CARVING OUT sufficient margins on cloud products is challenging. One way to break free from the problem—and differentiate from the commoditization crowd—is to focus on bundling. “”Blended margins”” on bundles containing multiple cloud products, services, and even hardware provide healthier returns for channel pros and simplify the buying process for customers.
“”Customers are increasingly seeking bundles,”” says Deepak Thadani, CEO of SCO Cloud. “”They want a simple, all-in-cloud solution that’s easy to understand and use.”” In addition, he says, businesses are looking for pricing that is not going to be a surprise every month, which frees up working capital.
Karl Palachuk, consultant, former MSP, and author of Managed Services in a Month, says that selling a bundle revolves around a few critical factors:
- Offerings must be client focused.
- A client must understand 100% of the package.
- A bundle must solve their problems and address their pain points.
Although there’s no one-size-fits-all approach to cloud bundling, experts say that the right strategy can go a long way toward transforming cloud products and services into a lucrative business.
Simplifying the Complex
These days, the complexities of business and IT aren’t lost on anyone. A typical SMB requires dozens of cloud applications—along with the ability to connect myriad systems and software.
Channel pros are in a position to combine and orchestrate these tools and technologies to not only simplify IT for clients but help them manage costs, according to Eric Long, president of cloud solutions provider TeraCloud, which has offices in Texas, Florida, and Oklahoma. “”It’s about assembling solutions in a modular way to add flexibility, save money, create a more predictable OPEX-based cost model, and simplify things,”” he explains.
A best-practice approach, according to Thadani, is to package bundles so that they deliver the biggest positive impact to different market segments. It’s wise to “”include everything that you think the majority of your customers need and over-deliver, so they are pleasantly surprised by your performance or support, or the included features,”” he says. You can differentiate your offerings with consulting expertise, service, and support.
When bundling is done effectively, the sum is often greater than the individual parts. For example, SCO Cloud has combined numerous critical components to produce a complete cloud-based solution for clients backed by high-quality support. SCO Cloud builds the virtual machine (VM) and handles backups, snapshots, replications, bandwidth, and security issues such as authentication, VPNs, and malware protection. “”A bundle allows you to sell the whole solution, without piecemealing it all together,”” Thadani explains.
Creating a bundle requires an understanding of products, specifications, and functionality across a wide spectrum of vendors, and which combinations of products produce the best results at an optimal price. You should also familiarize yourself with a cloud vendor’s roadmap and what service-level agreements and support frameworks are in place. Staying on top of market and product changes is key as well, Long says.
In some cases, working with a cloud distributor that packages and sells bundled products can simplify the process. Of course, it’s important to check out a distributor thoroughly, and understand how fast it can provision services, how it handles licensing and billing, and what service and support it offers.
Whether you work with a distributor or with cloud providers directly, it’s vital for clients to feel a sense of stability with a bundle. Frequent changes in offerings can undermine trust—and ratchet up the complexity level for you and your clients. A chaotic approach can also undermine profits, Long says. As a result, when he assembles tiers or packages, he aims to establish a vendor relationship for at least one year, and preferably longer. However, he also leaves some wiggle room. “”We let clients know that we reserve the right to make changes if we find a better mousetrap,”” he notes.
Selling Value
It’s unwise to assume that a client already understands the value of a bundle—or even the products and solutions it contains. When buyers are confused, they’re likely to balk, so you must take the time to explain everything clearly and thoroughly—without reverting to hard-sell techniques. “”Value is always determined by the client,”” Palachuk notes.
Long recommends steering clear of hype and a marketing-centric approach. Success revolves around listening closely to what clients say, recognizing their pain points, and conducting a thorough analysis of their business. This makes it possible to address current needs and also build trust that leads to an ongoing relationship—and revenue stream.
Explain to customers what the products in your bundle do, how they work together, why they’re necessary, and the overall value proposition. For instance, in the cybersecurity arena, you may need to discuss what defense-in-depth is and why it’s necessary to layer cloud and software-as-a-service solutions to create a stronger defense against cyberattacks. In the finance space, you could point out how bundling various commerce and finance functions—along with backups and strong security—drives cost and performance gains.
Finally, Long says it’s critical to check in with clients regularly to ensure that their needs are being met. “”You don’t want to wind up with a client paying several thousand dollars a month for a solution they don’t understand.””
Getting the Pricing Right
Of course, getting the pricing right on a cloud bundle is critical, which means understanding internal costs and profit margins. Thadani says you must also be aware of the competitive landscape and what others in the industry are offering at various price points. But rather than lowering pricing to beat competitors, experts say to stress the overall value to clients.
It’s also possible to offer tiers that deliver strong margins generally while providing price or feature incentives that entice clients to purchase higher-margin bundles. Let clients know that tiers make it easier for them to scale up or down as needed, potentially saving them money, since with cloud it’s often possible to make changes on the fly without any disruption or downtime. For instance, a client may start at a bronze tier and evolve to a silver, gold, or platinum package.
When you get cloud bundling right, the results can be impressive. Traditionally low-margin point products can become much higher-margin solutions. One-off sales to customers can evolve into long-standing, value-based relationships. Concludes Long: “”It’s up to the channel pro to combine products effectively, ensure there’s value, and that clients benefit. When this happens, everyone wins.””
Image: iStock
