XaaS Leaders: Get These Initiatives Right for Revenue Growth This Year!

By: Sean Ryan Revenue Growth Strategy, Technology Sales

Part 1 of this series introduced the top five technology industry challenges for 2018. Part 2 below addresses implications a few of these challenges will have on your tech business and how AGI can help.

XaaS revenue leaders face numerous, relentless challenges, including lowering the cost of customer acquisition, building a growth engine and leveraging channel partners. Getting these issues right is the key to revenue growth success.

Challenge 1: Lowering Cost-of-Customer Acquisition

Tech vendors must allocate additional resources to early sales cycle activities in an effort to:

  1. Identify and prioritize an increasing number of diverse prospects
  2. Deploy more effective, technically capable sellers that can convey the business value of products and solutions earlier in the buying process
  3. Build, cultivate and participate in social and online communities to generate interest in products and solutions
  4. Generate try-and-buy/freemium trials to secure larger lands; drive adoption and solution assurance in the trial to embed the solution in the customer’s environment

These actions will obviously substantially increase customer acquisition costs (CAC), often creating an expense-to-bookings (E/B) ratio of well over 100 percent. Vendors must improve the yield and capability of early sales-cycle resources in order to generate more sustainable CAC levels long-term. Tech companies increasingly utilize digital capabilities in this space to drive more cost-effective interactions with an expanding prospect universe.

AGI has helped companies improve segmentation and targeting of prospects to get in front of more likely buyers more frequently. As part of this work, you must structure new sales roles to better enable early sales-cycle selling including next generation digital reps, try-and-buy program managers, social marketing managers and other identify-land-adopt focused resources. AGI has also helped with resource reallocation and staffing modeling to support customer acquisition efforts.

Challenge 2: Building an Enhanced Revenue Growth Engine

Tech vendors must reallocate resources to support post-sales adoption, renewal and expansion sales motions:

  1. Drive adoption, solution assurance and continuous value within customer accounts
  2. Demonstrate business value of solutions and extend the community of users
  3. Identify opportunities for upsell and cross-sell to help capture increased customer wallet share and expand account annual recurring revenue (ARR)
  4. Track customer usage behavior to target and mitigate portfolio risk and identify required adoption, expansion and renewal activities
  5. Utilize customer usage data to identify common attributes that indicate a higher propensity to adopt, expand and consume in a XaaS environment that can be cycled back to the customer acquisition process to improve efficiency
  6. Secure renewals and frustrate the efforts of competitors to displace incumbent solutions

As AGI research bears out compellingly, a XaaS subscription booking provides an ideal platform for revenue expansion. Not only is expansion revenue between eight and 10 times less costly (sales and marketing costs) than net new acquisition, it is also considerably easier to identify, source and target. However, capturing all of this potential is dependent upon building a scalable, efficient subscription revenue engine to ignite growth.

Companies need to identify, build and articulate post-sales revenue plays and rules of engagement. AGI can help define post-sales roles (e.g., account managers, customer success reps, cross-sell specialists, etc.) to execute expansion plays. Our research provides us with industry benchmarking to calibrate post-sales roles.

Challenge 3: Leveraging Channel Partners

Tech vendors must examine their current channel partners, partner programs and internal partner support resources to align their indirect channel capabilities with their overall go-to-customer growth plans to:

  1. Determine the gaps in their direct coverage model that partner capability can supplement (e.g., opportunity identification, XaaS solution aggregation, SMB coverage, post-sales services and education)
  2. Evaluate the appropriate complement of different partner types required to effectively drive indirect channel performance (e.g., managed service providers (MSPs), systems integrators (SIs), independent software vendors (ISVs) and value-added resellers (VARs))
  3. Build the required internal capabilities to properly enable, incent, collaborate with and evaluate channel partners
  4. Identify and foster relationships with specialized partners (including other vendors) that can provide unique joint-offering or interoperability options that appeal to the emerging wave of XaaS buyers

A robust set of channel capabilities can provide vendors with a competitive advantage in the marketplace, but tech companies must be more deliberate and selective to focus on channel relationships that are ultimately accretive to revenue and customer value development.

To overcome this challenge, evaluate current partner relationships and identify opportunities to supplement programs with higher capability partners while curbing or eliminating support for partners with less or unneeded capability. Companies must also define indirect channel sales motions, rules of engagement, and roles and responsibilities for both vendors and partners. AGI can build effective internal channel-facing roles and sales compensation models (e.g., partner account managers, channel account managers, partner advocates and alliance managers) to properly support and enable channel partners.

Successful technology leaders who make the most of lowering cost-of-customer acquisition, building an enhanced revenue growth engine and leveraging channel partners will set a course for improved revenue growth this year.

The experts at the Alexander Group can help tech organizations of any size grow market share and top-line revenues by harnessing the power of effective go-to-customer coverage and sales compensation.

The final part of this series will address how to get acquisitions right and how to navigate ASC 606.

Read Part 1 of this series.

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Sean Ryan

Sean Ryan is a principal in the Stamford office. He co-leads the firm’s Technology practice on the east coast. Sean focuses around leading software, hardware and technology services companies through the difficult challenges of sales transformation, from traditional selling models and building the sales effectiveness and sales compensation structures required to effectively transition. Sean works primarily with technology clients in areas such as sales and marketing strategy formulation, sales transformation, direct, indirect and inside sales channel management, and sales compensation. Increasingly, Sean’s focus has centered around working with companies attempting to establish a presence in Cloud/XaaS markets for both traditional technology players and “born-in-the cloud” companies. Sean has significant experience working with both large companies and start-ups, with all forms of ownership including public, private equity-funded and privately held companies.

Sean has over 20 years of consulting experience with senior executive teams at Fortune 1000 companies and has led more than 200 engagements with clients over the course of his career. Prior to joining the Alexander Group, Sean worked for MarketBridge Corporation in the areas of sales and marketing strategy, sales coverage planning and sales channel building and design. He has managed and led project teams across the consulting spectrum from strategy and planning to execution of programs and sales channels across a variety of industries including technology, business services, office products, life sciences, financial services and telecommunications. Sean holds a B.A. in economics from Hamilton College. He is also a Certified Sales Compensation Professional.