Revenue Leakage – Reasons your subscriptions-based business could be losing revenue and how to minimize it

Options for CSP Direct Bill Partners with Microsoft’s New Requirements

Requirements for CSP Direct Bill Partners

Microsoft announced a performance standard for Microsoft CSP Direct Bill Partners.

This announcement has invoked a wide range of reactions from the partners in the Microsoft CSP program. Some partners are reassessing their business models, and others are doubling down on their plans.

Highlights of the announcement include:

  • Microsoft is introducing revenue requirements for the CSP direct bill partners program. Partners who want to enroll as direct bill partners in the Cloud Solution Provider program must meet at least USD300K in Cloud Solution Provider program revenue during the 12 months before their  required support contract renewal date.
  • This requirement will go into effect in January for current direct bill partners, and partners will need to meet the requirements by their partner support plan renewal date.
  • If partners are not able or would prefer not to meet these updated requirements, they will need to re-enroll as an indirect reseller in the CSP program.

So, what are the options for CSP Direct Bill Partners?

  1. Stay put and accelerate growth: If you are a direct bill CSP partner that is below the revenue requirement, here are a few specific considerations:
    1. Is this a strategic area of growth and how important is Azure revenue for your business? It is significantly more challenging to scale Azure through an indirect provider, so remaining a direct partner can make a big difference in your ability to sell and manage Azure billing.
    2. What does financial modeling look like? There are additional systems that must be implemented and a system that must be set up, potentially costing additional resources.
    3. Is there is a roadmap and template to follow? If this is a strategic opportunity for your business, you can define the products and services and follow this sort of three-step process. You can also use co-op funds to finance these activities.
  2. Evaluate the right Indirect Provider(s) for you: Indirect providers will welcome you with open arms; however, they are not all the same. Here are a few elements to consider when evaluating an indirect provider:
    1. The big three Distributors provide a wide range of products and services, including hardware, software, and cloud services. The most comprehensive range certainly provides you a one-stop-shop, but your business needs focus and specialization. Some providers have expertise around specific product lines, and your account manager may have specific capabilities. Ultimately, the biggest may not be the best.
    2. Billing alignment will save you time and money. Understand how they invoice you. How will you invoice your customers, and will their invoicing process impact your billing process? These processes can be time–consuming and need to be automated as much as possible. Understand the formats of Azure consumption and license-based invoices. Using a billing automation system like Work 365 will significantly reduce this risk and effort related to billing. Some distributors provide pro-rated refunds on reductions; some offer a free month or a set of free days.
    3. Is there an integration available with your internal systems? Have you invested in a billing and provisioning system? Indirect providers will want you to use their portals to provision all their services. They believe it is difficult to transition services from one provider to another, so a lock-in is inevitable. They will also offer a migration service to move your services over.
    4. Financial impact and Margins are going to be critical to your decision. If you lose on the margin, you could still gain it back on the savings from the ASFP cost (15K/year). At the 300K threshold, you could lose 5% of your margin and still arrive at break-even – this is back of the napkin math. Also, you can manage and expand margins only when you have options in service providers. If you only provision through the distributor portal, it’s more difficult to bundle and even shop around.
    5. Support becomes vital during a service migration or when things break. Distributors sell their support services as differentiation and it comes in the form of pre-sales and post-sales support. Distributors can be great sales partners and provide pre-sales support; it’s when things break where they contact Microsoft behind the scenes to coordinate. The level of support and business you bring in will dictate the margin you receive.

Summary

As with many Microsoft announcements, this one takes some thought and evaluation. Reinvestment of capital into your business in the form of automation can help your business achieve growth profitably.

At Work 365, we understand navigating the CSP business. We have a passion for building solutions that help our users navigate these challenges now and into the future.

Three Steps to Accelerate your Recurring Revenue Business

Recurring Revenue Business

Technology organizations have a growing list of channels to grow their business, with subscriptions and recurring revenue at the top of that list. Technology firms’ success relies on their ability to adjust, implement, and accelerate, based on their clients’ shifting needs.

This ability begins with an understanding that growth can be a moving target – when to maintain the status quo, when to follow the pack, and when to branch out on your own and establish differentiation.

But we continue to hear that without a strong foundation, rooted in proven best practices; you’ll be fighting an uphill battle from day 1. Ultimately, client engagement is proving to be the most consistent driver for business separating from the pack.

Here are three critical steps to enable and engage your customers for sustained business growth.

Sales and Product Management

This first step is self-explanatory on the surface: you need to know which products you’re selling and how you’re going to sell them. Understanding your product capacity, including how to differentiate, is critical when enabling your sales teams. If they don’t know what they can sell, how are they supposed to sell it?

Equally important is how you’re going to sell these products, and product positioning manifests in a few ways, which are easy to take for granted. Too often, companies will take products and publicize the product’s features, slap a satisfaction guarantee on it (or an “unmatched customer service” guarantee), and call it a day.

This strategy fails to recognize the challenges your clients are trying to solve, and what makes your company different. If you’re a Microsoft CSP, this is particularly important because the core product offerings you provide are not dissimilar from other competing CSPs.

At the core of any business, you must be able to define which products and services you’re selling (including subscriptions and one-time items), have an established pricing strategy with stated price lists, and a plan for your core-bundle offers. Bundling can evolve in many ways, so your team needs to understand your core bundles’ uniqueness as part of your sales strategy.

How to accelerate: as your practice grows, you should consider three main areas to kick that growth into high gear:

  1. Embrace Integration – explore automating your product catalog management and provisioning.
  2. Internal Incentives and Sales Performance Incentive Funds (SPIFFS) – Reward your sellers and maximize the sale of products that promote your business’s growth.
  3. Sales Incentives – how to reward your sellers and maximize the sale of products that promote your business’s growth.

Online Presence

In the digital economy, a company’s online presence is vital for their business to thrive. This is especially true for fostering more robust relationships with your clients and effectively messaging your differentiation to prospects.

We know what customers are asking for: transparency, agility, and attentive customer service. Yet each of those three areas poses a unique challenge of their own for companies embracing recurring revenue models. Providing clarity and agility can be particularly tricky if you’re manually managing hundreds of inquiries and change requests per month, exponentially increasing the internal effort needed to provide the level of customer services your clients desire.

The good news is many companies are actually nailing their online presence and delivering on the service their customers need. It all starts with self-service, a portal where your clients are empowered to view and manage their licenses, view billing data, and view new products and services available to help grow their business. Installing a branded customer self-service portal is a surefire way to deliver transparency, agility, and exceptional customer service, while also providing a platform to accelerate growth.

How to accelerate: once you have your self-service portal installed with your company branding, you can elevate your presence even further with the following tactics:

  1. Visitor Tracking Google Analytics – gain critical insights on what your customers are viewing to ensure your products and services align with their needs.
  2. Case and Ticket Management – streamline processes to boost customer satisfaction.
  3. Knowledge Base – build data streams and gain a better understanding of your customers.

Every company can improve its online presence, and even amidst a pandemic, Zuora’s Subscription Economy Index finds that subscription sales remain resilient, rising 12% in Q2 2020 alone. Providing your clients with a hassle-free, transparent process for navigating inquiries and requests is a recipe for increased engagement.

Automation and Integration

In a recent interview with current CEO of Zuora Tien Tzuo, there were some fascinating thoughts from Steve Cakebread (former CFO of Salesforce) around Automation and the subscription economy. Automation and the subscription economy are forever intertwined, with each facilitating growth of the other. The rapid rise in subscriptions isn’t possible without Automation; otherwise, it would be too painful to bill and collect cash on a monthly or annual schedule (it also wouldn’t make financial sense).

What Steve says is: “Automation is key. A lot of companies realize this way too late. You can’t just throw bodies at the problem anymore. People don’t want to do that kind of work these days.” Of course, he’s right. Too often, the standard procedure is adding headcount or resources to solve the problem. But for many growing small businesses, that’s not an option.

There are only two options: slow your growth, or automate. If you’re a business owner, the choice is clear: you have to find a way to automate. But how and where to start? An audit of your sales process is a good start, and being honest and objective with your evaluation is critical. From there, you’ll be able to target gaps and where your effort is overly manual. This is your foundation for transforming your business, identifying areas for investment – if you’re a CSP, integration with Partner Center is also worth exploring or integrating into your accounting system. As Steve mentioned, people don’t want to be working in excel spreadsheets all day, so enabling an automated, integrated flow across your systems is paramount. You also want to allow notifications and alerts through Power Automate’s flow.

How to accelerate: with your foundation in place, you want to continue eliminating overly manual workflows. The next four areas are how we see the best companies operating:

  1. Provisioning Integration with 3rd Party providers
  2. Payment Integrations for Cash Collection
  3. Provider Integrations for Provisioning
  4. Business Intelligence Reports – gain operational and sales insights

Once you begin to apply these tactics, you’ll be better informed, operating more efficiently, and gaining critical insights into how your business should grow recurring revenue. One other quote of sage advice from Steve: “Make sure you’re in a position to take advantage of the data. We would have done so many things at Salesforce differently if we just had access to the data.

Does your cloud business-facing a recurring revenue leakage problem? Learn how to manage recurring billing and subscription management of cloud services your business offer.

Use your Microsoft co-op incentives as a CSP reseller to accelerate growth

Microsoft co-op incentives

Quick Background: In Jan 2020, Microsoft started accumulating funds through the co-op program for its CSP resellers. CSP partners have been accumulating funds that can be deployed starting in July 2020.

These co-op funds can be used by Microsoft channel resellers towards qualified activities that grow their business. In addition to driving demand co-op investment funds are meant to help resellers focus on these critical areas:

  1. Creating and sustaining recurring revenue – greater certainty and stability.
  2. Maximize customer engagement – invest in relationships and become a trusted advisor, increasing engagement and adoption.
  3. Deliver additional services – upsell and cross-sell opportunities.

The Microsoft co-op guide directly lists various qualified activities, including demand generation activities like tradeshows and events. Neither of which are viable opportunities in a COVID-dictated 2020. Along with marketing activities, what is not always obvious is the opportunity to automate processes. Microsoft Direct resellers incur a significant burden in managing and provisioning seats and services.

Investing in a branded self-service site that allows your customers to manage their current services, while also purchasing new services, saves you time and resources and grows revenue.

How Branded Self-Service Portal will benefit your cloud business

Resellers with self-service portals can offload almost 80% of provisioning changes, significantly increasing customer satisfaction, and freeing up time to pursue other value-adding activities.

The guidebook explicitly states that you can use these funds for branding activities. These branded self-service portals facilitate customer engagement, demand generation, and revenue growth in five main ways:

  1. It’s what clients want.
    • Customers want increased transparency, the ability to manage services themselves, and real-time insight into costs and billing.
  1. It’s a direct channel for customer collaboration and communication.
    • Once implemented, these portals provide targeted information and allow your team to communicate (and market) directly to these customers when managing this portal.
  1. They eliminate work for your team and the customer.
    • Fewer emails, less back-and-forth, more automation = less effort.
  1. It unlocks upsell and cross-sell opportunities.
    • These portals provide additional visibility into product catalogs, and your unique offerings, facilitating more in-depth conversations around business needs.
  1. Payments and billing are automated.
    • Add unique services, your IP, and other new products to the existing subscription account.

The good news?

Work 365 helps you accomplish all the above, and you can apply co-op funds to utilize Work 365 solutions.

How does Work 365 help:

  1. Create your own company-branded, self-service portal.
    • Work 365 enables you to build a portal for your customers to view usage data, access personalized pricing, and create a customized product catalog.
  1. Integrate your Provisioning, Billing and Payments systems with Work 365.
    • Focus more on business needs and product value through more in-depth discussions with clients on how to grow their business.
  1. Identify business trends and insights with the data and reporting.
    • Have all your teams work in one system that includes all your customer data.

The Microsoft co-op program incentivizes resellers to invest in their growth using Microsoft funds. Work 365 can help you along with that journey.

How Work 365 can help you accelerate your business growth at scale while using co-op funds for the investment

​​Best Practices to Get Paid Faster – Building a Successful Recurring/Subscription Business​

Recurring or Subscription Business

As Simon Sinek says – “Start with Why”?

Volumes play an important role in a recurring or subscription business. This revenue is billed more frequently, in fact monthly- for 1 customer you are generating 12 invoices a year! The invoices are typically smaller in size than one-off sales. If you are reselling products (which is true for most Microsoft CSP Partners), the margins are tight. If customers don’t pay or delay payments, there is an impact on cash flow.

How to Collect Cash Faster?

Step 0: Sell to who will pay: In order to make sure there is no risk of non-payments you need to establish credit limits, do background checks and ensure that you won’t be left with the proverbial “bag in hand”- this is typically part of your Sales Process.

Step 1: Invoice Accurately. An accurate invoice is correct on all counts.

  • Who has the check or credit card? It could be the finance department, the procurement department, and the IT manager or relevant stakeholders who would need to approve your invoice.
  • What are exactly are they getting billed for? Are all the services and subscriptions correct, prices, changes in quantities, and refunds clearly shown in the invoice so that there isn’t any confusion?
  • When do they need to pay and most importantly receive the invoice? Is the invoice being sent to the customer on the correct date and with the correct due dates?  The invoice needs delivery needs to predictable. We see so many cases where customers have cash flow issues but are not able to generate an accurate invoice on the correct date based on the billing frequency.

Step 2: Invoice: Delivery, Persistent, Actionable, Convenient: It’s imperative your invoice is delivered to the right stakeholders in a medium that is acceptable to them (email, mailed physical signed copies). Is the invoice persistent? Can the invoice be easily accessed by the intended audience? A self-service portal that shows their orders and invoices would allow them to access your invoice when they need it. Is the invoice actionable: Does it clearly state how to pay you and how convenient is it to pay you?

“The customer experience is the sum total of all customer moments. The invoice is a defining customer moment. “

What Systems are Involved in Generating an Invoice and Collecting Cash?

The problem with the above situation is that while you’ve got all the pieces together:

  • There are multiple logins/identities
  • Your brand is diluted and there is no consistency is not there because of the different looks and feels.
  • Data is the new oil – and it’s messy to have oil all over the place
  • Access to these systems is limited and to a few people. The lack of access to this data creates problems like selling to customers you don’t want to, inability to create an accurate invoice.

What is Required for a Successful Billing Automation Solution to Generate Accurate Invoices and Collect Cash?

  • Customer data in one system 
  • Single Identity 
  • Single Portal for everything: what they’ve bought from you, when they bought is from you, agreements, invoices 

Cash Collection is a business function: 

  • Credit Limit should be associated with Aging Data and affect new Sales 
  • The customer Payment information should be in the customer system 
  • Automate Collections using Payment Gateways 
  • Don’t reward bad behavior – Credit Holds so that provisioning is stopped 

Work 365 offers a Billing and Subscription application that helps cloud companies archive the necessary requirements and processes to grow their revenue.

Scale your recurring revenue and Automate your Billing and Payments

Adjusting the Billing Contract to the New Frequency Using Work 365

Billing Contract Changes

Annual billing contracts are always great if you can get your customer to agree with them. It is great for your cash flow; it reduces the impact of the billing standpoint and your collection. Several companies enjoy the facilitation Annual Contracts brings to the table. But in today’s ever-changing environment you might be asked by your customers to change their billing cycle.

Then, what should you do?

There are two specific scenarios that you want to think about when it comes to change a Billing Cycle from annual to monthly or quarterly:

Scenario 1

The relationship changes at the renewing of the contract. The customer had an Annual contract and now wants a Monthly contract.

 

Solution:

  • Run the Change Log Invoice

This step is important because if there were any changes that happened between the last billing date and the last time you invoiced your client. You want to make sure you will include all those changes to the new invoice which you can see using the Change Log Invoice.

  • Adjust the Sales Unit and Sales Price, if needed

Work 365 can divide or multiply based on which sales unit was set up as the sales price and adjust on what needs to be invoiced at the time the invoice is generated. You need to take extra care if you sell your own IP where the annual price is different from the monthly price.

  • Adjust the Billing Contract to the new frequency

This is the simple step you need to perform in the billing contract to change the frequency of your invoice.

Scenario 2

The relationship changes in the middle of the contract. The changes are made mid-cycle. They want to add more licenses or products and they don’t want an Annual billing right now to conserve their cash flow. If you add the new changes to the current billing contract the invoice that is generated will show the balance for the year.

Solution:

  • Create a brand-new subscription to accommodate the change and associate it with the new billing contract

You will want to create a new subscription and associate it with a new billing contract because this is an existing relationship that will be billed using the original frequency as it was set up in the billing contract.

Have a question? Feel free to discuss the billing contract issue you are facing in your cloud business.