Build Revenue Streams With Packaged Services in the Cloud

Lou AntonucciBy Lou Antonucci

As technology service providers reinvent their business models and look for paths to capitalize on recurring revenue, a growing number of forward-thinking VARs and SIs are responding with packaged” vertical cloud-based solutions. In fact, Gartner predicts a rise in integrated ecosystems bundled software and services shipped together in 2013. These solutions are primarily high-function business management solutions from marketing through back-office operations integrated into one simplified user experience accessed through the cloud.

The Perfect Storm

As business applications move to the cloud, the nature of the relationship between customers and their technology service providers is changing. Software margins and infrastructure service revenue are diminishing, and channel partners must rethink their business models to deliver new forms of value to customers.

The cloud has also fueled the proliferation of specialized applications now that software developers can move to market so quickly. Applications that solve very specific business problems can be obtained with the ease of a credit card transaction. Businesses are faced with a new challenge of application overload.

These two factors create a perfect storm of opportunity for VARs and SIs. Customers want the functionality that these new applications can offer, but they dont want to go back to the days of siloed data and disconnected systems.

Partners with the capabilities to integrate a number of applications to make a simple, high-function packaged solution are in a unique position to build revenue opportunities. Data integration and application management offer new worlds of margin to smart VARs and SIs.

An Evolution in Packaged Services

With a long history in the data integration field, we have seen channel partners package solutions in many ways over the years. Generally, packaged services combine a fixed set of support services with an application or application set. Customers pay a monthly or yearly fee for the package.

The big opportunity that we see now is the ease of repeatability for the VAR or SI with cloud-based deployment. In a multitenant infrastructure environment, the service provider can integrate a number of functional applications that serve a defined set of customers. The cost of adding customers is nominal and builds recurring revenue.

As an example, one of our longtime channel partners worked with a nationally recognized real estate listing service to integrate CRM, ERP and industry applications. The resulting real estate agency business management system is hosted in the cloud and offered to customers on a subscription basis. With tens of thousands of agencies across the country, the VAR has a targeted solution for a large, well-defined market.    

Clearly, there is an upfront investment required from the VAR or SI. In most cases, they work with a customer to define the requirements, evaluate the best component applications and build the integrations to create a seamless customer experience. Building on industry experience is helpful and an understanding of the vertical market is critical to success.

Simplify the Customer Experience

Customers still want to spend their time working on their business, not fighting technology. The real value of packaged solutions is to make it easy for organizations to manage their business processes. The partner acts as the hub to simplify the technology for the customer.

The service provider who can bridge the gaps for industries challenged with mixed environments can unlock a tremendous opportunity. The cloud is new and still evolving, which means that there is uncertainty. There are plenty of software developers who are trying to catch up and transition their applications. Hybrid environments those incorporating both on-premises and cloud applications are the norm for most organizations.

Managing a mix of applications can be tricky and costly. By offering packaged solutions, service providers deliver an additional benefit for customers: the simplification of license fees. VARs and SIs provide a valuable service by charging a simple monthly fee and protecting the customer from the hassles of complex licensing and maintenance fees. This saves customers the frustration of trying to manage annual support fees for software they are not even sure they are using.

Solutions with Stickiness”

In addition to the benefits of scale and recurring revenue to the VAR, a solution that provides extensive industry functionality can be the basis for long-term, stable relationships. By gaining a foothold in an industry, the partner can expand functionality over time to increase revenue opportunities.

For example, a partner working with a retail franchise with 100 locations can begin with a combined CRM and ERP solution. Over time, adding in e-commerce and marketing automation integration builds an even deeper relationship with the franchises. As every business owner knows, selling additional services to existing clients is far easier than finding new customers.

What Drives Success with Packaged Solutions?

For VARs and SIs looking to get into the packaged solution game, there are lessons to be learned from those who have already started. Based on our experience helping technology service providers, the top five lessons include:

  1. Choose your cloud and integration platforms carefully. Platforms that are built specifically to support multitenant, partner-managed solutions will make your path much easier. Platforms that are focused on serving end users directly may not be able to easily support VAR service and revenue models.
  2. The greater number of applications that can be integrated to the core business application, the greater the long-term viability for your customers.
  3. Simplify the experience for your customer as much as possible. From licensing to training, make it easy for end users to access and use the system.
  4. Start thinking about your business in terms of recurring revenue streams. While upfront investments may seem challenging, the long-term benefits of consistent cash flow will pay off.
  5. Choose your focus industry carefully. Make sure you fully understand the competitors, market drivers and economic potential.

Business Transformation From the Cloud

The win-win of packaged solutions is helping both technology providers and end customers benefit from the proliferation of cloud-based applications. The integration of vertically focused application sets opens new sources of revenue for forward-thinking channel players. Simplified licensing and user experience, combined with industry-specific functionality puts key information directly in the hands of knowledge workers to achieve high productivity gains for customers. Solution providers who deliver that kind of customer value will build stable revenues far into the future.

As vice president of sales for Scribe Software, Lou Antonucci is responsible for leading the company’s global sales efforts. This includes the execution of Scribe’s direct and indirect channel sales initiatives, as well as their cloud platform sales strategies. Prior to joining Scribe in 2005, Antonucci served for more than 25 years in leadership positions in channel development, channel sales and direct sales.

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