SureStep Profitability Benchmark Overview

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The world is changing—now is the right time to transform your business to the cloud!

Transformation requires change. To successfully move to the cloud, you might need to:

• Modify your business model.• Balance your cash flow.• Train your employees.

The best practices help accelerate your journey to the cloud:

• Assess where you are now.• Identify steps that you can take now to transform your business to the cloud.• Implement these steps, and start down the road to cloud success.

Why are we here?

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Stages on the journey to cloud success

New to the cloud Early stage Mid stage Advanced stage

Not yet selling cloud solutions

Early sales Stable cloud revenue Most profitable cloud partner

As an inactive partner, you are:• Identifying the initial

steps you can take.• Starting to sell cloud

solutions.• Starting to build your

online presence.

As an early stage partner, you are:• Focusing on optimizing

cash flow and training.• Focusing on

transactional and lower-margin activities (such as on-going administration and support).

As a mid-stage partner, you are:• Differentiating your

cloud solutions by building richer offers.

• Building stable cloud revenue.

• Continuing to tweak and improve your business to better support the cloud.

As an advanced-stage partner, you are:• Building long-term

relationship with your customers.

• Focusing on business value and higher-margin activities.

• Developing strategic partnerships so that you can scale upon demand.

While each partner is unique, there are behaviors and activities that distinguish partners at different points on the journey.

Start Grow Optimize

What characterizes advanced-stage partners?

They have embraced the cloud

They are more profitable

They attach more services (inclusive of differentiated IP)

They have strong recurring revenue

They get more leads from digital marketing

They have sales teams dedicated to the cloud

Advanced-stage partners are more profitable

Realize 3× higher profit margins from cloud productivity solutions

Earn 8× more cloud revenue

Early stage

Advanced-stage

Cloud-Based

Revenue (median)

Earn 1.6× more revenue per employee

Early stage

Advanced-stage

Revenue per

Employee(median)

15%Early stage

Current Profit

Margin(median)

43%

Advanced-stage

X

8X

X

1.6X

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Effectiveness Index for Cloud Training Activities

Early stage Mid-stage Advanced-stage

34%46%

58%

Opinions of Microsoft Cloud Solutions

Provides an entrée for other solutions

Enables us to accelerate the profitability of our business

Is in high demand among our customers

38%

30%

30%

50%

52%

53%

63%

69%

71%

% Hired Staff for Cloud Business

Early stage Mid-stage Advanced-stage

69%81% 91%

Advanced-stage partners have embraced the cloud Have positive opinions on

opportunities the cloud deliversAre 3× more likely to recruit staff for the cloud

Consider training for the cloud to be 1.7× more helpful

5

Attach/Upsell Products

Early stage Mid-stage Advanced-stage

58% 64%81%

Use strategic partnerships to…

Cloud Revenue from Services (median)

Early stage Mid-stage Advanced-stage

38%58% 68%

22% 27%35%

Early stage Mid-stage Advanced-stage

35% 40% 50%

Advanced-stage partners sell more services

Earn 50% of revenue from services

Attach twice as many services

as early stage partnersNumber of Attached Services (median)

5 service

s

7 service

s

9 service

s

Are 1.6× more likely to upsell products

Use strategic partnerships to strengthen offers

Handle components of offer Scale upon demand

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Advanced-stage partners get more leads from digital marketingSpend 4× more on cloud marketing

Get almost half their leads through digital marketing

Have lead-generation partnerships in place

Early stage

Mid-stage

Advanced-stage

13%

26%

50%

% of Marketing Budget for Cloud Solution (median)

15%Early

stage

25%

Mid-stage

44%Advanced-

stage

% Cloud Leads from Digital Marketing (median)

Early stage

Mid-stage

Advanced-stage

62%

74%

87%

% with Lead-Generation Partnerships

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% Ranking Unmanaged Web Sales as Top Sales Motion for Leads

Early stage Mid-stage Advanced-stage

10%23% 28%

% with a Separate Cloud Sales Team

Early stage Mid-stage Advanced-stage

20%39%

61%

% with Account Managers

Advanced-stage partners have sales teams dedicated to the cloudAre 3× more likely to have separate cloud teams

Are 2× more likely to include cloud quotas in their sales-team compensation

Are 3× more likely to sell directly from the web

Are 3× more likely to have an cloud-account-manager team

Early stage Mid-stage Advanced-stage

25%

51%69%

Early stage Mid-stage Advanced-stage

27% 35%51%

Cloud Sales Compensation—Separate Quotas for Cloud

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The guidance and best practices that follow can accelerate your journey to the cloud and help ensure long-term success for your cloud business.

Step 1: Assess where you are now.

Step 2: Identify steps you can take now to transform your business to the cloud.

Step 3: Implement these steps, and start down the road to cloud success.

Even if not all best practices apply to your business, the guidance will prompt new ideas and will start, grow, and optimize your journey to the cloud.

The journey to the cloud

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Start your journey to the cloud with the Partner SureStep Profitability Benchmark Assessment Tool.

Enter your business information into the tool:

• Answer five questions that identify your current cloud performance.

• Answer 13 questions that help predict your business’s cloud potential.

The tool identifies which stage of the journey you are currently in:

• START: New to the cloud partner

• GROW: Early-stage cloud partner

• OPTIMIZE: Mid-stage and advanced-stage partner

Step 1: Assess where you are now

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START: New to the cloud partnerYou are starting the cloud-transformation journey.

GROW: Early-stage cloud partnerYou are in the early stages of cloud sales, or you are starting to stabilize your cloud revenue.

You might have high potential but room to improve current performance, or you might be performing well now but need to increase your potential.

OPTIMIZE: Mid-stage and advanced-stage partnerYou are transforming your business for the cloud!

Where are you now?

When you know where you are now, refer to the slides that follow to see the key priorities for your stage of the journey.

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Learn from partners who have successfully transformed their businesses.

Identify business practices that the most successful partners use.

Refer to the accompanying SureStep Profitability Benchmark Playbook for details.

Post the Quick Reference page that applies to your current stage where you can see it often; this will help you stay focused on the specific steps you can take.

Step 2: Identify steps you can take now

NEW TO THE CLOUD EARLY STAGE MID-STAGE ADVANCED-STAGE

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While each partner is unique, behavioral characteristics distinguish partners across the stages.

Learn about business practices that successful partners have implemented to transform their businesses to support cloud sales.

Use the accompanying SureStep Profitability Benchmark Playbook to get started. The playbook provides specific steps to take as you move through the stages on your journey to the cloud.

SureStep Profitability Benchmark Playbook: Learn best practices implemented by successful partners

START: Key priorities for partners getting started on their cloud-transformation journeysBuild your first cloud-service offer. When building it, attach a set of services, opt

for a recurring pricing model, build a unique value proposition, and make sure it is repeatable and scalable.

Use small-scale pilot projects to start selling cloud solutions and to develop and test domain expertise and your unique IP.

Build your online cloud presence through blog posts, Microsoft Pinpoint, and a basic website.

Enhance your credibility with customer references.

Train and develop your staff to deliver cloud solutions.

Introduce a specific cloud-sales process. Motivate your sales force with cloud incentives.

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Prioritize growing your cloud customer base.

Listen to business needs—add cloud workloads, attach new services and IP. Drive down costs by automating your processes and increasing staff efficiencies.

Generate leads from inbound marketing by building your digital profile: have online demos and return-on-investment (ROI) tools, improve search-engine optimizations (SEOs), and use social media, etc.

Expand your solution offerings by establishing partnerships that help you deliver a more comprehensive solution.

Sell to the business decision maker (BDM), move to prescriptive selling, and hire new staff.

Implement a cloud-sales plan with quotas and revenue goals for your cloud-sales team. Include incentives to drive up managed-services as well as packaged IP sales

GROW: Key priorities for early-stage partners

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OPTIMIZE: Key priorities for mid-stage and advanced-stage partners

Become a “one-stop shop” for your customers’ cloud-solution needs.

Leverage your vertical expertise to differentiate your offerings.

Strengthen your digital profile as a cloud thought leader to help ensure a consistent flow of inbound leads.

Scale your cloud solutions upon demand through strategic partnerships. Consider channel or geo expansion.

Be an early adopter and monitor trends as the industry continues to evolve.

Add account managers or customer-success managers to deepen relationships. Engage in activities that drive up customer adoption, and focus on cross-selling.

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The slides that follow detail specific business practices that the most successful partners use.

Use these practices to accelerate your journey to the cloud!

Step 3: Implement the steps most appropriate to your business

OPTIMIZE: Additional incremental activities to optimize your practices and help ensure the success of your cloud business

GROW: Incremental activities to grow your cloud business

START: Foundational activities to start selling cloud solutions

NEW TO THE CLOUD EARLY STAGE MID STAGE ADVANCED STAGE

Mature cloud partners focus on understanding the customer’s needs and building a comprehensive set of offers inclusive of fist party IP and Managed Services to meet them. On average, they double the number of attached services per sale of cloud solutions such as Office 365.

Build your offer

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Upsell• Work to become a trusted advisor by learning

your customers’ business needs.• Attach cloud workloads and services to further build

your IP:• Collaboration solutions• Conferencing solutions• Storage solutions

• Aim to attach seven services (average) to each sale within six months of sale.

• Attach additional recurring services:• Managed services• End-user training• Change-management consulting• External IT services/CIO services• Customization projects• On-going retainer hours

• Use strategic partnerships to extend/handle components of the cloud-productivity offer.

• Improve your services efficiency and monitor additional KPIs: managed services attach rate, utilization, etc.

Become the trusted advisor• Become a “one-stop shop” or virtual CIO for

your customers’ cloud-solution needs.• Use your vertical expertise to differentiate

your offerings.• Attach additional workloads and services to

further build your IP:• Enterprise social networking• Customer-relationship management

(CRM)• Attach additional recurring services:

• Business-process re-engineering• IP solutions• Consulting solutions

• Use strategic partnerships so that you can scale upon demand—consider channel or geo expansion.

• Drive down costs by automating your processes and increasing staff efficiencies.

Build your first cloud-service offer• When building your first cloud-service offer,

attach an initial set of services, opt for a recurring pricing model, build a unique value proposition, and make sure the offer is repeatable and scalable.

• Aim to attach five services within 30 days of sale.• Attach services such as:

• Pre-deployment services• Deployment and migration services• Ongoing management and

administration• Help-desk support

• Use small-scale pilot projects to start selling cloud solutions and to develop and test domain expertise and the unique IP.

• Improve your services’ efficiency and monitor key performance indicators (KPIs) such as utilization rate and gross services margin.

START GROW OPTIMIZE

Advanced-stage partners have established a strong digital profile. They leverage their thought leadership to strengthen their credibility and generate more leads.

Market your offer

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Generate more leads for cloud solutions Allocate 25 percent of marketing budget to the

cloud and aim to generate 25 percent of cloud leads with digital marketing.

Have one marketing full-time employee (FTE) and agency or two to five marketing FTEs.

Establish partnerships with other cloud partners to generate leads.

Monitor additional marketing KPIs: Marketing-conversion rate Advocacy and usage

Engage in five marketing activities (average). Types of additional marketing activities include:

Optimize your Pinpoint profile Peer-to-peer platforms Search-engine marketing Community and other in-person events

Enhance your website with sales presentations for your customers, in addition to online demos and ROI tools.

Build an editorial calendar for social media.

Strengthen your thought leadership Allocate 50 percent of your marketing budget to

the cloud and aim to generate 44 percent of cloud leads with digital marketing.

Have 2.5 marketing FTEs agency or six cloud-marketing staff.

Partner with PR and marketing agencies to generate leads.

Monitor additional marketing KPIs, including: Email-open rates Digital-marketing spending Unique website visitors

Participate in thought leadership: Publish blogs and white papers. Speak publicly about cloud solutions. Collaborate with key opinion leaders.

Engage in six marketing activities (average). Types of additional marketing activities include:

Paid search, online advertising, and peer-to-peer platforms

Social-media and search-engine marketing Comm unity and other in-person events

Advanced CRM engine in place.

Generate awareness of your cloud offers Allocate 13 percent of your marketing budget to

the cloud. Experiment with inbound digital marketing. Collaborate with Microsoft to generate Microsoft

Pinpoint leads. Monitor marketing KPIs:

Number of leads Marketing-conversion rate Search-engine traffic

Aim to engage in four marketing activities, such as: Community and other in-person events Email marketing and search-engine

marketing Blog and social networking presence

Build your online presence with a few customer references and blog posts.

Start building thought leadership by publishing industry-related and solution-related content.

START GROW OPTIMIZE

Advanced-stage partners have a comprehensive customer acquisition and retention strategy. They focus on building long-term relationships with their customers. Each upgrade and renewal date is a sales opportunity.

Sell your offer

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Prioritize growing your cloud customer base Dedicate 25 percent of your sales team to

cloud customer acquisition. Create a separate cloud team. Implement a specific cloud-compensation

model including renewal rate. Focus on selling to the business decision

maker. Monitor additional sales-related KPIs, including:

Active usage/deployment rate Churn rate Number of managed services sold per

salesperson Monitor account-management-related KPIs

including customer-renewal rates. Use direct, unmanaged sales. Move to prescriptive selling. Develop a programmatic approach for

consumption, with tools and processes in place to drive customer engagement.

Maximize your cloud sales Dedicate 50 percent of your sales team to

cloud customer acquisition. Have separate quotas for cloud solutions

including usage KPIs such as percent of assigned seats or percent of services utilized.

Include incentives to drive up managed-services sales..

Monitor sales-related KPIs, including: Consider adding the number of

managed services sold. Include incentives to drive up

managed-services sales. Add account managers or customer-success

managers to deepening relationships. Engage in activities that drive up customer adoption.

Monitor account-management-related KPIs, including:

Add the number of assigned seats or cloud consumption.

Direct, unmanaged sales provide a prominent source of new revenue.

Strategic partnerships to scale on-demand solutions.

Start building a cloud-sales plan Dedicate 10 percent of your sales team to

cloud customer acquisition. Provide incentives to drive sales of cloud

solutions. Monitor sales-related and account-

management-related KPIs: Deal-conversion rates Revenue per deal Number of seats per deal Average revenue per customer Customer-renewal rates

Identify sales opportunities with existing customers.

Introduce a specific cloud-sales process that is structured in Qualify, Proof, and Close phases.

START GROW OPTIMIZE

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Advanced-stage partners’ leadership is passionate about the cloud. They hired new employees for the cloud, and they have provided cloud training to their current staff.

Embrace the cloud

Develop a long-term cloud vision

Engage in training activities, including: Actively training staff on cloud

solutions Internally deploying the cloud

services that you are selling Gather feedback from staff to gauge training

effectiveness. Hire new staff to support the cloud.

Invest in training and staff Engage in training activities, including:

Train your staff on selling to the business decision maker.

Expand training activities to include: Watching online, on-demand training

videos Attending in-person training events Reading online materials about new

products Reading customer case studies

Aim to raise training effectiveness by 50 percent; measure it using performance tests and an internal questionnaire.

Hire new staff to support the cloud.

Maximize your potential Be an early adopter and monitor trends as

the industry continues to evolve. Expand your training activities to include:

Reading white papers Attending live webinars

Aim to raise training effectiveness by an additional 30 percent.

Hire new staff to support the cloud.

START GROW OPTIMIZE

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To help make sure you stay on course during your journey, here is how the best partners perform against the key indicators.

Leading indicatorsStart Grow Optimize

Services Performance

Gross services margin 35% 40% 45%

Managed services margin 40% 45% 50%

IP services gross margin 50% 57% 65%

Services Performance

Percent of revenue dedicated to marketing (excluding marketing headcount)

2% of revenue reinvested in

marketing

5% of revenue reinvested in

marketing

8% of sales reinvested in

marketing

Sales Performance

Percent of headcount compensated directly on cloud revenue

30% 60% 85%

Net-new customers added in the last 12 months 1–3 3–24 25+

Direct sales cost (percent of topline revenue) ~15% ~10% ~8%

Financial Performance

The annual number of touch-bases with customers, including marketing and service connections

6+ per customer 8+ per customer 12+ per customer

Percent of revenue from recurring sources 15% 33% 50%

Earnings before interest, taxes, depreciation, and amortization (EBITDA)

8% 12% 15%

Next steps Check out the SureStep Profitability BenchmarkAssessment Tool.

Refer to the accompanying SureStep Profitability Benchmark Playbook.

Post the Quick Reference page that applies to your current stage where you can see it

often; this will help you stay focused on specific steps you can take.

Share your feedback!

© 2015 Microsoft Corporation. All rights reserved. Microsoft, Windows, and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.