Strategy & Best Practices

Executive Q&A: How MSPs Can Differentiate in the Digital Economy

By Ideas @ AppDirect / June 4, 2018

CANCOM is one of the leading providers of IT infrastructure and services in Germany and Austria. As the company’s Manager Business Development Public Cloud, Christin Hanneken has been instrumental in driving CANCOM’s cloud sales strategy. In 2016, she successfully launched the AppDirect-powered CANCOM Business Cloud Marketplace, which offers more than 50 cloud services from leading international and local, industry-specific software and infrastructure vendors.

Hanneken recently co-presented “Three Ways To Differentiate In The Digital Economy” with AppDirect’s Maeva Riley at MSPWorld 2018. The following is an edited version of their discussion.

Q (Maeva Riley, AppDirect): CANCOM has been selling SaaS and IaaS since 2015, which in our business is a relatively long time. How did CANCOM know to jump into the cloud market so early on?

A (Christin Hanneken, CANCOM): It was an easy decision for two reasons. First, we moved into the cloud together with our vendors. Important partners like Microsoft—which started its CSP program in Europe in 2015—and Symantec or F-Secure moved to the cloud. They expected us to sell their cloud services, so that’s what we did.

Second, the margins with cloud services are so much better. Traditional services have maybe have a margin of three to five percent. What do we have in CSP? It's 20 to 30 percent, which is obviously a big difference.

Q: Fast forward to 2018, when the majority of providers are selling cloud-based services. For those that aren’t, is there still time to catch up?

A: I think there's still time, but it is limited. From our perspective, the time to move into the cloud should be right now. If you don’t, the other 50 percent of your competitors may take your customers.

"I think there's still time, but it is limited. From our perspective, the time to move into the cloud should be right now."

Q: So customers want cloud-based solutions from you, or they will look to competitors. What were some of the challenges you faced in meeting these customer needs?

A: When we decided to move into the cloud, there were quite a few challenges we had to overcome. When we launched our marketplace, for example, we thought having an online store is great and all of our customers would just go there and purchase everything themselves. Well, it wasn’t like that. We had to put work into it.

We noticed after a couple of months was that customers, especially when they're visiting the marketplace the first time, don't like to buy on their own. CANCOM has been a trusted advisor for 25 years, and that didn’t change when we moved the experience to the cloud. Customers still wanted assisted sales.

In fact, we noticed that our customers needed help to move into the cloud. That's when we decided that we needed to offer value-added services, for example, migration to help them get up and running. Basically, we help them make the first purchase and help them start using their solutions, and afterwards many of them are ready to do self-service.

Actually, aside from the customers, one of the biggest challenges we faced was lack of internal readiness. To solve for this, we visited our 35 sales offices all over Germany and Austria and taught the key account managers, sales representatives, and back‑office staff how to sell cloud and how the marketplace works so that they were ready to make the sale to the customer. It made a huge difference.

"We visited our 35 sales offices all over Germany and Austria and taught key sales staff how to sell cloud. It made a huge difference."

Q: Speaking of the sales organization, incentivizing your sales team can be one of the most critical factors for a successful cloud strategy. How does CANCOM approach incentivizing cloud sales?

A: Our salespeople are one of the most important assets we have. The good thing about cloud services, especially at the moment, is that not only are the margins great, but the incentives are also great. Talking about Microsoft again, you have a 20 percent margin, but in Germany you have 22 percent incentives on top of that.

Basically, you may have a margin of 42 percent. At CANCOM we give at least that 22 percent right to our salespeople, so they have fun selling our cloud services.

Q: So what kind of success are you seeing selling cloud services through your marketplace?

A: For over a year now, we’ve had a month-over-month growth rate of 25 percent for our SaaS and IaaS offerings, which is quite great actually.

We’ve been able to achieve this by focusing on a few key “hero” applications. When we started with our marketplace, we had 20 applications to focus on in our portfolio. Small applications from vendors you might not even know, but also applications from well-known vendors. We quickly figured out that it's better to focus on the hero applications, such as Microsoft Office 365, Microsoft Azure, and Amazon Web Services. That’s what we’re doing now, and they’ve contributed massive volume to our growth.

We also moved a whole bunch of our existing customers that are in the traditional licensing business to the cloud. That was a great thing to do for us, because we could also provide value-added services to move into the cloud. And then, the great thing is that once you’ve moved that customer to the cloud and they feel good about the marketplace, then you're ready to do cross- and upselling. It’s the perfect set up.

"For over a year now, we’ve had a month-over-month growth rate of 25 percent for our SaaS and IaaS offerings."

Q: That creates that customer stickiness that people are always talking about, right? They trust you and the relationship expands from there.

A: Yes, and that’s the second piece that's really important when talking about our strategy. CANCOM is a German company, and in Germany we care a lot about quality. Not only in our cars, but also in our IT. CANCOM has been working with our customers for a quarter of a century and offering really high-quality support services.

We knew we needed to continue that in our cloud business, which is why we decided to offer value-added services and support packages. We created a range of offerings, from consulting packages to quick setups like one-time migrations.

We also offer premium support packages, and we actually just started putting managed services into our marketplace. This is actually our way of differentiating within the digital economy. When you look at cloud services, they are all the same with everybody who's selling them. You need to find a way to differentiate. If you don't have a way to set yourself apart, it's all about the price. You have to decide whether you want to do this or not—and there's a lot of money in margins, of course—but there’s also a lot of revenue to be had in value-added services.

Q: Let’s talk about how CANCOM has been able to scale its cloud offerings. What have been the key factors?

A: Automation has been incredibly important in growing our business. I have a quick anecdote to explain what I mean. When I started working for CANCOM two-and-a-half years ago, I visited our headquarters in Munich and I came across a huge bill that was more than five pages long. It had lots of numbers and I thought, "Wow, there must be one lucky key account manager earning a lot of money here." It was a $25 CSP bill from Microsoft.

It was pretty sad, actually, because somebody had to draw up that bill and I’m sure it took them a lot of time. The challenge is the opposite for selling IaaS. That bill could be 10 cents one day and the next day it could be 15 cents. I don't think anybody wants to write the bills for that manually.

To be successful with both SaaS and IaaS, we knew we needed platform technology that could automate as much as possible, which is what we’ve found in AppDirect.

"To be successful, we knew we needed platform technology that could automate as much as possible, which is what we’ve found in AppDirect."

Q: What is CANCOM looking to do next with its cloud strategy?

A: We are always searching for new hero applications. We’ve already identified a couple of other applications we would like to focus on, including Symantec and DocuSign.

We’re also looking to focus more on bundling and solution selling. We’ll keep on identifying verticals that we can use as a pilot to try out how the solution selling works for us. You may be wondering why we didn't start solution selling in the beginning. Well, it's a step-by-step process. You need to start somewhere. The market in Germany, especially with small businesses, was very difficult two years ago because they weren't ready to use any cloud services. Now, some of the verticals are ready, so we can move in that direction.

Q: Any final words of advice for MSPs looking to sell cloud services?

A: When we started with our marketplace, we thought just having that online store and doing a little bit of marketing would bring us a whole bunch of customers. That wasn't the case. I'm completely honest with you, that's why we changed our strategy and really made our salespeople believe in selling cloud solutions to existing and new customers.

We still do marketing with our marketplace because it looks great. We also get customers just from marketing, but it's really, really hard and you have to invest a lot of money to be seen on Google and other key places. Really, we do both. We do a little bit of marketing, but we really focus on our salespeople. I think that’s the bottom line: If you want to succeed, focus on your salespeople.

To learn more about CANCOM’s cloud sales strategy and success with AppDirect, download the “CANCOM Achieves Double-Digit Monthly Growth in Cloud Commerce Marketplace” case study.

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