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Prospectors make things happen.

This quote by Aaron Ross speaks volumes:

If you’re in a prospecting role, your success and salary both depend on getting your foot in the door. This puts us in a tough spot because you start seeing people as numbers that you need to dial or an email that your need to send so you can get through your list.

When I first started in business development, I used to get emotional when I’d see prospects open my emails but not reply or when they said yes to a meeting but asked to reschedule which never happened after. It took me a couple months and then I finally realized:

“You’re the least of the prospect’s priorities.”

They have several day to day problems that they’re trying to tackle. Even family or career related priorities can get jumbled into their mind. This means that your job as a prospector isn’t to sell them. Your job is to inform them about your product or service that could take one problem off their plate. This mindset changes everything because every email that you send or every phone call that you make will be positioned from a perspective to help make their life better.

This also means that you can’t expect them to reply to shitty outreach which is focused on your product features and how much money your company has raised. Talk about them, not you.

When they don’t reply to your emails or calls, your followup should be designed to keep your product or service top of their mind. Lot of times they’ve seen your messages but they might’ve forgot to reply to it.

It’s never personal, you’re doing your job and they’re doing theirs. Tailor your outreach on making their job easy or making them look good, it’ll do wonders.

The post The #1 Thing You Need to Remember While Prospecting appeared first on Smit Patel.

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Channel? Alliances? It’s where bad sales reps get hired. This is what the historical perception of those teams have been.

While it’s foolish to generalize every person in that role, truth is most of them relied on resellers to push their product. This worked great in legacy businesses since they wanted to procure new products through resellers that they had built long lasting relationships with to cut risk.

But…this buying process has since been disrupted by SaaS and Cloud products. From the person with the hands on keyboard to the CIO, everyone is purchasing solutions collectively as well as individually. Traditional Resellers are no longer needed as much because products can be simply purchased with a credit card and doing month-to-month contracts.

Companies are now forced to look at other channels for revenue. Studying successful SaaS companies of today and based on my experience, two channels will slowly replace resellers:

  1. Solution Partners
  2. Integration Partners
Solution Partners

Solution partners act as an extension of the sales/CS/support teams, taking away the burden of recruiting and salaries.

They wrap their consulting services around SaaS products and earn a commission/referral fee for the sale. In exchange, they they are responsible for sales, tier 1 support and ongoing customer success. In a way they are resellers but with much more skin in the game.

It’s a win-win for the SaaS company as well as the partner. The SaaS company gets to grow in areas where they don’t have expertise in and the partner gets to be the product thought leader in the niche, whether it’s a particular geo or market (SMB, Mid-Market, Enterprise etc.)

Twilio

The company had limited expertise selling to Enterprise clients so they decided to launch a focused partner program targeting System Integrators and Solution Providers. They’re calling it $1.45T opportunity ;)  

Zendesk

Zendesk recognized in their 2017 annual report that their Enterprise clients needed more support than their smaller clients. As a result, they hired an executive in 2018 to expand their partner strategy with a focus on SI’s.

Integration Partners

Integration partners create a deeper value prop for respective products and allow them to become more “sticky.”

SaaS companies often have an open API or a platform product strategy which makes it easy for their products to integrate with others. As SaaS stacks of companies get bigger, this approach allows two products to be gelled together for a unified customer experience.

Atlassian

Their marketplace has generated over $250M since the launch in 2012. It’s a triple win for Atlassian because developers are making money building add-on’s to their products while reducing R&D costs for them ultimately making their products more compelling to the users.

Dropbox

While their competitor Box has taken a traditional B2B approach to growth with Enterprise/Inside sales, Dropbox was able to get 500K+ developers to integrate to their platform. Both companies are successful in their own way but proves that integrations can bring serious $$.

What an ideal partner strategy looks like – Okta

Their partner ecosystem shows the evolution of a traditional partner strategy being focused solely on resellers to a modern mix of cloud alliances, ISV’s, SI’s, and resellers(for large accounts).

Want to trade notes on partnerships/channel or want feedback to grow your SaaS partner strategy? Ping me here.

The post Traditional Resellers Are Dead – Meet The New Channels appeared first on Smit Patel.

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Public Cloud is here to stay. Cloud Revenue Projection in 2020 for Amazon AWS is $44B, Microsoft Azure $19B and Google Cloud Platform $17B. Haters gonna hate and smart enterprises are already adopting cloud to cut costs and time to market.

In order for organizations to migrate their applications to public cloud, there are three paths:

  1. Lift & shift – exactly what it sounds like, the approach is migrating applications to the cloud without any code changes. While it’s the least time intensive, it lacks cost benefits by not taking advantage of dynamic cloud capabilities.
  2. Refactoring – involves rearchitecting/recoding applications to take advantage of cloud-native frameworks. This approach is the most time-consuming and resource-intensive, but it can offer the lowest cloud spend.
  3. Replatforming  – provides the middle ground between rehosting & refactoring by making few code/version changes using less engineering resources.

All 3 options need engineering investment but they also require a key ingredient: cloud-native expertise.

If a company has an existing DevOps culture, their team is already equipped to go down either one of the above paths. But what if they don’t? They will need to invest heavily in initiatives to recruit a cloud engineering team like CapitalOne. That means both time and money are at stake. So what’s the alternative? “Born in the Cloud” managed services providers (MSP’s).

AWS alone has 100+ managed services partners.

So what does a typical “born in the cloud” Managed Service Provider (MSP) do? They’re a more sophisticated version of a traditional hosting provider. Majority of their business is to manage a company’s application and infrastructure with agreed upon SLA’s. Most of these MSP’s also provide migration services to companies as a strategy to eventually land them as a managed services client. They offer teams with strong cloud-native skills and expertise in migrating customers towards DevOps and automation.

There’s even a Gartner Magic Quadrant for the top providers:

MSP Strengths

1) Cloud expertise – Most of these firms are founded by cloud and DevOps experts that have helped organizations migrate to the cloud. This makes them a great acquisition and acqui-hire target.

2) Cost – Given that MSP’s manage several clients’ infrastructure, they are able to leverage economies of scale and get favorable terms from their cloud and SaaS partners.

3) Agility – Since most MSP’s are younger organizations, their management structure tends to be flat. There are usually 3 key hires required:

  • P&L/Offerings Leader: This person is the “CEO” of the MSP practice and responsible for P&L. They usually have the last say on tools and offerings.
  • Technical Leader: This is the right hand of the offerings leader. They vet new technologies that can help them deliver a better customer experience.
  • Delivery: This person’s team is usually responsible for on-boarding & managing the client environments.
Business Model

There are generally two pricing models that MSP’s

Flat monthly fee: This is a subscription that an organization will purchase to have the MSP manage their infrastructure.

% of cloud spend: This is mostly used by the large MSPs as they want to follow the pay as you go model offered by the cloud providers like AWS.

While both of these models are very customer friendly, there’s a risk around predictability. Several MSP’s including large ones like Rackspace are pushing “no commitment” pricing which can throw the business for a toss if a large customer churns. On the flip side, there are aggressive discounts offered for long-term contracts which makes large enterprises chose the latter.

If you dig deeper, there are several line items the can beef up an MSP’s offerings:

Is it working?

Typical managed services gross margins (50-60%) higher than professional services (40-50%) and resale services (10-20%). In addition, cloud providers and ISVs offer aggressive incentives to MSP partners push their products which can add to the margin.

Top players like Cloudreach, 2ndWatch, Nordcloud etc. are doing revenue in double-digit millions based on public reports with some doubling revenue YoY:

https://www.channele2e.com/investors/mergers-acquisitions/blackstone-acquires-aws-microsoft-salesforce-cloud-partner-cloudreach/

https://www.crn.com/news/cloud/300075394/2nd-watch-doubles-revenue-in-2014-says-best-times-for-cloud-partners-still-ahead.htm?itc=refresh

https://eit.europa.eu/newsroom/nordcloud-eit-digital-accelerator-alumnus-raises-additional-eur-25-million

Large Enterprises are accepting MSP’s

Yamaha:
http://2ndwatch.com/case-studies/yamaha/

Mckesson:
https://www.rackspace.com/customer-stories/mckesson

M&A

There’s already been major activity in the market over the last 12-18 month where Mid-Large MSP’s (50-100M revenue) are acquiring smaller ones(<10M revenue) with very strong service delivery and cloud IP. The proof is in the pudding:

Aug 2018 Cloudreach acquired Relus Cloud:
https://www.cloudreach.com/us/pressarchive/cloudreach-relus-cloud-join-forces/

Aug 2018 Onica acquired NetBrains, Sturdy & Trinimbus:
https://www.prweb.com/releases/2017/12/prweb15005496.htm
https://www.channele2e.com/news/onica-acquires-aws-partner-trinimbus/

Jul 2018 Hitachi Vintara acquired Rean Cloud:
https://www.reancloud.com/news/hitachi-vantara-to-acquire-rean-cloud/

Feb 2018 GDIT acquired CSRA:
https://www.defensenews.com/breaking-news/2018/02/12/general-dynamics-to-acquire-csra-in-nearly-10-billion-deal/

Sep 2017 Rackspace acquired Datapipe:
https://blog.rackspace.com/rackspace-announces-agreement-acquire-datapipe

Aug 2017 Pulsant acquired LayerV:
https://www.pulsant.com/knowledge-hub/blog/pulsant-announces-acquisition-of-layerv/

May 2017 Claranet makes 3 acquisitions:
https://www.claranet.co.uk/about-us/news/claranet-makes-three-acquisitions-boosting-revenues-over-40-cent-refinances-and

Apr 2017 ECS acquired Inforeliance
https://www.prnewswire.com/news-releases/ecs-federal-acquisition-of-inforeliance-300441364.html

Competition

Legacy Service Integrators/Outsourcers like Wipro, TCS, HCL etc. are forced by the market and modern MSP’s to start a cloud practice. They don’t have cloud-native DNA and are slow to move given the sheer size of their organizations. That said, they have deep pockets and ties with large enterprises giving them an easier “in” while selling cloud services.

Organization can also decide to run their own applications and infrastructure for several reasons like in-house expertise, regulations and higher control.

Total Addressable Market

Gartner is projecting that the overall 2019 global IT spending is $3.7 trillion. Specifically, IT services spending is projected to surpass $1 trillion in 2019. A quarter of this could be attributed to cloud and managed making the TAM approximately $250B.

Need help on which MSP’s to invest in? Email me on my firstname@firstnamelastname.com or tweet @thesmitpatel — I’d love to help.

The post The Cloud Investment Opportunity That VC’s Might Be Overlooking appeared first on Smit Patel.

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