- December 13, 2016
- Posted by: Theresa Caragol
- Category: Strategy and Trends
As we discussed in Part 1, ensuring first time success for our migration to cloud is critical to the overall health of our business. In Part 1, we outlined the key elements for success, the average time it takes for a transition, and recommendations on leveraging a software automation cloud business readiness platform to ensure we get things right the first time.
It is important that we make a commitment as an organization that we are truly dedicated to evolving our business in cloud. We must create a plan and define a strategy; know we must genuinely commit to assessing our current business state. And most importantly, we must then be ready to modify our business, financial, sales, marketing and operations model(s).
KloudReadiness President, George Mellor recommends selecting 3 – 5 strategic vendors to go to market with in the short-run after you have gone through this exercise. He suggests that we craft solution-stacks (packaging) and construct pricing frameworks that will ensure our success leveraging blended gross margin models and business objectives.
KloudReadiness research also found that the average platform (platform defined as solution, system, process) readiness is estimated at approximately 17 months. One of the ways to reduce this, and ensure a faster time to revenue is effective business planning. According to the KloudReadiness research, over ½ of the solution providers migrating to cloud do not have a business plan; and if they do over 2/3 of those plans are inadequate. That means they do not sufficiently consider the critical elements for successful cloud transformation.
Critical success elements include:
Objectives Based Business Plan: We clarify in our business plan that Cloud and subscription (MRR) services are critical to the long-term success of the business and that the business is committed to invest into, and grow this new business segment. We must clearly define the objectives that will drive the plan, outline the market(s) we will enter and focus on either our existing client base for cloud expansion or new customer logo acquisition in the first year.
Financial Plans: The study also showed that 83% of the financial plans are inadequate. The financial plan should map clearly to the objectives of the business plan. The plan needs to account for shifts in revenue, gross profit and EBITDA, and it needs to reflect all key investments in the new business area.
Sales Plans: The research showed approximately 94% of Sales Plans were inadequate. Sales plans must focus early on rewarding pipeline build. Therefore companies should offer an adequate base salary for six (6) months (to compensate for the pipeline growth). Then, after 6 months this component can be replaced by annual or monthly recurring revenue (MRR | ARR) measurements. Measuring and compensating sales professionals on achieving target average monthly revenue, contract size and increasing total contract value (TCV) over the contracts term are essential ingredients for success. Another best practice includes a structured plan that provides a front-end reward (20-35%) focused on driving MRR / ARR and the remainder pays out over the contract term to the sales person. It’s important that the company also doesn’t pay for all of the 12, 24, 36 month contracts upfront or the long term incentives to retain talent are removed.
In Part 3, we will focus on proven sales best practices for cloud readiness in our solution