Sunday, October 31, 2010

Your Office365 business model


Chris Knight left a comment on my recent post about why I am positive on Office365. His major points are that firstly, here in Australia, BPOS (and Office365) is sold through our largest Telco (Telstra). They are aggressively going after service business including your clients. No arguments there. Secondly, there is virtually no margin in BPOS for resellers. Again, no argument. This is EXACTLY why I love resellers when it comes to BPOS, they have a restricted business model when it comes to online services.

Here in Australia we know that Telstra is the 600 pound gorilla when it comes to BPOS. So many resellers I see are hell bent on opposing the gorilla. My approach is, they are the only game in town and I have to deal with that. In my books it is better to ride the gorilla than try and fight it. Sure, I might get some bruises and scratches but it is going to be a hell of lot less than if I tried to fight it. Wouldn’t a smarter thing be to team up with Telstra and offer skills and services they lack? Wouldn’t be smarter to leverage their sales teams to do the lead generation for you? Telcos are good at selling phones and are looking for IT people to help them sell technology to customers. If you were a smart operator you’d seek out these relationships to help build your online business. I know I am. The interesting to note here is that there is only a limited amount of these relationships available so those that choose to ride the gorilla are going to reap the benefits I believe.

By far the biggest sticking point for resellers is the lack of margin on BPOS. Couldn’t agree more. Can you change that? Nope. So why focus on it? I believe the major revenue stream with BPOS and ‘cloud computing’ is what it has always been – SERVICES. Customers still need IT Professionals to set up, configure, architect and support technology solutions no matter where they ultimately reside. The only way that your business will make money from selling product is to sell lots and lots of it no matter whether it is infrastructure or online services. I know that is a game I can’t play so that’s why I focus on SERVICES.

For many, including myself, this means a change of business model but in this game if you don’t change you die. The resistance of most traditional resellers to move to some form of cloud strategy is creating a gap in the market that is allowing competitors to enter and potentially steal business. These new competitors probably don’t have the experience, knowledge or professionalism that existing resellers have but guess what? They are still going to win business. Why? Rightly or wrongly customers want ‘cloud’ computing because it is being portrayed as saving them money. No matter whether that is correct it is what the customer perceives that matters.

Let me give you an example of a service opportunity in relation of Office365 I see. From my understanding the small business edition of Office365 will come with 3 web sites, an intranet, an extranet and a public facing website. Guess what? They’ll all be provided on SharePoint 2010. Most customers will probably need these to be configured, customized and managed because they won’t have the time or the knowledge. To me that means SERVICES revenue and I’m sure the same applies across all the other Office365 products.

As I have said before, it warms the cockles of my heart to hear resellers focus on dealing with telcos and how little margin there is in selling online services for I know they still don’t ‘get it’. You can’t expect to go into the world of online services with the same business model (no matter how well it worked previously). You have to change, adapt and overcome. This will mean making hard decisions, that in the short term may be quite painful. However, as a business person I encourage you NOT to take these, keep doing business the way you have been doing things and leave this ‘cloud stuff’ to me.