Last month, we highlighted a detailed process to help resellers add cloud services to their portfolios. This process works for VARs that are just starting to sell subscription-based services as well as MSPs that are looking to expand their portfolios, and it’s based on years’ of experience working with thousands of partners. The five-step process addresses the challenges and pitfalls that can stall your cloud services business efforts, and it includes the following:
- Financial Plan
- Solution Plan
- Operational Plan
- Marketing Plan
- Sales Training Plan
If you missed the first part of the three-part series, which focuses on the first two phases, you can find it here. For the next phase, we’ll focus on the Operational Plan, which includes SLAs, contracting process, service delivery and support model and monthly billing process. Next month, we’ll conclude with the Marketing Plan and Sales Training Plan.
Choose an SLA and Contract Model that Works for You and Your Customers
There are three key operational considerations when establishing a contract with your customers:
- SLA (Service Level Agreement): What are they getting when they buy the service? And what guarantees come with it?
- Contract Term: How long is their commitment? And what happens if they want to cancel the service?
- Payment Terms: How will they pay for the service?
These considerations are different for cloud service brokers (CSBs) and cloud service providers (CSPs).
For CSBs, your service provider partner (or cloud services aggregator) will establish SLAs and contract terms with you, and you need to use these as the basis for establishing your own SLAs with your customers. Consider whether you can dilute your provider’s SLAs and still meet your customer’s needs—this will give you breathing room to “under-promise and over-deliver.” For example, if the provider promises a one-hour resolution in your agreement, consider using a two-hour resolution in your customer agreement. For CSPs, you’ll need to establish your own SLAs, so make sure you have the right operational plan in place to meet them—it’s all on you to deliver!
Contract terms are typically structured as a fixed-term (i.e. with no cancellations or early termination fees) or month-to-month (cancel any time). Fixed-term contracts may also be evergreen (auto-renew unless cancelled, and the renewal can trigger another term or shift to month-to-month). While the financial security of a fixed-term contract may be attractive for you, be sensitive to market competition and realize that many cloud solutions are shifting to month-to-month. CSBs should never offer a contract term that is shorter than their commitment to their provider partner (or the CSB assumes financial risk), but they can offer a more rigid contract if the customer agrees. CSPs need to offer contract terms that are competitive in the market and make sure they can deliver a quality service. Remember: Cancellations put risk on your capital investments!
Finally, payment terms can be a fixed amount every month, or you can apply a usage-based model much like utility companies use, in which the customer is billed for only the services used. While there are financial advantages to locking in a monthly commitment, CSBs and CSPs need to be sensitive to the market. CSBs should always structure payments to match their contract with the service provider to avoid cash-flow issues. CSPs have more flexibility, but need to consider return on their capital investment.
Establish Your Service Delivery and Support Model
In this phase of the planning process, you need to answer the following questions:
- What are the roles for you, your partners, and your customer in the provisioning process?
- How are service level issues and quality assurance handled?
Again, these answers will be different for CSBs and CSPs. CSBs should expect the provisioning process to be well-defined and streamlined, but they need to understand “who does what” to get their customer up and running. For example, they may need to collect key information from the customer, migrate data or install hardware and software at the customer site. An aggregation partner may be the central point to collect information and help the CSB by working behind the scenes with multiple providers to ensure a smooth start for the full solution (and they should have the tools and processes to do this!). The provider may play a hands-on role in start of service or leave it up to you. And the customer may need to prepare data or open access to their IT environment. The bottom line is that you need to understand the moving parts, hold your partners accountable for their roles, and set the right expectation with your customer to prevent frustration. CSPs need to outline the same processes, and set the same customer expectation, but will likely manage most of the processes in-house.
Once the service is up and running, your customer needs to have a clear understanding of what to do if the service is not working properly. CSBs often play the role of taking first call as part of their agreement with the service provider and working with the provider to resolve issues. An aggregator should act as an intermediary between the CSB and the provider, making it easy for the CSB to support a multivendor solution. And you need to understand and document the role of the service provider and how to engage with them.
Also, make sure to close the loop with the customer as to how the issue was addressed, and how it will be prevented in the future—otherwise, you risk attrition. Again, CSPs will need to manage most of these processes in house, but there are options to outsource help desk or remote monitoring to improve the quality of service and customer experience. No matter which model you choose, you need to document all operational steps to make sure your customer is satisfied.
How Will Your Customers Be Billed For Your New Service?
Another important checkpoint you’ll want to address is how the billing process works for the new service. For example, will the service vendor bill your company, and then you’ll bill the end customer? Or, will the service vendor or aggregator bill the end customer and then send you a residual check once it receives payment? Another thing to keep in mind at this point is your current and long-term goal.
For example, maybe right now you’re selling just one cloud-based IT service, but what about two years from now when you’re selling four cloud services? Will the billing program you’re setting up now still work for you then? If, for example, your customer receives a different invoice from each cloud service provider, will that work for you and for the customer? Or, would it be better to figure out a way the customer could receive a single invoice that would grow incrementally as your business grows and as you add more services over time?
Consider the value a cloud services aggregator can deliver in making the billing process easier for you. Monthly billing and payments to providers can be complex. Inefficient processes can add operational costs, and impact customer service, cash flow and profitability.
Watch Out for IT Services Attrition
You could follow every recommended step up to this point and roll out a profitable new IT service, but if you don’t set up a regular review period, the program will erode over time. Maintaining your new cloud service won’t be nearly as time-consuming as setting it up was. However, you should be meeting with your provider, aggregator and customer quarterly and doing a recap of the program to ensure all the established guidelines and processes are still being followed. If you discover that a policy or procedure has changed, you can then determine whether the change was a good thing or not and take the appropriate action. What you don’t want to happen is to find out 12 months after the fact that your customer was not satisfied with the service and does not plan to renew, and you did nothing to proactively address its concerns. And, while the operations team should lead these reviews, be sure to include the sales team—these conversations often lead to new opportunities!
Like anything worthwhile in life, you have to work on it. Before leaving the discussion table and hammering out all the other details of the operation plan for your new IT services program, set a date for a quarterly business review. This will allow you to get back together again and ensure everything you’re planning now comes to fruition in a way that works best for you and your end customers. After all, this is a partnership, so it’s important that the processes, procedures, and the service itself meet everyone’s needs.
Jason Bystrak is director of Sales for the Services division of Ingram Micro North America. Guest blogs such as this one are published monthly, and are part of Talkin' Cloud's annual platinum sponsorship.