Before we discuss the functions and strategies that ensure success of a Cloud Service Business, let’s quickly look at some commonly used terms that you’ll frequently run into.
Cloud Business Terminology
MRR (Monthly Recurring Revenue): It is the sum of all monthly recurring revenues from all clients. Break down all your annual subscriptions into monthly revenue and add the monthly subscriptions to get this figure.
ARPU (Average Revenue per User): ARPU is your MRR divided by total monthly active users across all products.
Churn Rate (Percent): Churn Rate is the percentage of customers who drop out and don’t renew the contract with your business.
Churn Rate (%, for each product) = Total number of users ÷ Number of renewing users X 100
COA (Cost of Acquisition): COA is the key metric you need for planning and calculating the breakeven point.
COA (per user) = Cost of customer acquisition activities ÷ number of new users acquired
Core Functions of a Cloud Service Business
Like any other services business, Cloud Services also have marketing, lead generation, sales, business development, and finance as its core functions.
Marketing public cloud services can be tricky, because you have giants like Amazon, Google, and Microsoft as your competitors. The easiest way may be to work as a reseller of Microsoft Cloud Solutions with Ingram Micro. You can sell under the banner of Microsoft, with Ingram Micro providing marketing advice and guidance.
2. Lead Generation
Even if you don’t have a full-fledged marketing function for now, you must have a lead generation function. The various lead generation techniques include email marketing, press releases, blogging, cold calling, social media, workshops, webinars, etc.
3. Sales and Business Development
Sales and business development are critical functions, and you must have a strategy to close the sales and grow your business.
4. Financial Accounting
Like other businesses, accounting must be done on accrual basis, where the revenues are matched with the periods in which services are delivered against those revenues.
Strategies for Success as a Cloud Solution Provider
There are two core strategies for success as a CSP with Ingram Micro.
1. Customer Acquisition
For the first two to three years, you should work on acquiring as many customers (or “Seats”) for your business as possible. It is crucial to watch your COA during this time and know your estimated breakeven period. The lower your COA, the faster you will reach ROI.
2. Cross Selling and Upselling
According to research, it costs five times more to acquire a new customer than to generate new business from existing customers. Luckily, Cloud Services is all about upselling and cross selling. When you’ve acquired a certain minimum number of users or Seats, you must divert resources from new customer acquisition towards cross selling and upselling. This will take your ROI through the roof.
Stay tuned and feel free to ask us anything about the Microsoft CSP program at firstname.lastname@example.org