One of the highlights from Ingram Micro’s Cloud Summit event last month in Phoenix for me was talking with managed services providers like Mario Guerendo, president and CEO of LIBANGA Computer Systems, a 19-employee company that’s starting to see a major upsurge in its cloud revenue. Guerendo shared with me that the cloud comprised 25% of his company’s overall revenue in 2012, and he’s projecting that number to reach 45% by the end of this year.
Next week, I’ll be sharing the details about a specific project LIBANGA won with a medical practices customer recently, but I wanted to first share one thing this IT services provider is doing that’s getting customers excited about cloud services.
There is usually one or two IT services that serve as gateways to the cloud for your customers. In other words, it’s highly unlikely a customer is going to take an all-or-nothing approach to the cloud. What’s more likely to happen is that a customer will try one IT service now — such as migrating their email to the cloud — and if that proves to be a good experience and offers some tangible business benefits, then they’ll consider moving other IT solutions to the cloud as well.
For LIBANGA, hosted Exchange is often the first cloud service customers try, and once they do, they’re highly likely to add other services such as security, backups, and virtual desktop services after that. One challenge LIBANGA was running into was getting customers to take that first step to the cloud – especially if their on-premise servers were still working.
Guerendo and his team overcame this obstacle by developing a server buyback program, which entails paying customers the fair market resale value for their Exchange Servers and applying that value to the monthly cost of their hosted Exchange Server service in the form of a credit. Typically the credit caps at $100 per month and can run for three to six months, depending on the value of the server.
So, what does LIBANGA do with the customer’s legacy server(s). Depending on the condition of the server, the MSP might reformat it and resell it, or in some situations if the server is too old to resell, the solution provider decommissions it and recycles it. In the success story I’m going to be sharing from LIBANGA next week, you’ll see that one of the MSP’s customers had two servers, only one of which was able to be repurposed. Even though the solution provider lost $300 from the server that couldn’t be repurposed, the profit margin from the overall sale was healthy enough that it became a no-brainer decision, shortening the sales cycle by several months and has already led to several upsell opportunities. Sometimes it’s the little, outside-the-box ideas you come up with that make doing business with your company a little easier and help overcome your customers’ objections. And, those small changes can turn into big cloud revenue over time.