The Cloud Comes with Many Financial Questions for Transitioning Solution Providers

May 13, 2011 at 6:35 pm Leave a comment

by Sallie Martin, Consultant

There was a lot of discussion at the Baptie ChannelFocus conference surrounding the Cloud. A topic that recurred multiple times was the financial aspect of how the channel will be affected by this ‘new’ model. Many Solution Providers who haven’t already transitioned into the MSP model have several issues facing them as they look toward the future. The most glaring point is how to move to a recurring revenue model while trying to pay the bills based on traditional upfront payments.

Another consideration is who (vendors, distributors, 3rd party financers) can help them during this transition over the next year or so while they find their financial balance. If the Solution Provider wants to make the move to invest in Cloud infrastructure, how do they get the funding for this? Will the vendor help to finance marketing funds, or will the Solution Provider have to rely solely on their relationship with the Solution Providers? Skills to sell into the Cloud model change from a traditional IT sale to a line of business. The Cloud will require more of a business consulting role and less of the pure product play. How does a SP hire new or retrain their existing sales force to speak at a financial level instead of technical? How do they pay for these new sales skill requirements?

One step beyond sales skills is simply how do you now pay your sales reps commission on an annuity sale? Traditional line of business is upfront payment, but that’s not feasible with recurring revenue cash flow. A Solution Provider needs to understand what financial incentives might be offered for net new business, multi-year contracts or deal size. Many SPs make their gross profit in Services. What happens when Services revenues diminish with the transition to the Cloud?

You get the picture; there are a lot of questions that need to be asked up front.

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Entry filed under: Industry Perspective, Live from Events. Tags: , , , , , , , , .

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