By now, most MSPs have come to terms with the fact that their customers are going to move portions of their IT operations to the cloud--the pros simply outweigh the cons. In fact, according to the RightScale 2016 State of the Cloud Report, private cloud use increased from 63 percent to 77 percent between 2015 and 2016, and hybrid cloud use increased from 58 percent to 71 percent.
Selling cloud-based IT solutions continues to be a serious challenge for some MSPs, however, especially those used to $10,000 Small Business Server and Exchange projects with monthly managed and professional services added on. The thought of trading these sizeable projects for a few hundred dollars a month in Microsoft Office 365 subscription revenue does not add up. With a slight change in perspective, however, and by following the two tips below, MSPs can earn healthy margins selling Office 365.
Tip #1: Change Your O365 Sales Status From Advisor to CSP
Before MSPs can start selling Microsoft Office 365, they must determine which Microsoft program to employ. Several value-added distributors and master cloud service providers recommend channel partners use the Microsoft Cloud Solution Provider (CSP) program. The CSP program offers a few key advantages over other Microsoft partner licensing models (such as Advisor) including:
· You can retain ownership of customer relationships: Unlike other Office 365 programs that require partners to turn over the sale--including the billing and support--to Microsoft, the Microsoft CSP program enables channel partners to retain complete ownership of their customer relationships. This makes it much easier to bundle with professional services such as helpdesk support.
· You earn higher commissions: Under the current Microsoft Advisor program, channel partners earn just 3% margins on Office 365 subscriptions. The CSP program, on the other hand, provides partners with margins that are 11% or higher. Additionally, distributors and master cloud service providers often add financial incentives to attract channel partners to sign up with them, which can boost first year CSP subscription commissions to 16 percent or higher!
Tip #2: Make Office 365 Part of Your BDR Plan
As Outlook, Word, Excel, PowerPoint, SharePoint and Skype for Business move to the cloud, the data associated with these apps is synced in Microsoft’s cloud. This does not take away from the need to include Office 365 apps and data in your BDR strategy, however. Putting value-added services in place around Office 365 can increase revenues--add an extra layer of security and protection as your customers’ apps and data are moved into the cloud. The fact is, Microsoft’s backup and recovery processes might not align with your customers’ service level agreements, security and data protection requirements, or business needs. For instance, financial services companies have to follow strict long-term data retention guidelines that may supersede Microsoft’s cloud backup offering.
The key to preventing cloud offerings from eating into your BDR margins is to avoid treating BDR as a task-based IT function. Instead, you should view it as a strategic business process. When you talk to your clients about higher-level business concepts such as business continuity, RPO (recovery point objective) and RTO (recovery time objective), you’ll eliminate many of the objections that may arise with backing up cloud services. Also, by broadening the discussion from backup to more advanced solutions, services and business strategies, it makes it easier to influence higher-level decision makers and earn higher margins.
Cloud-based offerings like Microsoft Office 365 are not passing fads. They are gaining momentum and have become the new standard for businesses of all sizes and types. Despite some naysayers’ predictions that the cloud will eliminate the need for the channel, however, nothing could be further from the truth. The reality is that most businesses now have a portion of their IT on premise and a portion in the cloud, and they need the two environments to work together as if they were one platform. There is a significant amount of complexity and skill required to achieve this outcome, which is a sign that the channel is going to be in high demand for a long time to come.
Neal Bradbury is Senior Director of Business Development for Intronis MSP Solutions by Barracuda, a provider of backup and data protection solutions for managed services providers, where he is responsible for generating greater business value for the company’s MSP partner community and alliance partners.