I’m always fascinated when I talk to IT services providers about the cloud – particularly public cloud. To my amazement, many of these folks think public cloud will erode a chunk of their IT services business, especially the IT services providers that deal with Small to Medium Businesses (SMBs).
I guess the logic is as follows:
You have these IT services providers that have made their living managing customers’ On Premise resources (both hardware and software) and charge a set monthly fee. They also get an additional commission check by reselling these same customers all the hardware and software they need. The beauty of it is that all commissions were paid up front. Pretty sweet!
Then public cloud shows up ...
Customers no longer need to write big up front checks for hardware and software, and now pay only for the resources they need, when they need them. The result - service providers stop getting those big commission checks and instead are getting a fraction of the commission from the public cloud license sales every month. This is assuming they’re even reselling public cloud, since not every service provider does. Now, too many of these service providers don’t think they can deliver a profitable managed service around the economics of public cloud. That’s where they are wrong.
How to make money with Public Cloud
One good way to start is to follow the low-hanging fruit. The first public cloud service IT Service Providers should focus on is delivering managed services for Office 365.
1. O365 is the fastest growing product in Microsoft history.
2. There are over 500M On Premise Exchange licenses worldwide, and most if not all will move to O365. If you think Microsoft doesn’t want everyone moved over to O365, guess again…
3. Email is the dominant business application - every company needs email.
4. No company wants to deal with the administrative headache that comes with managing everyone’s email, especially SMBs.
Some IT services providers are already capitalizing on this massive opportunity with public cloud and Office 365, offering Migration Services to SMBs and Enterprises. This can be a nice piece of business and a great way to start the relationship with the customer, establishing your firm as a value added partner as well as a public cloud services provider. The problem with migration is that it’s a one-time revenue event for the service provider. Once the migration is done, there’s no recurring revenue.
A number of service providers are also reselling their customers licenses of O365, which has some annuity stream tied to it. However, that revenue stream is variable and completely controlled by Microsoft. This can also be another stopping point for service providers. They’ve done the heavy lifting with the customer to establish their role as a valued IT services partner, then they walk away. They don’t think they can build a profitable managed services practice around O365… and they’re wrong.
Three events that enable you to very profitable deliver O365 managed services to your customers:
1. Microsoft does not offer level one customer support!
You first need to let your customers know that Microsoft does not offer level one support. For SMBs, I think it would only take one gnarly encounter with Microsoft support desk for the customer to realize that they absolutely do not want to deal with support issues around Office 365. Also, most SMBs either have very few IT resources or none at all. If they do have IT resources, most likely it’s an IT generalist and not an expert in O365. Also, the Microsoft admin portal doesn’t exactly make it easy for them to get their issues resolved. Good luck if they need to start writing PowerShell scripts…
2. Offer the service to your customers at a fraction of the cost of their O365 licenses.
If you’re selling your customer O365 managed services, price these services so that your customer doesn’t think about the incremental cost to signing up for the service. If your customer is buying a bunch of $10-$20 licenses, you probably aren’t going to be able to charge them half that price for the managed service to complement the license sale – they probably won’t sign up. Make the price for that O365 managed service a fraction of the license price, 10% – 20%. Customers will sign up without thinking. Why? Because as I addressed above, they don’t want to deal with the administrative headache, especially if they’re an SMB! All that it takes is one call into Microsoft support. For a fraction of the license cost to get rid of any potential IT headaches with O365, there is a very high probability that the customer will not give the managed service a second thought.
3. Leverage an O365 management platform that drives down the operating cost to deliver the service.
If you follow the above process, you’ll be able to easily convince the customer to sign up for your O365 managed service. They’ll be happy because they don’t have to deal with the administrative mess and it cost them very little for that piece of mind. Now you need to deliver this service to your customer, and it needs to be delivered as easily and as cost effectively as possible. This is all about creating operating margin for your business.
How do you do this? Well, you can’t use senior level techs to deliver this service, as they’re too expensive for this type of work. Entry-level techs (very low cost) are a better choice for this job. You’ll also need an O365 management platform that is incredibly intuitive and feature rich, where these entry-level techs can very easily get up and running with little to no training, and administer this service to your customer base without any additional IT support from your staff. That means no writing PowerShell scripts…everything needs to be automated already.
That’s where Nuvolex comes in…
The Nuvolex platform is the most advanced and intuitive Office 365 management platform in the industry. Our platform is not only extremely feature rich and heavily automates O365 administration tasks, it is incredibly intuitive – extremely easy to use. This is critical because you cannot burn expensive IT resources delivering services to your customers if you want a profitable O365 managed services business. That will eat up your operating margin.
The Nuvolex platform allows you to manage all your Office 365 customers in one UI, perform all administrative tasks and track all admin activity, as well as provide your customers detailed reports on usage. There’s no platform in the industry that can deliver this powerful an offering with such ease. Also, the cost to use Nuvolex is a fraction of the price you charge your customer for your O365 managed service. We make using the Nuvolex platform a no brainer.
The opportunity to deliver managed services in Public Cloud is enormous, and O365 leads that opportunity. Pursuing O365 managed services opportunities with your customer base, along with migration services and license sales is a very attractive business opportunity for any IT service provider, and the beginning of establishing a public cloud managed services practice for your firm.
You can build a great managed service business around public cloud, especially O365!
Have questions about Nuvolex? Let us know in the comments!