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Five Steps to a Successful Technology Broker Business

By February 26, 2019 No Comments
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Technology Broker

Why would I build a Cloud Broker… and How? – 5 Easy Steps

Having been in the technology space for over 30 years, I’ve had plenty of chances to make mistakes—some large, some small. Over time, I’ve learned what works and, more importantly, what doesn’t. However, the recipe for success, or at least the strategy behind it, changes over time. What I did in 2002 wouldn’t necessarily work today, and vice versa.

With this backdrop, I asked the question, “What would be the characteristics of a ‘perfect technology business?’ Further, “How would I go about building such a business?”

First, let’s put some definition around these two questions:

What would be the characteristics of a perfect technology business?

There have been many articles, theses, journals and books written on this subject and I am not about to try and replicate any of them. Simply put, the bones of a great technology business for me would include:

·        Scale – The ability to develop an economy of scale, through continuously improving the revenue to fixed cost ratio.

·        Recurring Revenues – A majority of revenues would be recurring, either through period contracts for managed services or from commissions and margins on subscription licencing.

·        Simplicity – A minimum of equipment sales or complex installations. This is not at the expense of excellent engineering capability, however.

·        Unique Value – A mix of commodity services as well as complex, value-added services

·        Dissipated Risk – not too much revenue from one sector or customer group

·        Lifestyle – The ability to step away from the business and develop a lifestyle

In my conversations with hundreds of IT Channel Partners, there are many different business models, but only four persistent challenges that continue to bubble up to the surface. These are:

1.     Compressing margins in both Managed Services as well as Projects and Professional services. Forrester Research recently reported that MSP margins are falling as low as 17%

2.     Inconsistent revenues from quarter to quarter, putting downward pressure on cash flows. VARs need to continually refresh the pipeline just to maintain revenues

3.     The ever-increasing complexity of vendor offerings resulting in spiralling certification costs. This is exacerbated by the burgeoning number of ISV applications that customers are asking for.

4.     Depending on the structure, age and size of the business; the ability for an owner to step away, or take a reduced role in the business, when the time is right.

 How does Cloud enable an Agent model?

The challenges that I have outlined above are inextricably aligned with a model where there is either one time or high fixed costs associated with projects or Managed Services.

In Managed Services and the traditional buy/add margin/sell model, a heavy investment upfront will mean that costs exceed revenues. As revenue increases, more infrastructure and more staff may be required to support customers, thereby pushing the business into negative territory. Conversely, the Agent model allows the vendor to invoice the end user and pay ongoing commissions to the Partner.

Revenue Model Comparison

tradewinds technology brokerage graph

The Agent model allows the vendor to invoice the end user for the application, but also allows the partner to contribute valuable services and provide more strategic services, such as multi-cloud management, reporting and analytics, API integration and Service Management across multiple applications and platforms.

In return for the Partner identifying and qualifying the opportunity, the vendor will pay a commission, generally for the life of the customer, to the Partner.

Think about what this means. Revenue without cost. Direct contribution to EBITDA. Pure Profit. It may take a little longer to cover initial costs; however the funds received effectively have no Cost of Goods Sold against them, meaning that the only costs are those associated with finding and qualifying the opportunity and any associated customer support costs. This model allows the partner to do much more with much less.

 Step One—Define my value: This technology agent is an architect of outcomes.

In a sea of competition, change and choice, my business would need to be able to stand out, with a very clear value proposition. Value can be provided only when one has the knowledge to share.

My first step would be to enhance my knowledge of cloud-based products and services. By working with Tradewinds, I will gain access to technology experts across the major cloud offerings, including Collaboration, Contact Centre, Security and Infrastructure. While I can do courses online for all their Cloud providers, the ability to avail myself of free presales consulting will assist me in getting to market quickly and efficiently, with close to zero cost.

My value will be to focus and become expert in an area of significant change, that will affect a broad market segment. Given that ISDN is being decommissioned, just about every business in the country is going to need to do something with their telephony capability. That, coupled with the significant technology advances from simple voice to UCaaS now representing a complete customer engagement and collaboration strategy, Voice and Collaboration are where I would start.

I am now capable of providing expertise in the areas of voice, video, messaging, collaboration, team rooms etc.

Further defining value, I would rely on Tradewinds to provide PreSales resources to assist me in conversations with my prospects. This will allow me to remain agile in today’s cost heavy market. If I can keep my costs down, I can be more agile and flexible in what I provide and the types of customers that I go after.

Now, I am an agile expert, with a general capability to cover other areas of the technology stack.

Step Two: Research and Select a Target Market

In researching a target market, I would need to look at the suppliers that I had access to and perhaps to first define a lateral market, concerning the size of organisations that I believe I have value to provide. I may also look to select certain industry verticals, where I already had some experience or relationships.

For larger customers, I’ll look to provide assistance with their cloud migration strategy for voice. According to the 2018 Trends in Cloud Computing CompTIA report, “Nearly half of all companies claim that 31% to 60% of their IT systems are cloud-based, and many firms are exploring optimization and orchestration to get the most out of the new models” This means there is a tremendous opportunity to provide value, just by helping them with a strategy. It also means that I don’t have to pitch one cloud provider over another. I know I can work with Tradewinds presales and the config tools that they provide to help the customer define their strategy.

Step Three—Build My Value: Develop a Network and a profile

Building a network of contacts is a lifelong habit. Providing value to people, in either a personal or corporate way pushes you from the pack to the peloton. In providing that value, you have the opportunity to engage further. I would stay in touch with people that I can potentially do business with. I would work hard on my Social Media profile, to ensure that I am positioned well for what I am trying to do.

Use tools to broaden your engagement. One that I use regularly is Lusha. It is brilliant, although not so economical if you don’t use it properly.

I would get engaged in industry forums, groups and blog forums that match my expertise and target market.

Step Four—Identify and practice an entry strategy

My lead-in would be to ask the customer what they are doing about their voice environment, given the end of ISDN as a network interface. If they don’t know, it is an opportunity to educate and advise. If they have a strategy in place, then I would position the Tradewinds UC Matrix tool to assist them in selecting a provider.

There are many other easy entry points as well. For example:

·        If I find the customer has servers lurking in the closet, that’s an instant data centre or cloud services conversation.

·        If I see any devices that transmit credit cards, that’s a firewall and PCI compliance conversation.

·        If I see an existing hosted PBX system, I’ll be asking if it integrates with their CRM so their contact centre reps can get screen pops of customers as they call in.

·        If I see they store all of their data in one place, I’ll be asking what their disaster recovery plan is.

Step Five—Work with Tradewinds to host an event

Next, I would work with Tradewinds to assist with putting together a Customer Forum to talk about the business implications of the current change in the voice communications and contact centre arena.

I would make sure I have a good “drip” marketing system, so I can keep them engaged with me for a long period. As part of this drip campaign, I’d talk about new technologies such as moving to cloud-based unified communications, private/public cloud, and hosted contact centre. As a technology agent, I can represent lots of different options.

There are lots of ways to skin this cat, but this is the way I would approach my business today.

 Who can be a Technology Agent?

My answer on this has changed since launching Tradewinds. Then, I would have said if you are an existing VAR, Technology Consultant, Independent Sales Person or an MSP. Now, I would say, “Any person or organisation that holds a primary relationship with decision makers in business. If you can open a door, Tradewinds can help you close it behind you by bringing the right technology partners to the meeting table.

 Can you make money?

Why, “Yes, of course.” We have 17 years of experience in helping partners develop substantial recurring incomes through the Agency model.

 

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