By Jason Bystrak

As the popularity of cloud picked up in the business world a few years ago, many IT service providers saw the cloud as a threat to their on-premises hardware and service margins. These same service providers sold cloud services opportunistically, as a response to clients that requested to move solutions such as email or backup to a cloud environment. When clients asked them for their recommendations, however, overwhelmingly they preferred to propose on-premises solutions because that’s what they were most comfortable with — opting for a 30-day cash flow over a smaller, monthly revenue stream.

Since that time, however, savvy channel partners have experienced the financial benefit of recurring revenue and the opportunity to create a deeper and stickier relationship with their clients by wrapping professional and managed services around complex cloud solutions. Some of the more forward-thinking service providers are even leading with cloud proposals. This is especially true among smaller channel partners who see cloud as a way to compete against larger service providers.

At the same time, end users are gaining confidence in cloud computing – especially among small and midsize companies. They are now convinced that previous objections to adoption such as security and uptime are actually better in a cloud model since top cloud providers invest in enterprise-class architecture to deliver better technology than they can afford on their own. Since cloud is typically consumed in a “pay for what you use” model, they recognize that they can experience these security benefits while at the same time reducing capital investments and management costs.

For those IT service providers still holding on to the outdated break-fix  or on premise-only managed services sales models, it’s still not too late to make the transition to selling cloud services and building a more profitable and sustainable IT practice in the process. Following are some tips and best practices to ensure a successful transition.

3 Steps to Becoming a Strategic Cloud Service Provider

Any IT service provider wishing to sell cloud services needs to first conduct a financial analysis to understand the profitability around specific solutions it’s already selling. This typically reveals low margin, high cost, slow growth solutions that would be best shifted to cloud delivery due to obvious market demand. This exercise also shows which solutions are growing and profitable and should continue to be delivered on-premises. It also exposes solution gaps where a new profitable business can be built in the cloud. Solutions should be chosen after carefully vetting and negotiating the right agreements and financial incentives with cloud providers that fit their business needs.

Next, the IT service provider needs to conduct a skills assessment to potentially train existing employees or hire new technical talent than can design, implement and manage cloud solutions. They also need to build the right operational engine to handle the purchasing, provisioning, service management and monthly invoicing requirements for cloud computing.    

The third step requires a change of course for the marketing and sales teams. All too often, service providers have a relationship with end users’ IT departments only, and they’re not viewed as a source for cloud technology by other areas within the business that are critical to the cloud service decision making process. Marketing is critical — not only to attract new clients, but to educate existing ones. And the sales team needs to be trained on how to engage these decision makers, and how to articulate the value of cloud technology.

Engaging the New Decision-Makers

It’s important for IT service providers to understand that multiple departments and decision-makers are involved in a company’s decision to go to the cloud. For example, the IT department is working to meet budget requirements, reduce management costs and increase performance. They tend to view solutions such as backup and recovery and hosted email as ways to accomplish these goals. Finance leaders, on the other hand, see cloud as a way to shift away from capital budgets and into operating expenses. These decision-makers value the added cost savings of aligning costs with actual IT consumption rather than paying for future or peak time capacity that may never be utilized. Line of business leaders are also involved in the decision-making process and tend to choose cloud services when they need to quickly improve business processes. And then there are executive leaders with progressive mindsets who are hearing about cloud computing from peers and industry experts and tasking their teams to review the business cases for cloud and modernize their technology plans.

Find New Sales Opportunities Right Now

Despite the fact that the market is seeing a rapid increase in larger organizations making the transition to the cloud, the SMB market, which is the sweet spot for the IT channel, is adopting cloud faster than larger companies. And all industry research points to this explosive growth continuing for the foreseeable future. IT service providers who are willing to let go of the former mindset of selling on-premises-only products and services and taking the necessary steps outlined earlier to embrace this newer way of doing business can become true business partners to their customers and uncover new streams of recurring revenue in the process.

Jason Bystrak is senior director, The Americas at Ingram Micro Cloud. He is responsible for leading and developing the sales and market development organizations, driving profitable growth and operational excellence for the division and its portfolio of cloud, managed, professional and training solutions. Bystrak has been with Ingram Micro since 1995.