It is traumatic to lose what once was, a loved one, a cherished pet or that great pair of blue jeans. It’s an undesired change in our lives. Many VARs, IT Solution Providers (ITSPs) and Managed Service Providers (MSPs) are grappling with how to deal with the grief of coping with a dying business model.
It seemed like the endless streams of capital expenditures (CAPEX) would never end. It’s hard to believe that the years spent creating a great business, where you delivered superior solutions, to fantastic and loyal customers could be disrupted. But, unfortunately, operating expense (OPEX) has become the new black and black is what we all wear when it’s time to mourn a loss..
Perhaps you’re at one of the stages outlined below as you see that an evolution is required to make your business recurring revenue-friendly so you can seize upon the shift to a cloud-based services consumption model.
It’s hard to believe, but the model that most of us have leveraged for better than twenty-five years needs to be changed in order to capture the shift in spend that is growing monthly. Sad, but all too true. Let’s look at what the five stages of grief looks like for most of us.
Stage 1 - Shock and Denial
This can’t be happening to us. We’re too smart to have been caught off guard. I thought we had more time. Things have been so good over the past few years. How can we find ourselves in this position? Everything was fine only 6 - 8 months ago.
Well it won’t get any worse. It’s probably just seasonal. We’re always a little slow in the summer. This will all pass, we’ll be fine.
Stage 2 - Anger
How can our customers be looking at and procuring cloud services? We don’t recommend them and we’re their trusted advisor! We’ve spent years driving highly transactional deals that our customers love! We’ll keep on selling traditional on premise solutions and the hell with the rest of the world! What do they know?!
We thought we were ready for this transition, but it turns out you must prepare to change and understand that you need to discover what areas of growth you don’t know about. This is bullshit! Cloud is just a fad and we’re a great company!
Stage 3 - Depression and Detachment
Sure, our pipeline is soft and we’ve lost a few big datacenter deals. We had to cancel our club membership and they’re telling us the Sky Box is the next to go. I’m not quite sure what to do as this caught us off-guard.
I’d go out and drink every night, but my hardware vendors don’t seem to have the money to take me out anymore. I’m sure we can learn to like cheap family restaurants. The meat almost looks real. The good news is that the second floor windows don’t open from the inside.
Stage 4 - Bargaining
We have endless conversations with ourselves. We’re convinced that if we promise to eat well and not to drink so much they’ll be a divine intervention. It will bring back our traditional transactions and lump sum payments. We’re struggling to find meaning in all these changes foisted upon us that the marketplace and our customers have.
There must be a quick fix to all this. We’re willing to change. We’re willing to change!
Stage 5 - Acceptance
We now believe that the world of recurring revenue and cloud-based services is real and we’ve started to take the steps necessary to move to a recurring revenue-friendly business model.
Who knew all the prognosticators were right – it truly takes twelve months to change one's business and operating model and reposition our sales and marketing approach.
The move is the right one for us. Over time we are convinced that it will lead to thicker margins and a more sustainable business. It will be a little uncomfortable, but we are now well on our way to a balanced business model.
In the end, we knew we needed to evolve and progress, it just took us a bit too long to see the light. We just thought it wouldn’t affect us, but it did.
Although I did get a little overzealous, the sky is not falling. However, there are storm clouds on the horizon, and you need to assess and plan for the changes that are already underfoot. Perhaps next year cloud will be 20% - 22% of total IT spend, up from 15% today. Can you really afford not to take the threat seriously?
It’s time to get moving towards a recurring revenue-friendly business model. This will ensure you have a healthy and solid business three years from now. Let’s avoid the grief and get moving now and get out ahead of this problem. Remember, solid progress and sustainable health always takes longer than you expect.
Keep Calm and Cloud On - OPEX is the new Black…
Hope you found this brief insightful. As always, I’d be interested in your feedback. Please stay tuned for my next brief entitled "A CEO’s Tale – How I really Screwed-up a Business" on the importance of dealing with issues and change in the C-suite.