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Manage your Cloud Margins

We regularly meet up with Cloud Providers who confess they have no idea how much they are actually earning from their cloud services like the Microsoft CSP services they sell.

Does this sound familiar? In this blog we will show you how you can get insight in your margins. Once you have gained insight, you can decide on which services you would like to focus in the future.

Create the right conditions

Before you start setting up your pricing plan – which we will explain about later – you need to check if the right conditions are present.

1. Invoices

Is your financial system able to automatically create varying invoices every month? We are living in a Subscription Economy in which customers want to turn their licences on or off, according to their needs. This means your financial system needs to be linked to your Cloud order system or you will have a lot of administration. For tips on this, read our blog on this topic.

2. Vision and awareness

Make sure the organisation is aware of the importance of having a clear understanding of the revenues. This is a team effort which will be profitable to everybody in the long run.

Roadmap to get insight into your revenues

Now you are ready to start. Here are the steps to follow, to gain insight and increase your revenues:

1. Make one person accountable

Make one person responsible to determine margins and set up a pricing plan. Preferably this would a product manager, as he is aware of market conditions.

2. Define starting points

Define your business model: do you want to be a reseller or a service provider? In the former case you will add a percentage to the purchase price and just resell the product. In the latter case you will provide your customers with customized packages, adding value to the product, which calls for another pricing model.

3. Set up pricing administration

To keep an overview you will need to centralise purchasing and selling prices in one source. In this source the person responsible needs to keep track of the varying purchase prices, as well as the (adapting) selling prices. This source can be consulted at any time by all stakeholders.

4. Data insights

This ordering and billing data will be the source for a dashboard, in which the responsible person can create monthly as well as real-time reporting. It will provide all parties with a better insight into margins and revenues.

5. Review and adjust

On a regular basis the reporting needs to be discussed with product managers, finance and sales people and the management. It will show which products are actually creating revenues. This will help the sales managers focussing on the right products.

And again..

If needed, starting points can be re-defined and the process starts anew from step 2.

Now boost those revenues!

Once you have gained insight, you know on which products you need to focus. Or decide to add new products to your product range, while monitoring their revenues.

Make sure you are familiar with Microsoft’s remuneration schedule. By understanding their license and service conditions you can make more money from the same products. It is worthwhile taking some time to research!

If you would like to get insight into your revenues and you could need a helping hand, we are happy to help and discuss your opportunities. Our aim is to help your business accelerate.

Author: Thijs van Hofwegen, CCO


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