I often conduct strategy discussions with vendors who sell through Service Providers, and at some point during the meeting, I’ll ask the question – are Service Providers (ie. Managed Service Providers, Telcos, Cloud providers, etc) your Customer or your Partner? The answer is usually something like “well sometimes they’re customers and sometimes they’re partners but it doesn’t really matter – we know what they are”.
The thing is … it does matter. It affects your messaging and engagement model, your sales strategy and the type of people you hire, and even the compensation plans you put in place. So the question is “is there an easy way to define Service Providers?” And the answer is Yes. But first you have to understand whether customers think the “X” in your “X-as-a-Service” is a puppy or a battery hen.
Let me explain.
Puppies vs Battery Hens
There’s an interesting perspective on datacentre design that refers to treating servers like cattle rather than pets. From what I can tell, the reference comes from a presentation titled “CERN Data Centre Evolution” that details the scientific organisation’s approach to managing it’s 12,000-odd servers. If I can simplify the analogy, it’s this. When pets get sick, we take them to the vet and spend time and money to nurse them back to health. When cattle get sick, we shoot them and get another one.
Now let me introduce a similar idea for XaaS … puppies and battery hens. The puppies are a direct correlation to the pets above, but the reason I’ve picked battery hens rather than cattle is that we don’t even want the hen – we just want the eggs. As long as the egg looks and tastes like we want it to, we’re largely indifferent about how we got it. (I know we can get into a debate about Free Range eggs here, but again, you probably still don’t care about the specific chicken itself).
So now let’s come back to technology. If you are a vendor and you provide a solution that a Service Provider sells to customers as a Service, it’s important to understand how the customer perceives it. Let’s take (say) backup or archiving as a service. I would contend that customers see that as a battery hen. They don’t care what brand of servers or storage is being used to back up their data – they just need to know it’s being backed up and that they have a guarantee of what they’ve purchased, usually in the form of a Service Level Agreement. (We could think of this as being similar to the Certification Standards on the egg carton). If the Service Provider swapped one brand of hard disk for another, the customer wouldn’t care as long as their SLA wasn’t compromised. They just care about the egg.
Now let’s take Email or CRM as a Service. If the Service Provide swapped (say) Outlook for Notes, or vice versa, I guarantee you that the users would have a word to say about that. It’s because email is like a puppy. We know the menus, we have our favourite settings, we’ve got our email sorted in the folders just the way we like it, etc. I can’t just take your puppy and give you a different one without expecting some sort of reaction.
Service Providers Engagement
Which brings me back to my original statement. If customers perceive your “X” as a puppy, then Service Providers are partners, but if customers perceive your “X” as a battery hen, then Service Providers are in fact your real customer.
Why is this important?
Firstly, messaging. In a previous article, I talked about selling THROUGH partners. Now if your products are battery hens, that becomes irrelevant. For example, convincing a customer that my storage hardware is better than my competitor’s is irrelevant to the end-customer. In other words, I cannot influence the outcome by trying to influence the end-user. Instead I need to focus on the Service Provider as my customer. I have to explain why my product is the best FOR THEM. That may mean extra product functionality, but more often it is the non-product attributes:
• How it works with their solutions
• What billing options I can offer
• Management capabilities (of their end users)
• Level of automation
• Support and dispute resolution
• Ability to differentiate their solution
• Flexibility of pricing options
Note however, when it comes to “puppy” products, we need to treat Service Providers like partners and sell through them. We are still able to influence the outcome if we can influence the end-user.
‘This brings us to our second consideration, sales strategy and the type of sales people we hire. The sales people who were so effective in winning those large Enterprise customers don’t make sense in a battery hen environment. Their relationships and experience carries less weight because the customer doesn’t care what the technology is. Instead we need to focus on the Service Provider as the end-user, and have sales people who can use their political and sales astuteness to understand the Service Provider’s requirements to provide the right solution (exactly the approach they would take if this was an enterprise customer). Some sales people will make the transition, but some sales people won’t feel comfortable and will leave to work for puppy dog companies where their skills are still in demand. That’s ok.
And finally, this affects compensation plans. In a puppy dog world, Named (end-user) Accounts are valued, and sales people who close these accounts deserve to be rewarded. In a battery hen world, the idea of Named Accounts is meaningless. That has severe ramifications for how we reward our sales people. And for those who read my article about people being the biggest hurdle to the Cloud, you’ll remember we spoke about the importance of the right compensation plans driving the right behaviours. In the Battery Hen world, the Service Provider is the customer, so the compensation plan needs to reward sales people for engaging with and selling to the Service Provider, not the end-user.
Over the next few years, Service Providers are going to become an increasingly crucial piece of your go-to-market strategy. Understanding whether they are your customer or your partner affects how you engage, your messaging, the type of sales people you hire and the compensation plans you put in place to reward them. That means taking a look at your solutions and genuinely assessing whether you’re selling puppies or battery hens (and for some of you, it might be both) and building the right Service Provider strategy.