Maximizing Annuity Revenue in IT Services 5 Key Success Factors

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1 WHITE PAPER Maximizing Annuity Revenue in IT Services 5 Key Success Factors In today s economy, no company can afford to leave revenue on the table. This is especially so if it is recurring or annuity revenue! IT Service annuity revenue (Services Revenue) can be classified into two categories; low value and high value renewals. Most organizations do a good job at securing high value sales with conversion rates of 80% or more. But what about the low value renewals? Conversion rates range from 0% to 50%. Why? What can you do to capture that missed revenue opportunity? Cost, time, effort and inaccurate data are all reasons given for not pursuing low value deals. But also, annuity Services Revenue is different from Product based revenue. It takes different skill sets, methodologies, metrics and management. Not every organization has a Services Sales team in place to address their annuity revenue base. What options do you have to tap this revenue stream? You can create your own Services Revenue team in house or outsource it to a specialist organization. Setting up an internal team requires headcount, facilities, management, metrics, technology (CRM, databases, list management, data cleansing, business intelligence), suitable sales processes and management oversight. Additionally, ramp up time needs to be allowed for the new time to understand the nuances and complexities of your Service Revenue environment. In short, Services Revenue is best approached with a dedicated sales team. The alternative approach is to outsource to a specialist team that already has the people, process, technology and track record in converting an installed base into recurring, annuity services revenue. White Paper: Maximizing Annuity Revenue in IT Services 5 Key Success Factors 1 / 5

2 What are the Key Elements of any Successful Annuity Sales Team? 1. Data 2. People 3. Process 4. Technology 5. Methodology Data There is data and then there is actionable sales data. A common issue with renewals data is that it is incomplete. The distribution channel structure creates breakpoints in data collection that often prevents an efficient service renewal process. For example; a vendor may know that a service was sold to a Distributor but what happened then? Who is the end user? What is the actual expiry date? Is the service still in use? The Distributor may know that the service was on sold to a Reseller but what happened then? The Reseller should know the end user details for when the service was sold but have they kept detailed and accurate records sufficiently well to allow a renewal to occur? Let us not forget the end user either. They may have a fleet or installed base of equipment with services attached or software with support attached. Do they themselves know what they have; where it is; what SLA is in place and when it is due to expire? The reality is that most vendors do not have data that is sufficiently complete to allow a sales team or a sales process to renew those services. There are really only two options to cleanse the renewals data and make it actionable. The end user can update their own details if they are provided with some sort of self service portal. The alternative is that your annuity sales team has to discover the missing details by going one on one with the end user. White Paper: Maximizing Annuity Revenue in IT Services 5 Key Success Factors 2 / 5

3 People Selling Services is different to selling Product. This is a key factor that needs to be understood by any organization wanting to optimise their Service Revenue Generation. Product sales are about tangible items that can be accurately described (specifications), touched and seen. Services are intangible and offer a promise future value. Convincing buyers to acquire a promise of that future value requires different techniques to that of product based selling. The IT Distribution chain (Vendor Distributor Reseller End User) is generally built around product based sales organisations. Asking a product salesperson to sell $1M of equipment and $100,000 of services is not always easy. Some can do it with success but many cannot make that transition. Besides, with limited time and a high sales revenue quota the average rep can only focus on a small number of deals. They naturally gravitate towards the big ticket items (equipment with a high price tag) at the expense of services. Process Selling Services involves a different sales process to that of Products. There are different steps, stages, techniques and metrics. To be as successful as possible in IT Service Revenue generation requires a thorough understanding of the Services sales process. Trying to adapt a Product based sales approach to Service sales is a common mistake made by companies of all sizes. Sure, Product salespeople do sell Services but the question is how well do they do it? Could you achieve better results from dedicated or specialist teams? Technology It is quite common to see companies of all sizes trying to managing annuity revenue streams using spreadsheets. Whilst spreadsheets are an indispensable tool for the Finance department, sales needs it s own tools. Services sales needs to understand the entire food chain of the Service in question from Vendor to Distributor to Reseller to End User. What is the serial number/product number? Where is it? What SLA is attached? What is the expiry date? What price was it sold at? Who makes the White Paper: Maximizing Annuity Revenue in IT Services 5 Key Success Factors 3 / 5

4 decision to renew? How will they make that decision? What other services do they have? Can we attach new services? Who is their Reseller? In addition, to optimise a Service Revenue sales process a level of automation is desirable. How can you take as much human leg work out of renewing low value, high volume services? How can make it easy for the customer to self serve? Likewise, for those renewals that require a human touch from your Services sales team what tools can you provide them to be as effective as possible? After all, they only have so many hours in each day. A spreadsheet does have a role to play and that is as a source file for uploading to a Sales CRM that has been customised for Services renewals in general and your team in particular. Further, that CRM needs to have an open interface that will allow it to interoperate and share data with your other business systems. Methodology Putting it all together into an effective Service Revenue Generation effort requires an overall method. Sure, there are similarities between companies, sectors and industries but there are also plenty of factors that are unique to your business. Putting all that together into a working system requires effort, resources and patience. Summary Annuity Service Revenue Generation requires a coordinated effort of actionable data, suitably trained people, proven sales processes supported by specialist technology tools and managed by a proven methodology. Organizations can build these capabilities internally or look to the market and outsource to specialist providers. White Paper: Maximizing Annuity Revenue in IT Services 5 Key Success Factors 4 / 5

5 About the author: David Mackey is the CEO of The 365RPM Group who specialize in Revenue Performance Management (RPM). Their Renewals 365 division is a specialist provider of IT Service Revenue sales teams. Their Revenue 365 division has developed and maintained its purpose built Sales CRM app Leads 365. As a business they have 10 years continuous industry experience in successfully managing annuity service revenue streams for global IT brands. Together, these services are combined into an outsourced offering via their Maintenance 365 service. White Paper: Maximizing Annuity Revenue in IT Services 5 Key Success Factors 5 / 5

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