Transitioning To A Cloud-based CRM Or ERP Business
As you look to the horizon of the small/medium sized business CRM and ERP market it’s hard to miss the dark clouds of change looming in the near distance. The changing patterns in underlying technology will impact how our customers perceive, receive and use the software as well as the services we provide in response. There are great uncertainties about market demand, margins, services, cash flow and the preservation of hard fought market space. There is change ahead as far as the eye can see.
But fear not, there are sunny rays of hope already filtering through the dark storm clouds. Let’s take a look at what this means for Microsoft Dynamics partners.
For many partners the shock of change and the lack of perspective has produced a fear-base reaction of denial. “Nothing is really going to change for my business because we are good service providers and our customers love us”’ say some. Others reply, “It doesn’t matter where the application is installed, the customer is still going to need implementation help.” The downside of denial is we stand still while the winds of change sweep over us. In this particular scenario, this is not a recommended strategy.
All indications are that your CRM and/or ERP business will change dramatically over the next 2-4 years (sooner if just CRM) in the following areas:
- Customer attitudes – Our customers are tired of costly, badly run software projects. They demand and will receive high quality business software that they can rent by the user. If they don’t like their partner or solution, they can and will switch.
- Cash flow: A percentage of your license and services revenues will be paid on a subscription basis while your expenses will remain on their current payment schedule. This will have a significant negative impact on your cash flow for about 2-3 years.
- Marketing: New customers will find you most likely via the web. This will require your company to:
- Reduce the cost of prospect acquisition significantly from current averages.
- Focus on specialized vertical markets or industries (1-4 max)
- Fine tune your website and related demand generation engine
- Develop more structured prospect nurturing processes
- Understand that your market will be North America or the English speaking world
- Sales: Your customer add volume will most likely increase dramatically with a corresponding need to reduce cost of sales from current averages. This will require your company to:
- Tightly integrate you marketing and sales processes
- Sell remotely
- Sell in waves with each customer, adding new licenses and services over time
- Adjust your sales team skill sets
- Adjust your sales compensation model
- Create IP: The most successful cloud-based Dynamics partner will have significant revenues generated from reselling or having others resell their own intellectual property. The greatest rewards will go to the business that creates the best solutions first that can be resold by others. This IP will be software, templates, tools or services based. In essence, your company will become an ISV.
- Delivery services: Many of the traditional implementation services will no longer be needed. Some of the remaining services will need to be highly standardized to reduce costs. Many if not all cloud based services will be performed remotely. Process improvement services will become much more in demand. This will change your delivery team member skillsets.
It is important to remember that this is a process of transitioning your business over time. Albeit, the time to start the transition is now, since we are no longer in denial! Here are some key elements to your transition roadmap.
- Forecast your cash flow requirements: Model your mix of revenues and expenses over the next 3-4 years based on a range of predicted sales of cloud-based software and services. Organize the necessary capital sources to cover your shortfall. If you don’t have a good modelling tool, contact us at PartnerWorks for help.
- Develop and package your IP: Start the process of identifying your domain expertise, library of software assets and reference sites. Work through the process and investment of standardizing and pricing your product for cloud distribution.
- Branding: With more of a product focus, you will need to secure product brand names, URL(s), keywords and tag lines to be used in your marketing efforts.
- Demand generation engine: Revamp your website to do at least the following:
- Focus on one or more vertical market(s)
- Generate demand using sound SEO and PPC methods
- Develop repeatable and cost effective prospect nurturing processes to take advantage of the volume of inquiries generated from your revamped website.
- Sales function: Work on reducing your sales cycle by half. This will most likely require providing prospects with self-help resources and selling customers on smaller initial projects to get started. Since you will be highly vertical market focused, you’ll be able to repeat and refine much of our selling processes.
- Sales compensation: Subscription based selling requires a different compensation model. Work through the creation of a good sales compensation plan based on subscription sales that is both motivating and cost effective. If you need help figuring out the optimal configurations, contact use at PartnerWorks.
- Create a transition roadmap: This in essence is your long term project plan broken down by task, responsibilities and dates. The major areas of your business that will be impact have been listed above, the difficulty comes in defining the details and marrying up the transition process to your current business operations and team. Contact us at PartnerWorks if you need some help with creating your transition roadmap.
The good news is that there are huge opportunities that await partners that embrace the cloud. Of primary importance to partners today is to start moving forward now.
If you have any questions about this topic feel free to contact Ross Allen at email@example.com.