Lost sale analysis in your current on premise business is likely to reveal that deals are currently being lost because you are unable to offer your existing and new clients a cloud or SaaS based solution to the potential client’s problem. In some cases as the incumbent solution provider, you are not being “considered” for new business in what you would consider to be accounts that “you own”. This is happening throughout the industry because the clients believe that their incumbent solution providers do not have the cloud or SaaS capability the RFP requests. This is clearly a problematic situation that the following simple program will help you get to the bottom of.
You might try a round of lost sale analysis for all deals over a certain dollar amount lost in the next quarter. Set the deal size bar so you are talking to potential clients of 30-50 per cent of the proposals that you lost. Ask each proposal or quote recipient over the threshold that did not select your offering(whether they are in your installed base or not) the following ten questions:
- Who was the successful solution provider?
- What did you end up purchasing?
- What were the critical factors that you considered in making your purchase decision?
- Did we ask the right questions?
- Did we answer the right questions?
- Did we talk to the right people in your organization?
- What were the strengths of our proposal?
- What were the weaknesses of our proposal?
- If you were I, based on what you know about our organization, what would you do to increase your chances of being successful with your organization next time?
- Based on your recent experience with our organization will you ask us to respond to your needs for technology products and solutions next time there is a requirement?
At the end of three months you will have generated definitive knowledge regarding whether or not you will need to make cloud/Saas business investments simply to maintain your installed base and the current size of your business.
The implications of base erosion
What are some of the implications and potential costs associated with your business not being asked to respond to requests for cloud/SaaS proposals in your installed base? Most of the value in your business resides in the present value of the streams of cash that will originate from your installed base. Systematic erosion of your base has a negative impact on your businesses value for a number of reasons. The most obvious of these reasons is the requirement to find new revenue sources to replace the losses to base erosion. Cost per sales dollar associated with new business exceeds the cost per order dollar of businesses generated by your installed base. As a result base erosion not only reduces revenue levels in the short and long term, it increases the cost associated with the business in the short term. These two impacts on your business result in lower current profitability and eventually lower long-term business valuations.
What you need to know
You might think about doing some lost sale analysis in your business. You need to find out if any cloud or SaaS solutions have been sold into your installed base in the last twelve months by any other company other then yours. You are likely find, as many have, that the competitive environment that has been created in your installed base requires you to make at least some preliminary investments in cloud/SaaS capability to service current needs of your installed base. In fact you may find that if you do not make these base-maintaining investments in cloud/SaaS capabilities that base erosion and value degradation of your business may accelerate in the future. You will need a plan to guide these investments.
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Margaret and Bruce Stuart founded Channelcorp in 1989. The firm is a global leader in the assistance of reseller, distributor and vendor clients. Channelcorp specializes in the business model transformation that is required in the face of the structural changes to recurring revenue driven business models in the worldwide IT business (www.channelcorp.com/services.php). Channelcorp publishes and sells four industry- leading books and 12 white papers (www.channelcorp.com/publications.php). This independent firm has delivered consulting and executive education to vendor, reseller and distribution clients in more then 40 emerging, developing and mature markets around the world. (www.channelcorp.com/workshops.php). More than 25,000 channel professionals from around the world subscribe to the newsletter Channelcorp intelligence (www.channelcorp.com/newsletter.php).