How and why should I build a Cloud Agency? – 5 Easy Steps

With Tony Heywood

Having been in the technology space for over 30 years, I’ve had plenty of chances to make large and small mistakes. Over time I’ve learned what works and, more importantly, what doesn’t. However, the recipe for success and its strategy 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.

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 would include:

• Scale – The ability to develop an economy of scale through continuously improving the revenue to fixed cost ratio.
• Recurring Revenues – Most revenues should be recurring through period contracts for managed services or 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.
• 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.

There are many different business models in my conversations with hundreds of IT Channel Partners, but only five persistent challenges continue to bubble up to the surface. These are:

1. Compressing margins in both Managed Services as well as Projects and Professional Services. In 2019, Forrester Research reported that MSP margins are falling as low as 17%. In 2021, the Service Leadership index made the observation that the industry standard is 8% and “best in class” MSPs have margins of 18%.
2. Inconsistent revenues from Projects and Professional Services. VARs need to continually refresh the pipeline just to maintain revenues.
3. The ever-increasing complexity of vendor offerings which results in spiraling certification costs. This is exacerbated by the burgeoning number of ISV applications that customers are asking for.
4. The continuous fragmenting nature of technology. No longer can anyone say that they are truly a ‘full stack’ provider. They must partner to prosper.
5. Depending on the structure, age, and size of the business, an owner can step away, or take a reduced role in the business, when the time is right.

More recently, the cost of resourcing an engineering bench has skyrocketed.  At the recent CRN Pipeline conference on the Gold Coast, Bridget Gray of Korn Ferry quipped that it is an employee’s market, allowing candidates to demand high salaries beyond anything we have seen in the past.

How does Cloud enable an Agent model?

The challenges I have outlined above are inextricably aligned to a model with either a 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 staff may be required to support customers, 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

The Agent model allows the vendor to invoice the end user for the application and 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 to the Partner, generally for the life of the customer.

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. 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 stand out with a 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 an expert in an area of significant change that will affect a broad market segment. Given that ISDN is being decommissioned, almost every business in the country will need to reevaluate its telephony capability. That, coupled with the significant technological advances from simple voice to UCaaS now represents a complete customer engagement and collaboration strategy, voice and collaboration is where I would start.

I can now provide expertise in 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 I go after.

Now, I am an agile expert with the 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 I had access to and define a lateral market in terms of the size of organisations I believe I have value to provide. I may also look to select certain industry verticals where I already have some experience or relationships.

I’ll look to assist with their cloud migration strategy for voice for larger customers. Research conducted by NextMedia in early 2022 found that COVID has forced more than 73% of organisations to move a higher percentage of their applications and infrastructure to the cloud. This means there is a tremendous opportunity to provide value by helping them with a migration strategy. The same research showed that over 50% of support desk calls involve voice solutions. Why take that internally when you can completely outsource that to the supplier?

In helping the customer solve their challenge, I know I can work with Tradewinds presales and their configuration tools 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, either personal or corporate, pushes you from the pack to the peloton. In delivering that value, you have the opportunity to engage further. I would stay in touch with people 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 and I would engage in industry forums, groups, and blog forums that match my expertise and target market.

I would work with the Tradewinds Marketing team to develop my digital assets, optimize my profiles, and get SEO working for me.

Step Four—Identify and practice an entry strategy

My initial entry strategy would be to ask the customer what they are doing about cybersecurity for their critical systems. I would also dig into how they are managing their voice environment, given the shift to video, messaging, and full collaboration platforms, such as Microsoft Teams.

It is an opportunity to educate and advise if they don’t know. If they have a strategy in place, I would position the Tradewinds Cybersecurity & UC Matrix tools 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
• If I see any devices that transmit credit card information, 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 will ask 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 cybersecurity, voice communications, and contact centre arenas.

I would ensure I have a good “drip” marketing system to keep customers engaged with me for a long time. 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 many different options, categories, and brands without taking on the costs normally attributed to being a certified organization.

There are many ways to untangle this ball of wool, but this is how I would approach my business today.

Who can be a Technology Agent?

My answer to this has changed since Tradewinds first began. Back then, I would have told you that if you are an existing VAR, Technology Consultant, Independent Salesperson, or MSP, you can be a Technology Agent. Today I would say, “Any person or organisation with a primary relationship with decision-makers in business can be Technology Agents. If you can open a door, Tradewinds can help close it behind you by bringing the right technology partners to the meeting table.

Can you make money?

Why, “Yes, of course.” We have 20 years of experience helping partners develop substantial recurring incomes through the Agency model.

The model helps Partners and Agents develop monthly revenues representing 100% EBIT contribution.

With everything that Tradewinds has laid out on the table for you, now if your time to reach out, and generate some big wins. Let’s get started today, please email me at theywood@tradewindsbrokerage.com.au.

About Tradewinds

Telarus, LLC, dba Tradewinds Technology Brokerage is the largest technology solutions brokerage in the United States, Canada, EMEA, Australia, and New Zealand. We have created the most efficient and friendly community where our agent-partners quickly source technology solutions through our robust portfolio of 290 leading service providers. To accelerate our agent-partner’s growth, we created industry-leading apps, tools and hired experts who specialise in the development of technology solutions for Cloud, Cybersecurity, IoT, Mobility, SD-WAN, ILEC, and UCXE. Coupled with our industry-leading Sales Engineering team, Tradewinds also provides Account Management, Commissions, and Marketing services. Our primary goal is unchanged since 2002; we accelerate our partner’s growth at scale in the most efficient manner possible. To learn more about Tradewinds and our award-winning services, please visit www.TradewindsBrokerage.com.au. or follow us on LinkedIn.