Six Rules for Cloud Success
- Details
- Written by Geoff Sinn
Managed/Cloud Services (MCS) has evolved over the past 20 years from a niche offering to an accepted way of doing business. While MCS was initially provided by a limited number of IT based companies, the number of companies now looking to get into MCS is growing rapidly. Companies are looking for new sources of predictable revenue and MCS is viewed as an attractive alternative.
The challenge companies face with respect to providing MCS is how to enter the market in the "right" way. MCS is not an easy or straight forward business to get into and companies often enter the market with no real understanding of what it takes to be successful.
The following are six rules that all companies need to know to make an informed decision about entering the MCS business.
- Rule #1 – You need to have a three time horizon. Building a successful MCS business is a multi-year proposition with a different focus for each year - year 1 on building infrastructure, year 2 on customer acquisition, and year 3 on rapid revenue growth. As a rough rule of thumb, revenues in year 1 and year 2 will be approximately 5% and 35% of expected year 3 revenue respectively
- Rule #2 - Annuity based businesses have different revenue characteristics than transaction based businesses. Moving from a book and bill business to one where revenue is received over a 12 to 36 month period, requires a fundamental shift in such things such as revenue recognition, cash flow, customer billing, customers support and sales compensation
- Rule #3 – Play to your strengths. It is amazing how many companies enter the MCS market with a service that has little or no relationship to what they currently do. Building a MCS business is hard enough without launching an initial service that has nothing to do with existing expertise and core competencies
- Rule #4 – You need to create market presence and awareness before you actively market your new service. Just because you have a new service to offer doesn't mean customers, including existing customers, will buy it, no matter how successful your traditional business has been.
- Rule #5 – Change will be required. The extent to which you can leverage existing personnel, infrastructure, and processes and procedures to sell and deliver MCS is typically limited
- Rule #6 – Different business models can be deployed from a resell only model to a build your own service(s) model to a hybrid model. Though all have their pros and cons, the hybrid model stands out above the rest when everything is taken into consideration
Remember and apply these six rules as you plan your way to successful cloud operations for your company!
