Selling MSP Services with a Cloud-First Approach in Mind
If you’re an MSP who has decided to take a cloud-first approach to managed services, you know the value of cloud-based offerings.
But that doesn’t mean your prospective clients will recognize the value of the cloud-based managed services that you may choose to offer. For that reason, it’s critical to develop a sales strategy that clearly communicates why customers should choose the cloud-first managed services that you offer over traditional alternatives.
Doing this requires carefully explaining the benefits of cloud-based solutions without getting too technical. MSPs should also be prepared to respond to common sales objections that prospects may raise when they propose cloud-based services.
Best practices for selling cloud-based managed services
In general, there are several best practices that should shape the way you approach customers when offering managed services that are powered by cloud-based tools and infrastructure, as opposed to those that depend only on on-premises resources.
Sell on the value of the cloud
By now, most business decision-makers have at least a basic understanding of what cloud computing is, and a sense that it offers value in various ways. But they may not be sure exactly how the cloud works or what value it brings to their business specifically.
Toward that end, position the value of the cloud at the front and center of your sales pitch when selling managed services based on the cloud. Emphasize the flexibility, scalability, and business continuity advantages that you are able to extend to customers when you deliver cloud-based managed services.
If you offer cloud-based backup, for example, you want them to know that your service can scale seamlessly as the customer’s backup needs grow in size and that their backup data will be safe even if their local servers go offline.
Sell to the right customers
Some customers will benefit more from cloud-based managed services than others. You should evaluate your prospects from this perspective before deciding where to target your pitches.
Consider factors such as:
How quickly a prospective client is growing. Businesses that expect to add employees and infrastructure rapidly will benefit more from the scalability of cloud-based managed services.
How critical business continuity is to the client. A business that can tolerate very little downtime will find more value in cloud-based services that offer higher levels of availability.
Whether the business is subject to any regulatory considerations that could make it more difficult for it to use cloud-based services.
Further reading How to Sell Managed Services to SMBs
Address sales objections
There are several common objections that prospects might raise when you pitch cloud-based managed services to them. Know what these objections are and have a response prepared:
- Expense: If cloud-based services are more expensive than the on-premise equivalent, prospects may think they are overpriced. In response, emphasize that cloud-based services come with a higher degree of reliability, flexibility, and other value. The customer should know that the higher cost corresponds to a higher value.
- Requires Internet connection: Prospects may worry that managed services delivered via the cloud will break if their Internet connection goes down. Make clear that you have contingency plans in place for this scenario, and that some cloud-based services may continue to work in offline mode even when the connection is unavailable.
- Security: Clients may worry about having data or applications running in the cloud. Emphasize that their data will be encrypted and protected via access-control. Where applicable, point out as well that the cloud can actually be more secure than on-premises infrastructure, because it is easier to centralize and automate security operations in the cloud.
- Data accessibility: If prospects worry that they may not have easy access to their data if it is stored in the cloud rather than a local data center, explain that data in the cloud can be accessed from anywhere, provided you have the right credentials to access it.
Further reading Handling MSP Sales Objections
Add value to cloud-based services
In cases where you are reselling cloud services or infrastructure from a third-party cloud vendor, it’s critical to ensure that you add value to those services in some way, and make the value clear to the customer. Otherwise, customers will wonder why they should pay you when they could purchase the same service at a lower price directly from a cloud vendor.
Added value can come in many forms; ease of implementation and management are common examples. Higher reliability, optimization and customization are also good value-add strategies.
As an example, if you are reselling Microsoft 365, you could build deployment and management into your managed-service offering. These are the value-adds that would make your service more valuable to the client than one purchased directly from Microsoft.
As another example, if you offer managed backup services that are powered by cloud-based backup tools and storage, your value-add would be the integration between these different components that you provide, as well as the management you offer. Customers should be willing to pay you for offering them all of this functionality through a single managed service, because deploying it themselves would require tremendous effort.
When offering cloud-based managed services, your profit margins may be thinner than they would be with conventional services because you have to pay fixed fees for the cloud services and tools on which your offering is based. The markup that you can charge while still providing competitive pricing is often smaller.
This does not mean, however, that you can’t price strategically to help drive sales. For example, don’t be afraid to offer lower prices for clients who consume your cloud-based services at high volume. Even if your margins shrink, you will still generate a healthy profit if the volume of consumption is high enough.
You should also carefully calculate your operational costs for different types of cloud-based services. Some services may involve very low maintenance and support costs for you. In this case, you can offer these services at low markups and still turn a profit. On the other hand, some cloud-based services are more expensive to offer, especially if they require extensive management or customization by you. Be sure to price accordingly.
Compensate your sales team appropriately
Finally, be sure to compensate your sales team appropriately for their work in selling cloud-based managed services. Best practices in this regard include:
- Set the right commission model. If your renewals occur monthly, you could offer salespeople commission based on monthly recurring revenue; or you could offer a commission based on total contract value (in this case, around 10 percent is a typical commission).
- Pay based on closed deals only, not on reservations.
- Offer bonuses for sales of long-term contracts.
- Consider offering ongoing commissions for salespeople for the duration of each contract that they sell. The commissions can decrease over time, but should never be zero. The goal here is to encourage the sales team to sign long-term customers and minimize client churn.
Selling managed services that are based on cloud tools or infrastructure requires a special approach. Making the value of cloud-based services clear to prospects is critical, as is finding the right prospects and setting your prices strategically. And, as always, you must be prepared for the sales objections that are likely to arise. Follow these pointers and you’ll thrive in your cloud-first MSP strategy.