Adapting to SaaS: How LSPs do it successfully?

Adapting to SaaS: How LSPs do it successfully?

A cloud has descended upon the traditional Large Account Reseller (LAR) and Licensing Solution Providers (LSP) business models. Where a license sale once meant a handshake and an occasional discussion regarding renewal, the majority of customers now opt for the instant gratification provided by online solutions, I.e. the cloud. With the capability to immediately compare differing prices with their respective offerings and capabilities, the game has evolved. Microsoft is now pushing LARs and LSPs to become Cloud Solution Providers (CSP). This prompting is mostly accomplished through encouraging licensing sales to shift from enterprise agreements (EA) to either CSP agreements or Microsoft Products and Services Agreements (MPSA). This change is due in large part to the inflexibility of EA agreements. After purchasing an EA, customers are locked in to three-year agreements. So, developments like sweating assets or underutilizing licenses “shelfware” can lead customers to not renew agreements, or even move to alternative providers. Additionally, EAs have had their minimum thresholds doubled, from 250 seats to 500. With cloud-based services like Azure and Office 365 becoming the norm, even large organizations are shifting how they purchase products and services and looking for more flexible Microsoft Volume Licensing options. 

The change LSPs and LARs experience when transitioning to CSP is dynamic. Opportunities for capitalizing on the market turbulence are plentiful, but so too are the difficulties that come with any industrial turbulence. Our experts have provided their opinion on some of the challenges that come with moving to a more cloud-conducive environment below.  

  • Cloud Presence: Customers want the flexibility, accessibility, and additional options that a cloud marketplace provides. Giving them the ability to express themselves, have their needs considered, and supporting their movements with enough support are all integral. 
  • Human Connection: Modern customers want regular communication with the people they do business with. Furthermore, the LSP, LAR, or CSP should be able to update the customer regarding new innovations and occurrences, both at Microsoft and elsewhere within the industry. 
  • Consultation: The support and sales teams should fully understand the rights and structure of the licenses they are selling. By providing guidance regarding usage, discounts, and other saving potential to their clients, they gain the customer’s trust and secure further business.  
  • Tracking: Customers appreciate understanding how their usage is being tracked and billed. This is only possible through automation or with the support of a large accounting department.  
  • Sales Modeling: Microsoft compensation is no longer based on the strict sale of licenses, but on a user’s software consumption. The more they use, the more is earned. This means that salespersons will need to use different strategies and terminology while negotiating with potential and current customers. 
  • Delivery: Many LSP and LARs use third-party organizations for service. The presence of middlemen often results in funding inefficiency and miscommunication.  
  • Servicing: If large numbers of customers want to use your software, you must have the infrastructure to give it to them. Failure to deliver can often result in a customer losing faith, or even choosing an alternate supplier with a more stable base. 

Modern businesses transform, grow, and sometimes, shrink quickly. The dynamic nature of contemporary industry requires a solution tailored to its speed and agility. If an EA is understood and used to full capacity, it is usually renewed. Problems only appear when unforeseen changes occur, including flux in demand. Alternately, SaaS solutions are widely prevalent and profitable in today’s market, but moving into new territory requires a different perspective regarding infrastructure, support, staff training, etc. Adopting the adjustable, monthly recurring revenue model generates massive amounts of data, information that can only be realistically managed by an automation engine. Transitioning to a new business plan can be tricky, but for those that pull it off, the rewards are huge.  

Please get in touch with our LSP expert to begin a discussion of how we can best work together.

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