Modern MSPs Win with High-Value, High-Margin Cloud Services
Reselling licenses does not yield a high-value business.
Let’s say you’ve been reselling XaaS apps licenses at $50 per user per year with a 20% reseller commission. As a license-only business, you will generate only $50,000 in annual gross margin even after the sale of 5,000 licenses.
Clearly, the value of any XaaS application or hosted service is not in its direct contribution to your bottom line. The value is in using hosted apps and services as a foundation for building high-value IT solutions that you strategically select, integrate, customize, and support as a managed service.
Now imagine you’ve assembled your own ecosystem of cloud technologies, wrapped your own services around them, and charge for IT-as-a-service at $50/user/month or more.
As you can see from the blue line in the graphic, the value of gross margin dollars generated by a monthly recurring revenue stream of $50/user/month at 40% gross margin is $1.2 million per year. That’s a business model that is scalable and profitable!
Bundling is a mutually beneficial strategy for your customers and your business.
Modern MSPs build and bundle ongoing services to solve for business outcomes and amortize the one-time project charges to create a recurring monthly fee. Not only will this help your customers with predictable billing and forecasting, but you can count on steady revenue for growing your business.
Meeting the total needs for your customers may include managing and maintaining legacy on-premises technology, migrating systems to the cloud, and servicing a growing cloud solution. To create success for your business, including maintaining a growth strategy, you need to nail your bundled offerings.
It’s time to step up as the change agent to help customers achieve specific business outcomes and a digital transformation. To do this, you must also pursue change—in your business model, partnerships, the solutions you offer, and in how you work with your customers to offer greater lifetime value.
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