer expects, “all-in” solutions. In other words, while they will accept the need to “convert” to the new consumption model, they will be increasingly reluctant to pay for additional services, especially to “configure” the solution. Their attitude will be, if it doesn’t work out-of-the-box, the software isn’t useful and there is no point throwing money at “customization” or even “configuration” to get the software to do what it should in the first place. Customization and heavy configuration will be interpreted as “the solution has missed the design mark”, and the customer will refuse to pay for the mistake.The buyer expectation will be “as I add more users, I expect an lower cost per user”, especially when the buyer is comparing a cloud solution to an on-premise solution.Comments:
  • Purpose:Explain what customers are looking for (and demanding) in a Cloud-based solution.Key Points:Again, the customer expects a solution that fits their business, out of the box. They think of software as a utility, whether CRM or ERP, and wish to buy it as such. They want to buy software the same way they buy electricity or any other utility. They do not want to buy and maintain generators to produce their own power.The customer expects that add-on functionality (e.g. workstreams, or specific value chain optimization functionality) can be purchased as needed, for an additional cost.The customer expects flexibility in terms of access to certain processing power; for example a manufacturer may want to run a very complex Bill of Materials routine that requires significant CPU processing power. What is cost-prohibitive today, in terms of procuring the necessary computing infrastructure to complete the task, in the future they will expect to “rent” access to the required processing power for short periods of time to run the routine in an accelerated manner. In other words, the manufacturing firm will use 1,000 computers’ processing power for an hour, to perform a specific task that cannot be done cost-effectively in-house. They also expect this “rented” access to computing capability to scale up and down according to the evolving needs of their business.Customer will also expect to receive value almost immediately. In other words, they will expect a solution that is instantly “on”, and fully usable. If it isn’t, their assumption is that the developer didn’t know what they were doing in terms of building out their IP to deliver a total solution. Customers will no longer pay the price for inadequate functionality.
  • Purpose:Share what other partners are currently experiencing specific to cloud based competitors. Key Points:This data is based on anecdotal information from partners and has not been validated through a formal study. However there is merit in the current perception of partners with respect to what is going on in the market. What is missing and cannot be validated, in any way, is how many prospects exist that only want a cloud solution, and don’t engage a Dynamics Partner based on the perception that the partner does not have a cloud offering.Partners in CRM have a cloud based competitor in 100% of their pipeline In the US market, the west has the highest percentage of cloud adopters and as such has the highest percentage of cloud competitors.Central region in the US is the most conservative and therefore has the fewest number of cloud competitors in active opportunities. Comments:
  • Purpose:Section slide to introduce what we can learn from some of the early Cloud entrants.Key Points:Comments:
  • Purpose:Introduce the 6 principals of Cloud success that Partners need to consider. If Partner can embrace these business principals, they increase their odds of success in the Cloud. Key Points:Changes to the Partner business model brought about by Cloud computing will be seismic, with significant shifts in revenue, cash flow, personnel and customer acquisition costs, to mention a few. Partners must accept that there are major changes ahead, significantly different from anything they have overcome before, and that accepting and adapting to change is the only way forward. Their reward for undergoing such a shift is that their revenue, 70% of which must be recreated each year, will move to an annuitized revenue model. They sell once, then maintain the customer in perpetuity under a subscription model. With Cloud, Partners can expect 60% recurring revenue.To optimize revenue and profitability Partners MUST have value added IP they can add to the monthly subscription price. Without IP, Partners will suffer from sub-par business performance. Packaging and pricing must move from an a la carte time and materials structure/estimates to all inclusive software + services package for a single monthly per user fee. Due to customer mobility, Partners must learn to manage customer churn and create an environment (sticky) whereby customers do not explore alternatives when their contract is up for renewal. Cross sell / upsell and re-sell of customer will be key to long-term customer retention. That said, Partners could run the risk of fatiguing or offending the buyer if they relentlessly attempt to sell the customers non-stop. Adopting a rigorous process of selling in waves, allowing for breathing room between campaigns, will be necessary. Comments:
  • Purpose:Segue into the next section of the deck, which speaks to the order of magnitude shifts the Dynamics eco system will soon experience. Key Points:Comments:
  • Purpose:Illustrate the degree to which the Cloud will impact different market segments, as represented by the standard Microsoft customer scenarios.Key Points:At the lower market segments, changes to the Partner business (processes, procedures, business models) will be radical, with Business-In-A-Box experiencing a minimum of 50%, but likely closer to 65%, of their current business functions changing.Moving upmarket in terms of segments, the degree of change will become progressively less, but still meaningful enough to demand a clear and focussed response.Comments:The degree of change to a business model is largely a subjective scale. The degree of urgency and order of magnitude of response must be determined based upon the customer scenarios a Partner currently pursues.
  • Purpose:Reinforce how a Cloud business model differs from a on-premise operation in terms of its software:services ratio.Key PointsThis is simply a visual representation of what was discussed during the previous slide; its purpose is to visually reinforce the point that services revenue from Cloud customers will be dramatically lower than current ratios.
  • Purpose:Reinforce how a Cloud business model will require Partners to shift their implementation focus, and create more efficient, streamlined installation processes.Key Points:The on-premise data is based on a Salesworks analysis of BIB Microsoft GP deployments where Salesworks measured the average number of hours required to deploy a solution. The cloud based services came from an analysis of SPLA based licensing for similar customers in the BIB space. With the exception of data conversion, every aspect of solution implementation will have to be streamlined in order to mitigate the negative impact on services margins. Cloud customers will be unwilling to invest large amounts in upfront services, yet they will expect a complete solution to be delivered; which puts extreme pressure on Partners to streamline their processes.The average 8 seat ERP implementation today takes approximately 160 hours. This time will need to be significantly reduced in order to drive a profitable Cloud based business. Conversely, CRM implementations are averaging less than 8 hours of service for every seat of CRMOL implemented.
  • Purpose:Reinforce how a Cloud business model will require Partners to shift their sales processes to support a higher volume of new customer adds at a lower per-customer acquisition cost.Key Points:The on-premise data is based on a Salesworks analysis of BIB Microsoft GP deployments where Salesworks was able to measure the average number of hours required to deploy a solution. The cloud based services came from an analysis of SPLA based licensing for similar customers in the BIB category. Currently, selling a typical on-premise BIB ERP solution can take as many as 120 hours of sales time, including travel and demo preparation time. In the Cloud, the selling will need to be significantly streamlined, likely to less than 40 total hours per transaction. Marketing will play a critical role in terms of prospect generation (discussed later), but sales must become hyper-efficient at qualifying prospects and closing deals.
  • Purpose:Illustrate how a Cloud business model will require Partners to shift their tactical marketing mix, in order to increase prospect volumes and decrease costs.Key Points:In today’s on-premise world, traditional marketing tactics still dominate the marketing mix (accounting for as much as 80% of the tactical activities)Online tactics in the on-premise world, are only just emerging, with Partners slowly gaining proficiency in search engine optimization (SEO) and Pay-per-Click (SEM).This mix will largely need to be reversed in the Cloud. The Cloud customer expects to find you online, period, which will drive a far greater reliance on Online marketing to cost-effectively source a sufficient volume of prospects.
  • Purpose:Show the impact a Cloud business model will have on the various Partner organization resources.Key Points:Across the board, every resource in the partner business will be impacted by a Partner’s movement to the Cloud. It will require new types of resources, performing tasks more efficiently at a lower cost. The most senior and experienced resources with the highest costs will be impacted most as they adjust to the new paradigm of cloud computing and realize that the value they bring to the Partner business is significantly diminished. This may potentially result in salary reductions and staff rationalization across certain skill sets. Comments:
  • Purpose:Segue into the packaging and pricing segment of the program.Key Points:Comments:
  • Purpose:Segue to the Sticky customer environment and churn management. Key Points:It will be imperative that partners have customers renew their subscription, given that the second term of any SaaS contract is far more profitable then the first term. In order to drive this outcome, the environment Partners provide those customers must be sticky, hard to leave, like the person sitting in their Ames chair, feeling comfortable. “Sticky” is a combination of the SaaS applications they are consuming (the more services, the more sticky the environment – harder to leave) coupled with the ease of doing business with the Partner; which ties back into a Partner’s pricing and packaging strategy. Comments:
  • Purpose:Discuss the three primary factors that will affect Cloud customer churn.Key Points:The more products and services customers purchase, the less likely they will be to shop their contract around with other partner at the point of renewal. Churn rates are highest when the contract is about to expire. Managing this sensitive period of time with value-added customer service and proactive sales engagement will be an important sales/service rhythm for partners who want to defend against customer defection.The most effective strategy for ensuring customer retention is making your organization easy to do business with. If every contact results in an invoice or aggravation customers will be less likely to stay. Partners need to keep this in mind as they develop their pricing and packaging strategies.Comments:
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  • Purpose:Section slide to introduce the topic of Customer Acquisition/Marketing.
  • Purpose:Describe the primary components of building a brand. Key Points:Branding is so much more than a logo or an advertising campaign. Brand is about winning the battle in the mind of the prospect and predisposing that prospect to want to buy from your company. It is about conveying what the prospect can expect if they do business with you. Brands are built over time, and there are no short cuts. Comments:Microsoft partners will benefit more from the power of the Microsoft brand in the cloud than they ever have selling on-premise solutions. Unlike some other competitors who need to build a brand, Microsoft has one of the top 5 brands, globally, and their investment in on going marketing and branding will not only preserve the brand, but actually strengthen it.
  • Purpose:Impress upon Partners the need to think in terms of far higher prospect generation volumes than was required to grow a traditional VAR business.Key Points:Partners require far greater volume of new customer adds to generate an acceptable level of revenue, and profitability, than is the case for a traditional VAR business, because there are no “balloon” or lump sum payments for either software or services.Marketing needs to delivery prospects at a far lower cost than is required by a traditional VAR business in order maintain acceptable customer acquisition costs.These factors dictate that a very different marketing approach is required to generate Cloud prospects.
  • Purpose:Impress upon Partners that Cloud customers will have to be sourced online rather than through traditional marketing methods and tactics.Key Points:In order to maintain a sustainable, profitable Cloud-based business, marketing as a function needs to:Reduce the cost of customer acquisition; in other words, source prospects at a lower unit cost (for reasons stated in the previous slide)Increase the quality of the prospects, so they can be “qualified” and closed at a faster rate than what was acceptable for a traditional VAR business. Over time this drive the development of “lead scoring” mechanisms or methodologies so that marketing expenditures can be more precisely targeted towards tactics that deliver the most cost-effective and quantifiable results.Because Cloud customers expect to find potential suppliers online (they will not trust someone without an online presence), Partners must develop truly effective online demand generation “machines”.
  • Purpose:Contrast the customer acquisition costs of a “best in class” on-premise Dynamics Partner to what Partners will need to achieve to drive a financially viable Cloud business model.Key Points:Between current sales and marketing costs, a top performing Dynamics Partner will spend nearly $17K to acquire an on-premise customerFor customer acquisition costs to remain reasonable and financially affordable in the long run (i.e. around 15% of revenue, or less), they will have to be driven down, most likely into the $6.5K range.Comments:Many Partners will react strongly to this objective, suggesting it is impossible. We will introduce additional material later in the program to shed some light on how these cost reductions can be achieved.
  • Purpose:Prepare the partners for a changing buyer profile and changing buying criteria.Key Points:The buyers profile is changing. Moving forward we will see less engagement from IT and more engagement from the business community.The business community will have a very different set of objectives and priorities than previously experienced.These buyers will be heavily influenced by SaaS/Cloud positioning and will be expecting accelerated benefits and increased flexibility.Comments:Especially in SMB, business owners and senior line-of-business managers will increasingly engage in the product/solution selection process; and with that comes an increased focus on specific business process challenges, industry specific functionality, configuration and reporting; as well as an increased focus on business case development and TCO analysis. Aside from understanding the implications and motivations behind moving business projects from a capital expense to an operating expense, sales professionals must be capable of facilitating a business case/business benefit discussion as well.Moving forward buyers will be looking to eliminate the complexity, risk and fear from the selection process. They will resonate with partners that make the buying process easy, the solution easy to justify and fund, with the ability to scale up and down as their business expands or contracts without penalties.Most importantly they will be looking for (demanding) industry specific knowledge and product configuration. Gone are the days of “just imagine”. As more and more vertical solutions sets are released as SaaS options, and geographical proximity becomes less of an influencing factor in the prospect’s decision making process, horizontally focused partners will be increasingly challenged to differentiate themselves.
  • Purpose:Discuss the primary changes in on-premise vs. SaaS buying criteria and how those changes impact the sales cycle.Key Points:Third generation selling strategy aligns with SaaS solution offerings.Prospects will no longer have the patience for long implementation cycles and even longer payback periods. Speed-to-value will become the primary buying criteria (given the change in buyer profile).Comments:On-premise buying criteria was primarily predicated on functional fit to existing business processes; but that fit came with a significant price and risk premium.Moving forward prospects will relinquish some personalization for reduced cost (capital) and reduced risk; monthly/annually rather than perpetual (which effectively meant they re-bought every five years based on their enhancement/maintenance fees).With SaaS, prospects will be looking for vendors to clearly communicate the business value of their respective solutions and will EXPECT vendors to have a working knowledge of their industries and its associated challenges. They will less time for discovery and will be looking for a more prescriptive sales approach.
  • Purpose:Transition from “current state” and changing buyer behaviour to how these changes impact the sales process.
  • Purpose:Share the differences specific to a cloud sales process.Key Points:The differences between a “heavy”, high-touch, on-premise sales process are significant. Seismic, not subtle.Comments:Significantly different from traditional “F2F” sales approach: SaaS sales professionals will not have the luxury of repeated visits to client sites, with multiple meetings with all relevant prospect stakeholders.Different experience for both Buyers and Sellers: Buyers will be looking for partners that can deliver relatively immediate value (<30 day implementation cycle) and understand their industry drivers, challenges, and business processes; and will have little to no interest in the technology that sits behind the solution. Sellers will be manically focused on qualification and sales process compliance. These two contradictory set of objectives must be aligned to drive a mutually beneficial sales/buying process.Different cost and compensation models: Cost of sale must be dramatically reduced; which will drive significant changes to compensation models to reflect the shift from up-front license revenue to monthly subscription payments, as well as desired behavioral changes.Significantly shorter sales cycle: Traditional 4 – 9 months sales cycles will not drive sufficient deal/subscription volume to support the new SaaS business models. Sales cycles must run from lead to close in <30 days.Entire sales process executed remotely: To manage cost of sale and maximize saleseffectiveness, almost all sales campaigns must be executed remotely. Not relevant for all businesses: SaaS solutions sets are not ideally suited to all businesses; which means sales professionals must be extremely effective at qualification to ensure they are not pursuing deals that cannot be won. This activity must be supported by a qualification checklist to ensure a high close probability (far more robust than BANT).
  • Purpose:Communicate the criticality of simplicity and ease of doing business.Key Points:Success in the cloud will be highly dependant being “found” and upon your ease-of-doing business.Comments:Selecting a vendor and buying business application software has, historically, been a frustrating, confusing and complicated experience for most companies. Finding vendors/partners that had a viable, relevant solution set was a challenge.Differentiating one vendor or solution set from another was a challenge.Managing conflicting vendor sales processes (as a buyer) was a challenge.Managing multiple on-premise sales campaigns (as a sales leader) was a challenge.For partners to operate a profitable and effective SaaS sales organization they must specialize, simplify and standardize.Specialization (supported by SEO/SEM) will get you found; which make the experience and process easier for the prospectSpecialization will drive the development of vertical content; which leads to Value Chain Solution Sets that drive meaningful and measureable differentiation; which increases the partners close probability and make sit easier for the prospect given they are engaged with a vendor that understands their business issue and challenges.Simplifying the buying cycle (and by default simplifying the selling cycle) reduces buyer risk and confusion.Simplifying the discovery and demonstration (trial) process make sit easier for the prospect to focus on high-value capabilities.Simplifying the configuration/customization process (by building out vertical IP and /or developing Value Chain Solution Sets) makes it easier identify partners than can deliver immediate impact and business benefits.Lastly, simplifying the selling process and standardizing the process drives consistency and predictability that serves both the partner and the prospect.
  • Segue to Slide:Given the analyst forecasts, changing customer expectations, and what we have learned from CRM’s transition to the Cloud, it is critical that we look at how these elements will impact individual partner businesses in the future. Based on the visible and measureable trends we discussed we can make logical predictions about what will occur with partners. Purpose:Provide insight early in the program as to what the potential impacts of the cloud will be on partners based on the forecasted changes. Key Points:Customers have little to no interest in buying cloud solutions from horizontal or low value add suppliers. All research shows that the majority of the time they want to buy directly from a Vertical / value chain partner or from the SaaS vendor (SFDC, Netsuite, Microsoft)As the decision making moves from the IT and administrative departments into line of business decision makers, partners who were historically comfortable selling to IT teams or low level administrative people will have to re-tool and re-skill to pursue opportunities driven by upper level management. This change will require a much more sophisticated business approach to selling business applications. The shift to “pay as you go” will have an immediate and significant impact on partners’ cash flow. More importantly, it will increase the demands on the partners’ customer care teams to retain the contract when it matures. Poor service and/or limited customer engagement will result in low renewal rates.Customer demands for simpler, easier to use intuitive solutions will result in much lower services-to-seat ratios, with decrease in demand for services resulting in workforce reduction and/or a change in the types and volume of consulting resources that will be required. Comments:
  • Purpose: Provide insight early in the program as to what the potential impacts of the cloud will be on partners based on the forecasted changes. Key Points:In the Cloud, much of the integration required to support connectivity between disparate applications is being built directly into the platform and infrastructure; which will result in a significant decline in demand for system integration services; certainly far less than partners experience today. That said it will not be eliminated entirely as Hybrid solutions (on premise + in the cloud) will still require integration services, albeit much less than today. SaaS solution providers will provide many of the services currently provided by hosting organizations. As the SaaS adoption rate increases, correspondingly the inverse will occur with traditional hosting organizations. In the future it will not make sense (or be economically viable) for partners to employ services staff in high cost centers like London. With the majority of the services work done remotely, Partners can locate staff anywhere. It might make better sense to sell in London, yet locate your service team in Iceland (nearshoring), taking advantage of the lower cost location to be hyper competitive. In the US market it would be better to sell in Boston and New York and locate your operations in Iowa (homeshoring). Consider also that India, China and Brazil could also sell and service your local customers from the anywhere on the planet. Comments:
  • Purpose:Show the anticipated time-line-to-impact relative to the North American market. Key Points:In 2011 we do not expect a material change in how partners react to customer demands. Most customers today are only beginning to understand the benefits of the cloud. However, if Partners stays in denial about the market shifts caused by cloud computing they will significantly increase their risk as the window closes on traditional on-premise solutions.2012 will see cloud based CRM AND ERP demand increase, which will place more pressure on those partners that have yet to fully embrace the cloud and therefore behind schedule in the process of changing their businesses. If they were in denial in 2011, they wil suffer “fear of worsening” in 2012.By mid to late 2013, 50% of customers across all application areas will be seeking cloud solutions. Partners that have done nothing to migrate their business will move into “catatonic shock” as their funnel and pipeline drops by half. 2014 will be the tipping point for cloud solutions, with the majority of buyers looking solely for cloud solutions. All partners that did make the commitment to embrace change in the previous three years will be “angry and depressed” as they see their livelihood's slipping away. Post 2015, is a cloud world with less than 30% of customers looking for on premise solutions. Partners that failed to act, will be facing “little to no hope” of success if they have done nothing up until this point. Comments:The color of the calendar years indicates when demand for cloud solutions is expected to reach 50% of total demand, meaning that 50% of customers will be demanding only cloud solutions from the business applications ecosystem (late 2013 – 2014). Given the volume of work a partner complete to prepare themselves for this change, there remains little time for inaction.
  • Purpose:Frame the 4 stages of transitioning to the cloudKey Points:Starting any new business, especially one in uncharted waters, requires careful planning and readiness to get it right.These 4 stages can be executed in varying degrees of speed, with some executed simultaneously rather than sequentially (as depicted here). The DPA offers rich content with respect to each phase of this process and, in conjunction with your local PDC, can assist partners in getting to the Execution and Fine Tuning stages faster. Comments:The color bars on the following slides coincide with the colors displayed here.
  • Purpose:Show three potential transition approaches that Partners can take. Key Points:Each partner must decide how and when to execute their move to the cloud based on their individual risk tolerance. There is risk in going too quickly and there is risk in waiting too long. If you compare the Aggressive Growth plan with the Conservative Growth plan, you can see the conservative plan invests over a year in planning and readiness where the aggressive plan is in execution mode within 8 months. It is expected that most partners will opt for the Measured Growth approach. Comments:Bottom axis is months
  • Purpose:Provide a high-level overview of what Partners will need to plan and prepare for during their first year. Key Points:Typically Partners are not good planners. They go about their business expecting it to largely stay the same and as a result are more reactive than proactive. A move to the cloud is a much more serious undertaking. Partners must be made aware of the importance of proper planning and readiness in order to prosper through this transition. Partners should be referred to the various DPA courses that can support this transition effort and assist them in this initial planning stage. Note that marketing moves to execution quickly, due largely to the fact that certain on-demand marketing tactics take time to drive meaningful results in the search engines. Additionally, demand generation has to be out in front of sale by at least 90 – 120 days. Comments:
  • Purpose:Provide a high-level overview of what Partners will need to plan and prepare for during their first year. Key Points:The sales and delivery process within the partner organization will have to be re-mapped and re-equipped (with new tools, templates, processes, SOP etc.) to support cloud based solutions. Each resource will need to be assessed to determine if they have the appropriate competencies, cost base and ability/desire to change to support the new Cloud business model.Breaking the old habits of how Partners have done things for the last 25 years will be hard (face to face sales, on site consulting, etc.) but doing so is essential to driving out costs and increasing velocity. Comments:
  • Purpose:Have the partner understand that transitioning to the cloud is NOT LIKE adding a practice (SharePoint, BI, CRM). They need to think of this as starting a new type of business. Key Points:The business model for cloud based partners is more about volume and less about depth of technical expertise. Cloud Partners’ success will be more reliant on marketing and sales execution than on technical skills. For most partners this approach is a 180 degree change in direction.This is a new business and will require capital or financing, from an internal or external source (or both). With the current average Partner earnings sitting at 5.8% it leaves little on the table for this type of investment, which is why Partners need to focus on optimizing their profits now to facilitate this oncoming transition. Comments:
  • Purpose:Have the partner understand that transitioning to the cloud is NOT LIKE adding a practice (BI, SharePoint, CRM). They need to think of this as starting a new type of business.Key Points:The transition to cloud is much more complex than simply adding a new product line. Partners will need to add new people to fulfill new bodies of work (with new compensation models). Based on what we have seen, Partners will not be able to divert resources to this new business unit and still remain profitable.Partners will need their cloud teams to focus 100% of their time and energy on growing this new business unit to be effective. Managing the change within your organization will become more important due to the magnitude of the changes and the significant impact it will have on the resources currently employed to support an on-premise solution-set.* Note: There is DPA content specific to leading and managing change in an organization, please comment on that here so Partners know there are tools available support them through the change initiative. Comments:
  • Purpose:Impress upon Partners the need to think in terms of far higher prospect generation volumes than was required to grow a traditional VAR business.Key Points:Partners require far greater volume of new customer adds to generate an acceptable level of revenue, and profitability, than is the case for a traditional VAR business, because there are no “balloon” or lump sum payments for either software or services.Marketing needs to delivery prospects at a far lower cost than is required by a traditional VAR business in order maintain acceptable customer acquisition costs.These factors dictate that a very different marketing approach is required to generate Cloud prospects.
  • Purpose:Impress upon Partners the need to think in terms of far higher prospect generation volumes than was required to grow a traditional VAR business.Key Points:Partners require far greater volume of new customer adds to generate an acceptable level of revenue, and profitability, than is the case for a traditional VAR business, because there are no “balloon” or lump sum payments for either software or services.Marketing needs to delivery prospects at a far lower cost than is required by a traditional VAR business in order maintain acceptable customer acquisition costs.These factors dictate that a very different marketing approach is required to generate Cloud prospects.
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  • Keynote - Cloud Transformation, Guus Krabbenborg

    1. 1. Thanks to• Diamond Sponsors• Gold Sponsors
    2. 2. Microsoft Dynamics Partner AcademyTransitioning to the CloudAn introduction
    3. 3. Introducing Partner Master Class• Recognised worldwide as a top PDC• All personnel have built partners from scratch• Live and breath your business pains• Wide range of experience in all areas• Proven success in multiple countries across Europe• Top class coaches
    4. 4. Guus Krabbenborg• Guus has been co-founder of DBS Business Solutions in 1994. When he left in 1999 DBS has grown to 120 employees• Guus has been commercial director at Navision NL and started in 2000 his own company TerDege• Since 2000 Guus has specialized in supporting Dynamics partners. He delivers trainings and workshops in many places around the world• Guus also executes workshops for companies looking for new ERP or CRM solutions• Finally Guus writes books, columns and a well-known newsletter for partners
    5. 5. Microsoft Dynamics Partner Acadamy Partner Marketing Specialist Academy LEADERSHIP ROLE MARKETING ROLE PDC Partner Partner Technology Developer/ Architect Academy CONSULTANT Partner Partner Microsoft Dynamics Sales Sales Academy Specialist Partner Academy SALES ROLE Partner Application Solution Consultant Academy Partner DEVELOPER Partner Partner Presales Project Project Specialist Academy Management Manager PRESALES Academy ROLE PROJECT MANAGER CPLS
    6. 6. Some reflections….• You don’t have to be ill to become better…• Life’s to short to make all possible mistakes yourself!• It’s not about what you know, but what you do with what you know…..
    7. 7. Partner KPI‟s, September 2010 Resellers Only High Low AverageAnnual Income $17,525,615 $1,468,614 $6,299,106EBITDA % 20.5% -4.5% 5.8%Services/Software Ratio 15.0 0.6 2.2Software Gross Margin 47% 12% 31%Services Gross Margin 64% 14% 42%Other Operating Expenses % of Revenue 47% 17% 33%Days Sales Outstanding 123 0 41Days Payables Outstanding 117 0 41Average Annual Hours Billed, per billable resource 1,565 559 1,088Average Annual Cost, per billable resource $159,602 $56,185 $97,538Average Hourly Charge-out Rate, per billable resource $193 $110 $154Realized BMUR 2.7 1.1 1.7Total New Customer Adds (last 12 months) 62 4 18Revenue/Employee $294,118 $110,839 $193,890Average New Deal Size $366,804 $37,859 $105,578Revenue/Salesperson $5,394,172 $558,191 $1,427,604Marketing Expenses % of Revenue 8.3% 0.1% 1.6%Sales Costs % of Revenue 19.3% 4.5% 9.4% Source: Salesworks Partner Data Base
    8. 8. Microsoft Dynamics Partner AcademyWhat is Cloud Computing and what doothers think?
    9. 9. Cloud ComputingWhat… Applications delivered as services that are always available, scale as required, provisioned just-in-time, run on shared industry-standard hardware, and are billed on a pay as you consume basisWhy… Accelerates speed to solution, lowers TCO, and allows for more budget to be allocated to innovation vs. maintenance
    10. 10. Defining Cloud ComputingClarity around the options On-Premises Hosted Cloud• Buy own machines, • Rent machines, • Pay-as-you-go connectivity, software, connectivity, software • Shared, multi-tenant etc. • Lower capital costs, environment• Upfront capital costs but pay for fixed • Offers pool of for the infrastructure capacity, even if idle computing resources,• Complete control and • Less control, but abstracted from responsibility fewer responsibilities infrastructure
    11. 11. The platform for the new generation of business • • • • • • • •
    12. 12. What Customers are ExpectingA reduction in both capital (CapEx) and operating (OpEx) expenses• Pay only for what you use• Do-it-yourself mentality – less appetite for servicesLower total cost of ownership• No maintenance or enhancement• Less hardware, fewer technicians, etc.Simplified software management
    13. 13. What Customers are ExpectingVertically-specific applications• Out-of-the-box functionality – Instant on• Add on apps and functions when neededFlexibility• Use 1,000 computers for one hour – BOM, MRP, ECO, simulations• ScalabilityTime to value• Speed to implementation• Speed to market
    14. 14. The Partner Experience – North AmericaIn CRM 100% of the deals in the partners‟ pipelines have one or more cloud based CRM competitors.In ERPBased on Region• Eastern region averaging about 30%• Central region averaging 25%• West region averaging about 35%In some geographies, as many as 50% of potential ERP prospects areenquiring about Cloud-based options now!
    15. 15. Cloud Leadership ProgramEarly Entrants, Early Lessons
    16. 16. 1. Shifts Happen
    17. 17. Cloud Impact Customer Scenario Tier 2 ERP Multi X Vertical Buyer Business-in-a-Box Some core business Strong preference for Complete, vertically- Basic GLAPR cloud-based applications, work cloud-based core specific cloud-based solutions demanded, streams, and business applications to solutions demanded, accessible for a single Demand Shift infrastructure move to be accessible on a accessible for a single monthly fee. No room for the cloud to reduce subscription basis, monthly fee. Strong up-front fees (other than costs, but a high need supplemented by add- resistance to up-front justified as a migration remains for ons and customization fees (other than justified cost to a subscription customization and to meet the specific as a migration cost to a model), and no demand complex integration. needs of the business. subscription model), and for customization Traditional services Traditional services almost no demand for whatsoever. Traditional business almost business somewhat customization services business virtually completely preserved. preserved. whatsoever. Traditional eliminated. services business severely reduced.Change in 25–30 % 35–50 % > 50 % > 65 %Business
    18. 18. Services/Software Ratios 2.17 0.18 0.08 NetSuite Average Microsoft Dynamics VAR
    19. 19. Composition of Services Executive Training 160 140 Workstation Setup 120 Server Configuration 100 Hours Data Conversion 80 60 Reporting 40 User and Super User 20 Training 0 Application Setup and Configuration On-Premises Cloud
    20. 20. Sales Impacts Close 120 Proof Solution 100 Develop 80 Qualify Hours 60 40 20 0 On-Premises Cloud
    21. 21. Marketing Impacts Traditional Online Telemarketing (External) High Impact Direct Mail Postcard Direct Mail Cloud Letter Direct Mail Traditional Online Exec Briefings Phone Follow-up (Internal) WebinarsOn-Premises Email Nurture Marketing Search Engine Optimization Pay-per-Click Campaigns 0% 20% 40% 60% 80% 100%
    22. 22. Impact of Cloud on your People – Changing Mindsets• S+S • Business Skills • Fixed price • Web-centric • Focus on• Speed to Close • New SOW • Social Media Service vs. App• Subscription- Architectures • Deployment • New and • Focus on based • Governance Included in Exiting Scaled Design• Solutions Models Subscription Customers • New Tools and Focused Fees Services• Compensation • Compensation • New • Fast and Cheap Operational Implementation Models
    23. 23. Packaging
    24. 24. Sticky Customer EnvironmentManaging Churn
    25. 25. Churn ManagementFor a Partner it is about• Planning and executing cross-sell strategies – The more products and services subscribed to, the harder it is to leave• Knowing when they are likely to fall off – End of trial, end of contract• Making it easy to stay – Evergreen services
    26. 26. Thanks to• Diamond Sponsors• Gold Sponsors
    27. 27. Cloud Leadership ProgramCustomer Acquisition
    28. 28. First Fact of Cloud MarketingThe Cloud is a volume game• Significantly more new customer adds are required due to lower upfront revenue collection• Lower cost per prospect acquisition• This is not a matter of “tweaking”, Cloud requires a significantly different marketing approach
    29. 29. Second Fact of Cloud MarketingThe “online” customer expects to find and buy from you onlineA viable long term business model depends on• Marketing costs lower than for “on premise” solutions• High prospect quality, using some form of “lead scoring”• An effective and efficient online demand generation engine
    30. 30. Microsoft Dynamics Best in Class Marketing Customer acquisition cost Costs Sales Costs $5,200 $11,500 $3,200 $3,100 On-Premises Cloud
    31. 31. Cloud Leadership ProgramSell in Waves - Sales Leadership
    32. 32. Who Are The BuyersBusiness People: Owners/LOB ManagersFocused on business functionality/processes/rationaleLooking for Ease and Speed• Easy to Buy• Easy to Pay for• Easy to Scale (up and down)Require limited educationWant to buy rather than be sold toEXPECT industry specific capabilities with limited configuration
    33. 33. Buying Criteria ChangesOn Premise: SaaS:• Functional fit • Speed to Value• Price • Economics• ROI/Payback • (Capex vs. Opex) • TCO• Risk (scope/budget)• Flexibility/Configurability • Industry configuration• Relationship/Experience • Business flexibility• Product flexibility • Risk (data/security)
    34. 34. Cloud Leadership ProgramSelling In The Cloud
    35. 35. Selling in the CloudSignificantly different from traditional “F2F” sales approachDifferent experience for both Buyers and SellersDifferent cost and compensation modelsSignificantly shorter sales cycleEntire sales process executed remotelyNot relevant for all businessesMore than just a deployment option – strategic differentiationSolution factory mindset (sales, configuration, implementation)
    36. 36. Buying in the Cloud – Make it EasyTo be found• (SEO, PPC)To differentiate• Vertical or Value Chain Solution SetsTo sell/close• Hard-wired sales processes• Clearly communicated buying process• Compliance/CRM/Reporting• Firm management oversightFor business decision makers (BDMs) to say yes• TCO/ROI analysis• Risk reduction
    37. 37. Overall Predictions affecting Partners in the Cloud1. Customers will be pre-disposed to buying directly from SaaS vendors or partners that offer vertical or value chain solutions.2. Cloud offerings will favour a business centric buying approach, challenging partners current sales operations3. The pricing model of selling a license and a bundle of services will shift dramatically to a pay as you go model.4. Fewer service professionals will be required in the deployment and maintenance of cloud solutions.
    38. 38. Overall Predictions affecting Partners in the Cloud6. Systems integrations (applications, servers, systems) will become part of the overall offering in PaaS reducing demand for systems integration.7. SaaS customer adoption will negatively impact hosting operations8. The importance of proximity to customer will be dramatically reduced and replaced by homeshoring, nearshoring or offshoring
    39. 39. Time Horizon
    40. 40. Transition Stages
    41. 41. Transition Timelines
    42. 42. Year 1 Transition Plan
    43. 43. Year 1 Transition Plan
    44. 44. Transitioning to the CloudThink 180 degrees from where your business is today• This is a volume-based sales and marketing game; a utility – not a services playThink about investment capital requirements• Whether internally or externally sourced, or both
    45. 45. Transitioning to the CloudThe transition to the Cloud is like starting a new business unit• It is not like adding a service line (Microsoft Dynamics CRM, Microsoft Dynamics AX)Think new people• You will be a hybrid for a period of time• Must remain profitable to reach the inflection pointThink change management• People need to make the transition
    46. 46. Workshop „Cloud Transformation‟- Partner Master Class delivers workshops „Cloud transformation‟ for NL/B in Breda (NL) - 2 Days - Focussed on „awareness‟- Next session on December 13-14, 2011- Then in the first week of March 2012
    47. 47. Questions?Thanks for your attention!Guus 622 496 073
    48. 48. Thanks to• Diamond Sponsors• Gold Sponsors