In this seventh article in the series, Transmentum’s Steve Potts focuses on the role of suppliers in the recurring revenue business model
Why supplier relations are critical to growth
If you look at any successful company you will find their success is not based totally on acquiring and keeping customers. There will always be some key supplier relationships in the strategic plan. Those relationships are critical to keeping customers and acquiring new ones.
The road to recurring revenue has some very compelling steps with regard to suppliers. Your managed services will be delivered using the same mission critical software every day. Logically, your selection of software vendor and the on-going management of that relationship will therefore also be mission critical. In a break-fix model it may well be appropriate to shop around and obtain the best deal for every project. That is not so easy when you have thousands of licences spread across hundreds of your customers all dependant on the support from a single vendor.
What do you need from a managed service software vendor?
- Commitment to your market (vendors may be new to your country)
- First class local technical support for your time zone
- Readily available education and training available locally for sales & technical teams
- A sensible commercial contract balanced between your needs and the vendors
- Formally documented escalation process for support
- Professional account management available locally
- Proven track record in their area of expertise
- Existing case studies and customer referrals in your target market sectors
- An understanding of the currency and tax laws of your country
- A clearly defined and published road map for future developments
- Support documentation available in your countries language
- Deliver consistent sales if you want them to take you seriously
- Professional, successful, companies pay regularly and on time giving the vendor confidence
- Treat them like partners - don’t beat them up and shout and scream at them
- Make sure that all of the people in your organisation that engage suppliers understand the points above specifically your gate keepers (accounts, personal assistants, receptionists)
- Be formal and get agreements in writing
- Network with other resellers and keep up to speed with market developments
- Deliver end user feedback in a positive light
- Make sure all of your teams sales and technical people attend the appropriate training courses
So what are the vendors looking for?
The current changes in technology are deemed to be disruptive. Many vendors believe that between 20-30 percent of current traditional IT resellers may go out of business within the next two years. Those that rely on a break-fix business model are at the greatest risk. The vendors need smaller companies that are closer to the market. Even with new technologies like the cloud and managed services “local feet on the street” are still considered to be a vital route to market. The Vendors are however focussing their investment on resellers that meet these criteria:
Resellers that are run by innovative and forward thinking leaders
- Willing to change their business models
- Willing to learn
- Willing to think out of the box
Innovation is being driven by US vendors
The current contingent of US vendors are the tip of the iceberg. Transmentum met four more who plan to enter Europe via the UK in Q4 of 2012. The message is consistent: many of the vendors are predicting the current spend on outsourced IT services will rise globally from the current figure of $22bn to $41bn by 2015.
In Europe, recurring revenue based Managed Service provision is the fastest growing part of the IT sector.
By 2015, 35 percent of all SME IT spend will be on outsourced IT services.
Complexity of solutions is going up, mobile devices, bring your own device, cloud, managed services, VoIP, all creates new opportunity for those willing to adapt quickly.
The vendors all use the same language. They all talk about sharing success with the resellers. Particularly those that meet the criteria listed above. They all declare that they need resellers to be their primary route to market. It's the only way they can scale up globally fast enough.
Are you on their target list?
Three simple questions, to consider:
- Do you know who they are?
- Do they know who you are?
- Do they know who your competitors are?
Steve Potts is director accountable for growth at Transmentum
Article 1. Controlling the wheel of fortune
Article 2: Strategy: The Foundation of Growth
Article 3: A sales strategy for accelerating growth
Article 4: Marketing and Your Proposition
Article 5: Help Desk - a profit centre or a cost?
Article 6: Six factors in customer retention
Article 8: Building a product and services strategy
Article 9: IP and your managed service