Strategy & Best Practices

Drive Growth and Revenue Through Easier Cloud-Based Reselling

By Ideas @ AppDirect / July 4, 2016

Reselling Cloud Technology is Getting Much Easier. Find Out Why More and More Companies Are Choosing to Become a Reseller.

Not too long ago, “cloud computing” seemed like nothing more than tech jargon, something that was hard to understand and was confined to corporate IT departments. Today, cloud computing has caught on with companies of all sizes and is fueling fundamental shifts in business models. With the cloud, a one-person company can access as much computing power as a multinational corporation at a fraction of the cost.

For software developers and vendors, the cloud has been particularly disruptive. In fact, 85 percent of new software built today is for the cloud. Given these changes, software developers and vendors are seeking new and innovative ways to sell their products while reducing customer churn, decreasing operating costs, and boosting profitability. The cloud is an obvious place to turn for independent software vendors (ISVs), looking for the most effective ways to sell cloud services. Direct-to-customer, affiliates, referrals—there are many models that can pay big dividends.

However, reselling cloud services, whether you’re an ISV looking to build a program or a reseller looking for the right products to sell, is a powerful strategy for creating deeper relationships with existing customers and reducing churn. But what is the size of this opportunity and does it make sense for your business?

Adoption of Cloud Services: Fueling the Reseller Opportunity

To truly understand the size of the reseller opportunity, it helps to understand how a wide spectrum of businesses across every industry are adopting cloud services, a fact that is rapidly fueling demand.

Cloud adoption has skyrocketed over the past few years. In fact, revenue from SaaS and cloud-based business application services will grow from $13.5 billion in 2011 to $32.8 billion in 2016, nearly a 20 percent increase (in contrast, general IT revenue grows at only five percent year-over-year). To capture this revenue, it’s becoming increasingly important for software vendors and resellers to find flexible tools they can use to bring new products to market quickly and cost effectively.

For end-user customers, there are a variety of reasons to turn to cloud services, but the most common among them are better collaboration capabilities, the ability to access data from anywhere, and saving on overall operating costs (more on this in a minute). Here are a few important statistics that underscore the rapid rate of cloud adoption and showcase the immense opportunity for reselling cloud services:

• Fast adoption growth. Forty-eight percent of companies are moving to the cloud. These organizations are replacing their on-premises legacy technology with updated solutions that scale easier, at a lower cost.
• Popularity of cloud applications. Seventy-two percent of companies have at least one application running in the cloud, a figure that is up from 57 percent in 2012. What’s more, cloud applications are expected to account for 90 percent of worldwide mobile data traffic by 2019.
• Large revenue spends. Enterprises will invest an average of $2.87 million in cloud services during 2016. For mid-market organizations, this number is $578K over the next 12 months. And overall, 78 percent of businesses indicate that they are considering purchasing new solutions in the next two to three years, creating a large opportunity for resellers.

In addition, the global SaaS market is projected to grow from $49 billion in 2015 to $67 billion in 2018. Cloud services have clearly reached their tipping point as the demand for these products expands to companies of all sizes and industries. Resellers are just hitting the tip of the iceberg in terms of taking advantage of these huge shifts in IT spending. Held back by complex, clunky technology—if they’re able to access any type of reseller platform at all—they’re often limited to just a few applications. On the flip side, ISVs face hurdles launching these platforms and building reseller networks. So how can resellers and ISVs alike get access to solutions that allow them to be more effective?

Selling Cloud Services: Understanding Why Customers Seek Cloud Solutions

After looking at overall adoption trends, it’s helpful to drill down and examine the factors that are driving cloud adoption and growth for end-user businesses. Why are these customers seeking more cloud-based solutions? Here are a few of the major benefits that are driving adoption.

Lower upfront costs. On-premises solutions can be expensive and usually require a large upfront capital investment. In contrast, cloud-based solutions are typically subscription based, requiring less capital and upfront risk. This is attractive to customers that seek solutions with a lower initial investment.

For example, ServiceMax, a company that provides SaaS for managing field technicians, relies on the cloud for its primary architecture, running as little of its own data center infrastructure as possible. Startups don’t always have large budgets, and ServiceMax was able to take advantage of the cost efficiencies to successfully launch and optimize its businesses.

Access to applications anytime, anywhere. The number of employees that telecommute has risen 37 percent since 1995 according to Gallup. An increase in offsite workers requires new strategies and solutions to keep them connected to the home office and business critical data. As a result, many companies are turning to the cloud. Cloud services offer new methods for employees, customers, and business partners alike to share information regardless of physical location.

For example, many companies are shifting to cloud-based productivity tools with collaboration components, such as Microsoft Office 365. According to Microsoft, four out of five Fortune 500 companies use the cloud-based version of its popular productivity suite. While this is just one offering of many, it shows how companies are turning to cloud-based solutions to meet today’s changing needs.

Greater scalability. Whether companies are small or large, they will eventually need the ability to scale. For example, Netflix takes advantage of cloud resources to scale up and down based on demand for video streaming.

The entertainment provider faces large surges for capacity during peak days and times. As a result, the company outgrew its data center capabilities and migrated its website and streaming services from a traditional data center to a cloud-based environment. This migration has allowed Netflix to scale up or down based on the complex demands of customers, providing agility and flexibility.

Even for smaller companies, scalability is critical. For an e-commerce business, for example, the ability to add more computing resources during peak shopping times is key. For a growing accounting firm, the ability to easily add more seats to give new employees access to SaaS accounting solutions is essential.

Easier software updates. One great benefit of cloud-based services is that most updates take place automatically entirely on the developer side, so customers don’t need to worry about wasting time installing manual updates. This can be a large time-savings, especially for companies that have multiple products running in a variety of environments.

Secure method for controlling documents. With more employees collaborating from remote offices, the need for better document control is rising. In the past, employees sent emails back and forth via attachments, which resulted in a mess of changes and different versions. The cloud offers companies solutions to manage these documents in a way that ensures everyone knows which documents are the most recent.

Greater overall security. The loss of laptops and computers is a large security concern for companies. For example, two years ago Coca-Cola Enterprises announced that the personal information of about 74,000 employees, contractors, and suppliers might have been compromised when several laptops containing unencrypted personal data were stolen from the company’s headquarters. This and other similar stories making headlines highlight the importance of data security.

In contrast, many cloud services are hosted in data centers that have military-grade security. While any data can be vulnerable if shortcuts are taken, storing data in the cloud is a far better alternative to storing data on laptops and USB drives.

These are just a few of the many reasons why customers migrate to the cloud. The “why,” however, doesn’t really matter; what is important is the fact that companies are adopting cloud solutions at a rapidly increasing rate. For ISVs and resellers, this means more customers than ever are eager to buy cloud services.

Cloud Services: Boosting Retention

For any business involved in the SaaS industry, whether a cloud ISV or reseller, customer retention is critical. The cost of acquiring new customers is six to seven times more than retaining the ones you already have. Despite this, companies have ranked customer retention near the bottom of their top priorities. Until recently, companies ranked “driving sales” as their highest priority, while “engaging customers” and “building brand loyalty” tied for last place.

For resellers, offering other types of products or services presents an opportunity to provide more value to customers (and capture more sales) through cross-selling or up-selling. For example, if your customer has already purchased Microsoft Office 365, you can offer backup apps, such as Mozy or Trend Micro, to provide additional protection for their documents. Having a targeted portfolio of cloud services that makes sense for your customers and prospects is very important to drive retention and growth.

For ISVs, launching a program and working with resellers means having an extended team available to act as expert advisors on your products and help users get the most out of your solutions. Resellers not only sell, but also provide important onboarding, customer service, and management assistance.

Cloud Resellers: 4 More Valuable Benefits

In addition to improved customer retention, a reselling strategy provides a range of other benefits. We’ve already looked at cloud adoption trends and the benefits that SMBs can get from moving more of their operations to the cloud. Here are a few more benefits that reselling can provide:

Minimal costs. Depending on which providers you work with, for resellers, going to market with a new cloud service can be as simple as a few button clicks. ISVs can provide solutions that make it easy to select new products, add them to your catalog, complete the sale, and then provision and manage customers. There is no need for costly in-house development to integrate costly connectors, add new SKUs, or other sales activities. For ISVs, you can choose an all-in-one platform that offers advanced tools for partner relationship management, billing, marketing management, and more. Once again, ISVs no longer need to invest time and money in developing these solutions in house.

Expanded reach. As we’ve seen, as cloud adoption has grown, so has awareness about the benefits of cloud services. When resellers sell one type of app and have the ability to easily add options to that offering (such as Office 365 plus Mozy as mentioned above) more value is provided to the customer. As a result, you can retain customers more effectively, and draw in prospects who are looking for a more robust solution.

For ISVs, a reseller team provides more “feet on the street” selling your products and services and can help you grow faster. It can even help you expand into new global regions where it would be cost-prohibitive to open an office and train a sales team.

Increased revenue. Given the expanded reach and improved customer retention that a reselling strategy can deliver, it makes sense that the reselling model can provide increased revenue for resellers and ISVs alike. To gain the greatest benefit, you should look for partners and platforms that have the ability to easily adjust revenue share percentages, which will provide maximum flexibility and earnings for both parties.

Moving Forward

The cloud is changing the way that people do business, a fact that is especially true for software developers and vendors. A reselling strategy can be one of the best ways to expand reach, improve customer retention, and drive more revenue. To be successful, however, both ISVs who create software and the resellers who market and sell cloud services need technology tools that provide maximum flexibility at a reasonable cost.

The AppDirect Reseller Management Service powers best-in-class reseller programs that enable resellers to choose from a catalog of products and services and begin selling right away. Resellers can independently onboard customers, place purchase orders, and manage end users. For ISVs, the AppDirect reseller platform provides advanced tools to launch and manage a partner program easily and cost effectively. Program administrators can efficiently manage and audit a reseller network, all through one platform.

There has never been a better time to consider becoming a reseller of cloud services, and with the right technology tools, there’s no limit to the success you can achieve.

Ideas @ AppDirect is a leading source for trends, statistics, and other information shaping the cloud service commerce industry.