Any IT services provider still skeptical of the cloud opportunity needs to consider this: You’ll be hard-pressed to find another model in IT that promotes customer retention the way cloud services do. Once you hook the customer through a cloud services contract that covers most, if not all, of their IT needs, the customer is unlikely to ever want to procure IT services from anyone else. That is, so long as you uphold your end of the bargain by providing reliable, scalable services.
Cloud services, as a natural extension of managed services, are designed to establish a long-term engagement between the client and service provider. This approach isn’t like selling a product, in which scenario the customer may or may not come back to you for the next purchase. Presumably the customer would return to you, but the temptation to seek the lowest price would be ever-present.
Stickiness, therefore, is much harder to achieve in a product-centric transactional relationship. But that changes in a big way once the client becomes heavily dependent on you for their business to operate successfully on a day-to-day basis and to scale as business needs grow.
To properly satisfy customer requirements, cloud services providers (CSPs) have to understand the customer’s business, the pressures under which it operates and the goals it is trying to achieve. In doing so, the provider can fulfill the role of trusted advisor – a consultant that not only can address the client’s IT needs but also strategize together with the client about how IT assets and processes support business growth plans.
In this model, the more you do for the customer, the stickier you will be. Anecdotally, service providers say they enjoy customer retention of more than 90 percent when they take over IT environments, completely freeing the customer from the day-to-day maintenance burdens of maintaining the environment. This allows the customer to focus on the core business to better compete in the market.
With cloud services, customer retention could conceivably reach 100 percent in a lot of cases, especially for service providers that not only handle IT maintenance functions but also take over product provisioning and billing. Customers, after all, don’t want to be bothered with these necessary, but non-core, activities.
Ideally, service providers would fold the costs of all these services into a single monthly fee, thereby switching capital expenditures to the operating costs column. This approach has won favor with customers of telecommunications companies that provide not only phone service but also cable TV and Internet connectivity.
Think about how hard it is to switch to another cable company once you agree to sign up for your current provider’s “triple-play” offering. It’s a bigger hassle than most people care to deal with. Most customers of your IT cloud services will feel the same way about switching to another provider. They won’t want the hassle, but even more importantly, they’ll want to stick with you because you are providing them with reliable services that allow them to mind their core business without worrying about performance and scalability issues.
Maurice Saluan is senior VP of sales for Zenith Infotech as well as seasoned sales veteran in the managed service arena. Guest blog entries such as this one are contributed on a monthly basis as part of MSPmentor's 2011 Platinum sponsorship. Find all of Saluan’s blog entries here.