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What to Wrap Around Cloud MRR

14 Aug 2015 by Howard M Cohen

Even before cloud, some service providers realized they could enjoy many of the same benefits as their telecom counterparts. Beyond monitoring the dedicated leased lines for their customers to reach other company locations or the nearest Internet point-of-presence, they could be the sales agent for those carrier circuits, receiving a commission check for every month the customer used those lines. And that meant recurring revenue.

Some service providers projected that if they could sell enough of the circuits, they could hit their break-even point or quota before the next month began.

Welcoming cloud

Cloud computing took things beyond carrier circuits, generating recurring revenue from many more services.

When customers saw cloud computing for its superior services and lower costs, everything changed. Those accustomed to providing, configuring and installing equipment complained their revenue streams were drying up. Suddenly, those recurring revenue streams seemed miniscule compared to the up-front project fees that were going away, and some service providers panicked.

Praising the holy grail

Most every service provider has attended meetings and conferences where some self-anointed service provider coach or guru has espoused the wonders of Monthly Recurring Revenue (MRR) — the holy grail of IT services. They draw a box on the flipchart representing the first month of revenue from the first customer. Then two more boxes stacked to the right of the first one, representing the first customer’s second payment and the second customer’s first. And so on, drawing a wonderful curve up and to the right.

Make no mistake, that chart is correct. That is definitely how MRR works, but they usually leave out the scale, which most service providers find insufficient. You make more recurring income, but it would take far too long for it to become enough income, satisfying income, real success.

The bottom line is when you trade in up-front service fees for MRR, you lose significant revenue.

Wrapping services around cloud

The question service providers need to ask is, “Why give up one for the other?” You can — and should — have it all.

There is much work for a service provider to do for their customer before they ever enter into a cloud service subscription contract. The cloud service needs to be planned for, selected, evaluated, and a deployment strategy must be devised. All of these are fee-bearing services.

Then there is more work to be done to transition customers from their current on-premises system to the new cloud service. Data must be migrated. Services must be provisioned. New client interfaces and devices may be needed, and they too must be deployed. Again, more services to be delivered and charged for.

Finally, during the entire useful lifecycle of the service, there are support and management services that will be required. All will be billable to the customer.

That’s some serious revenue. Let’s drill down a little more.

Considering services required pre-MRR

Your customers need a guide. They need someone who knows which cloud services are best, and best for their needs. That guide also makes sure the variety of cloud services being purchased will all work well together, creating an efficient system. Cloud integration. That guide, that expert, earns a significant fee for providing all this guidance and design. Services include:

  • Initial consulting
  • Application inventory and evaluation
  • Solution architecture/cloud service selection
  • Information architecture/capacity planning
  • Security planning with cloud integration design
  • Application transition planning
  • Environment transition planning

Adding transitional services

Since all cloud services are accessed via the Internet, someone needs to configure the customer’s Internet services to deliver them properly. Internet protocol addresses must be assigned, domain name system servers identified and much more. Initial capacities from the cloud service, including processor power, usable memory and accessible storage, must be specified. 

Not only the services, but the people who will use them need to be prepared, trained and oriented to a new way of thinking about their computing environment. Their data must be migrated. Their devices prepared. Transitional services include:

  • User transition training
  • Cloud service provisioning
  • Email system migration
  • Email archiving
  • Data migration
  • User deployment and rollout

Including more MRR

It is unlikely that your customer will purchase just one cloud service. More often than not, numerous services from numerous cloud vendors are bundled to create a robust, complete solution. This, like any on-premises solution, must be monitored, managed and supported. Each of the following services generates more recurring revenue for you:

  • Day zero transition support
  • User support program
  • Network and cloud service QoS (Quality of Service) monitoring and management program
  • Capacity management

Serving your customers best

You have just wrapped your own services completely around the cloud subscription — before, during and after the actual sale — increasing your revenue on this deal substantially.

The truth is that all of the services we’ve talked about are services your customers truly need. By weaving all of these services together before, during and after the signing of the cloud subscription, you are providing your customer with a truly robust, complete solution.

Partnering with Insight

Your Insight support team can walk you through the sourcing of all of the cloud services your customers will need. If you cannot or do not wish to deliver any of the wraparound services yourself, Insight helps you find the right resources to deliver optimal performance on all of these services and more. Give us a call at 1.800.INSIGHT, or visit our insight.com to learn more about cloud MRR and solve, buy and manage these wraparound services for your customers before, during and after their cloud subscription service purchase.