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The New Reseller Economics of Cloud and How to Help Your Channel Succeed

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The new economics of selling cloud through channels is impacting all resellers – even those who are not offering cloud-based solutions.   There is no escaping the impact of cloud on any reseller, solution provider, agent, or dealer’s business.   Here are some interesting statistics on cloud-based applications and how businesses and individuals are consuming them at a rapidly growing rate.

Successful Channels Cloud Swiss Army Knife Illustration 7-1-14

Cloud-delivered services are transforming every phase of business and are dramatically changing the economics and operations of technology resellers.  Tech resellers need to figure out what business they want to be in and what level of service they will be providing.  JB Wood, author of several books on trends in the technology world, proposes that “software eats hardware, and cloud eats software.”  This means that cloud service delivery is completely changing the way businesses consume and deliver services, and resellers need to transform their business model to compete in the new channel cloud economy.

In his books “Consumption Economics” and “B4B”, Wood outlines the four levels that suppliers and channel resellers need to carefully choose which level they want to play.

JB Wood Supplier Illustration 7-1-14

The higher the level of service provided the more desirable it is for end customers, but the more complex it is for channel resellers to deliver.  The burden of delivering the outcome switches from the end customer back to the service provider.   As a result, a reseller’s / supplier’s business gets more complex to manage, to operate, and to generate profitable revenue.

What can channel executives do to prepare their resellers for the new economic realities that are dictated by cloud computing?  The first is to help them model their business strategy and operations to profitably compete with changing economics.   Providing a business simulation tool to help resellers build financial and operational scenarios will go a long way in helping resellers understand the implications to their business and designing strategies that will generate a sustainable and profitable growth business.

Cloud and Non-Cloud Reseller Business Growth & ROI Simulator:

Reseller’s business models are being turned upside down with the growth in cloud services.  Traditional resellers have built their business with well-paid outside sales professionals that earn commissions on enterprise software licenses and hardware purchases.   With the growth in cloud services, the large upfront payments are no longer required, which significantly changes the economics of a reseller’s business.   The transition to a recurring business model is good in the long term, but it is very tough to manage the loss of cash flow in the short and medium term.   As a result, resellers are having a tough time managing salaries, operational expenses, and gross margins in the new reality for their business.  A business growth simulator can help resellers do scenario planning to estimate alternative sales levels, required direct and indirect staff and expenses, and full business P&L analysis to model the cloud success requirements.   Here is a best practice workflow for a reseller business growth and ROI simulation system to help model alternative futures and make strategy decisions.

Reseller Growth Simulation ROI Estimator web tool workflow

This guided process allows a reseller to register and answer guided questions about their business and generate a customized P&L and resource planning dashboard report for their business.  It also allows a reseller to conduct scenario analysis and plan alternative staffing, sales, expense and pricing levels to determine the right combinations of strategies for achieving profitable growth.

Once a reseller registers for this online business growth simulation and ROI tool they can be presented with a range of configuration options to customize with their business strategy.

Reseller Grow Sim and ROI Calc Goal Selection Page 7-1-14

Each one of these “checks” takes a reseller to a range of questions where values for each variable are selected from provided ranges.  The result is the creation of a custom P&L for a reseller to review and refine in real time.

Growth Sim Dashboard Part A 7-1-14

Growth Sim Dashboard Part B 7-1-14

Armed with a custom reseller P&L business growth simulation & ROI tool, any number of alternative future scenarios can be modelled to determine the right pricing, revenue, staffing, expense, profit, and ROI metrics for the business.  It becomes a very powerful tool to help resellers look objectively at their business and make informed strategy decisions about their business future.

There is no denying the new economics of cloud computing.  Vendors who figure out that they and their resellers will win if they collaborate on profitable growth business models will be the most successful in the market.

For more information about business growth simulation and ROI tools, please contact info@successfulchannels.com.

 

 

 

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