Do cloud contracts need to change in light of potential economic uncertainty to become more flexible?
Navigating without a map – the new cloud market
Depending on which side of the fence we sit (cloud or non-cloud) – the changed tech landscape is here to stay, and as Microsoft Azure stretches out ahead of competitors, how do traditional resellers and private cloud providers continue to drive sales in this new world? Especially in a time of economic uncertainty, when we don’t yet know what tomorrow will hold in terms of financial market performance, or job cuts.
One of the issues with cloud is that, in most cases, the revenue per project no longer equals the revenue that would have occurred had hardware and infrastructure been purchased. Many vendors are struggling with this predicament, as quotas and sales targets always go up – and if people as a whole are buying less to do what they need – then where will those extra sales come from? You can’t outrun the market for ever – so despite the difficulties selling a service over hardware, there is the fundamental fact that the makeup of IT budgets has changed. Coupled with the potential for a few years of slower growth and the gap between sales and quota grows.
That’s not to say IT budgets in general are getting lower, but the market for compute is reducing – as servers get more powerful and more can be done ‘with less’ – and for even cheaper, if purchased from a multi-tenant cloud environment.
Moore’s law around processor technology is great for customers, but has become a headache for hardware sales reps trying to recoup their lost earnings. Many traditional resellers are now reselling public cloud services in a bid to plug the gap in traditional earnings, but perhaps they have to look at the wider IT landscape – and figure out what IT buyers are spending their money on today. Information Age predicts that by 2020, 44% of IT budgets will be driven towards Internet of Things technology so is this something that resellers and cloud service providers should be getting behind now, rather than waiting for a new wave of providers to disrupt their market? This is very much in the same vein as when cloud service providers came onto the scene and disrupted the traditional hardware reseller model, and resellers rushed to have a competing offering.
Of course, many hardware resellers are still around and doing very well today, but the market has changed and it has become much more competitive. These businesses are no longer competing on service quality or price alone; the tables have turned completely and they are having to sell against cloud services in Tier 1 datacentres that may be half the cost of their offering.
It can be tricky to sell an intangible service. An intangible product requiring long term investment, which might not show obvious advantages for an extended period of time, goes against the grain of many ROI calculations that vendors hand out for traditional hardware sales.
What is the return on investment for a new analytics solution? Perhaps the results are only going to be visible six months down the line when it is integrated into the marketing function. And if there was no analytics solution in place before then how do you demonstrate an ROI – compared to upgrading to the latest server that has a 4 month ROI compared to its predecessor.
Selling a service like the cloud requires a shift in perspective. Customers buying cloud services want to hear different things than customers purchasing on-premise hardware. Security may come to the fore, when previously, they were comfortable with handling the security requirements of their in-house datacentre infrastructure themselves. It was a known unknown.
When trying to motivate customers to move away from on-premise hardware to the cloud, it is the salesperson’s job to pick up on what the real issues are that are holding them back from making their decision.
The problem that prospects raise is often not the one that really matters to them, it is shadowing a real concern that they don’t want to voice. Or perhaps, they don’t even realise it is not the true reason.
Building up a list of the common concerns you come across from customers, aligned with how you can overcome these claims will enable you to address these issues early on in the sales cycle, so that they are handled and put to one side, sooner rather than later.
Change your message
Businesses, particularly small ones, may baulk at long term, committed payment plans when it comes to shifting from Capex to Opex, especially in turbulent and uncertain economic times. Cloud requires people to commit – unless you are using a ‘true’ elastic, public cloud – but even these come with strings attached that are difficult to extricate yourself from. Whereas cloud was once seen as a way of reducing cost, could the market move back to making capital expenditures on hardware in a bid to reduce ongoing, long-term costs and contracts?
The tip of the iceberg
Technology is a great tool for enabling businesses to grow and save money. What other product could you sell that could offer the same business enabling benefits as technology? We’ve discussed previously how you can structure a sales pitch, and the points discussed there still stand. The benefits you present need to be tied into the larger business perspective. How do the benefits provided by a feature link into the broader business goals? How will increased work efficiency brought about by the cloud allow a company to hit its long term targets? How does increased security allow a company to tackle upcoming challenges or threats? What are the long term outcomes of better integration between departments? All these questions and more need to be already answered by your sales team and presented to the prospective client.
But you do need to weigh up the risk that economic uncertainty is bringing to the table – is this a massive factor for the customer that is going to overshadow any decision they make? Do cloud contracts need to change in light of potential economic uncertainty to become more flexible?
Read our Big BIG Cloud Report over in our Sales Resources section.