A bit about the business of selling software: Part 2. Money in the "clouds"
As I promised in my previous post “A bit about the software business” , I continue the story about how money is made for software: and this time I decided to dedicate the post to the features of the cloud service business.
Leaving aside the technical details and terminological disputes - by cloud services here I will understand those services that are consumed by the business for the implementation of the main business processes (communication with customers - CRM, warehouse - MRP / ERP, accounting, etc.), and not technology offers, like VPS for rent (whether unmanaged or equipped with a control panel). Based on one of the possible classifications of "clouds", such services are called SaaS (Software as a Service).
Undoubtedly, the most popular question that arises for all those who are new to SaaS for the first time is “Why aren't cloud services selling in Russia?” does not use SaaS.
The popular (and well-known to all a little bit interested in the topic) answer to this question is:
')
“The risks of placing data and applications in the cloud are too great” (I’ll add that the latest cases of shutting down hundreds of servers in Agave and transforming the “fast” into “dead” and back add specific Russian moments to the list of risks), ”
I will not argue with the fact that there are risks, I’ll just note the fact that even after cutting off those customers for whom the current level of risks is unacceptable, many customers remain who could be consumers of SaaS services, but they are not. The fact is that there is another side to the problem with SaaS, which is formulated like this:
"The great difficulties in organizing the mechanism of mass direct sales of Business-2-Business, especially by Western vendors (non-Russian legal entities"), and a number of problems with the adaptation of the existing model of reseller license resellers. "
The fact is that Salesforce and its followers mainly use the direct sales model, mainly through online. With the help of mass (really mass - including on radio and television) advertising, they attract customers who come to the site, register and start working. The client signs up for the trial, tries, if he likes it, then he starts paying for the service.
As you can see, there are no resellers in this scheme, at least those that cannot boast of “special” relations with the vendor (i.e., in fact, small and medium ones). At the moment, some Western cloud providers in the West offer referrals when rewards are paid to attract customers, but this is very different from what happens with the classic sale of licenses.
Russia is among those countries where in order to carry out a “sell-buy” business transaction, it is necessary to issue and print several paper documents, sign, print and exchange copies with the counterparty. Without going into the moral and ethical features of this concept, I want to note that this set of documents significantly increases the cost of each transaction, which, as suggested by the concept of SaaS, take place monthly.
Also in Russia, interaction with foreign contractors is fraught with a lot of difficulties and peculiarities, what feeds the mass of customs brokers and distributors (not only software, but also ordinary goods). In the case of SaaS, this translates into the fact that the western vendor practically cannot sell anything directly to Russian enterprises, hence the need to distribute SaaS services ... Which, by the way, almost all vendors in the current standard versions of licensing agreements prohibit reselling. Why it is forbidden to understand simply, they do not need “collective farm” uncontrolled distributors, and have not yet decided how to make non-collective farms.
In general, selling SaaS directly from world vendors for various reasons is difficult in Russia. But difficulties, as is known, do not frighten, but only stimulate to overcome obstacles. In addition to these problems, there are a number of points that hinder SaaS sales.
Each reseller has a certain circle of customers and roughly predicted customer flow - roughly speaking, how many customers it attracts monthly. As I showed in the previous part , a relatively small number of customers purchasing on-premise licenses (that is, not for rent, but for hosting) provides a small reseller with the opportunity to somehow exist and hope for future victories of the Russian economy, thanks to a large% of resale (large not in the sense that it is large in a specific sense (~ 10%, as you remember), but in the sense that the resulting profit (10% * license value) is pretty decent).
Now imagine that the reseller begins to resell the SaaS service based on the same product that he previously sold on-premise (CRM, ERM, whatever). The cost of a monthly subscription to SaaS services is usually 24-36 times less than the price of a regular license (that is, the price of a license is divided by 2-3 years).
This means that when switching to sales, the SaaS-monthly money flow with an unchanged customer flow (the number of customers that the reseller “processes”, his “contact patch”) will decrease by 24-36 times, and it will take 2 to 3 years to go to the same level of profitability (typing customers) that the reseller received when selling regular licenses. Usually, SaaS propagandists hold back this moment or disguise it with the promise that more customers will come running to a cheap monthly subscription ... but not 24 times more.
There is no tragedy in this, but resellers understand better than anyone else that it will take a long time to exit the resale of SaaS services for payback (from a reseller point of view), and, of course, consciously push the client to SaaS at the current moment permanent license) no one will.
Thus, SaaS competes within the current circle of reseller clients not only in terms of its functions and risks, but also in terms of the profit that the reseller will receive from the transaction. You have to have nerves of iron to sell SaaS to a client, which will bring “spread out” profit (monthly payment) and completely repulse in 2-3 years instead of a similar offer, but get “all at once” money. Especially in our country, where in 2-3 years everything can change a lot.
Many foreign colleagues love the place and out of place to utter the phrase "Customer is the king". The phrase is pathetic and common, therefore it is pronounced out of place and out of place, but it is often remembered with reference to the concept of “ownership of customer”, i.e. customer ownership The one who bills the end consumer is, in some way, the “owner” of the client, i.e. controls the relationship.
Resellers greatly value this customer relationship, and there are a number of reasons for this.
First, it is a “single window” . Customers do not like to run around different shops for the right things, but prefer supermarkets to buy everything at once. Similarly, with the software - if they came to the reseller for an OS, then most likely they will buy an office suite and an antivirus, or maybe something else, i.e. reseller will earn more money. It also means simplified bookkeeping. If it is possible to resolve the issue with one set of documents, then most companies will prefer to do just that, since the preparation of accounting documents, distribution, signing of acts, etc. worth the money.
Secondly, the price . Reseller can play the price for the end customer. This may be dumping to win a tender and earn something else (future sales, other licenses and implementation services), or vice versa, an overpriced price to achieve another goal (redistribute the cost of different positions of the tender or simply popular in Russian reseller layers receive additional "exhaust", which I will not touch).
Third, trust. This factor is difficult to overestimate, but resellers are well aware that they talk with the person who paid the money much more willingly and trust more, which means there is an opportunity to maintain relationships and sell more in the future.
In Western conditions, service providers sell directly, i.e. the reseller becomes in fact referral and loses ownership of the client. Naturally, there are also large partners who bargain for convenient conditions for themselves and therefore do not lose a client, but for the majority of Russian distributors and resellers, until some special mechanisms are invented, there will be big questions as to whether they will be profitable SaaS.
In my opinion, now it is the large resellers who have a chance to grab a significant chance of the SaaS market in Russia - they can donate part of their profits and hold out for several years, and thus expand their market share. Softline and Softkey have already made their projects, I think, on the queue integrators and local resellers with strong positions and connections in the regions.
Leaving aside the technical details and terminological disputes - by cloud services here I will understand those services that are consumed by the business for the implementation of the main business processes (communication with customers - CRM, warehouse - MRP / ERP, accounting, etc.), and not technology offers, like VPS for rent (whether unmanaged or equipped with a control panel). Based on one of the possible classifications of "clouds", such services are called SaaS (Software as a Service).
Undoubtedly, the most popular question that arises for all those who are new to SaaS for the first time is “Why aren't cloud services selling in Russia?” does not use SaaS.
The popular (and well-known to all a little bit interested in the topic) answer to this question is:
')
“The risks of placing data and applications in the cloud are too great” (I’ll add that the latest cases of shutting down hundreds of servers in Agave and transforming the “fast” into “dead” and back add specific Russian moments to the list of risks), ”
I will not argue with the fact that there are risks, I’ll just note the fact that even after cutting off those customers for whom the current level of risks is unacceptable, many customers remain who could be consumers of SaaS services, but they are not. The fact is that there is another side to the problem with SaaS, which is formulated like this:
"The great difficulties in organizing the mechanism of mass direct sales of Business-2-Business, especially by Western vendors (non-Russian legal entities"), and a number of problems with the adaptation of the existing model of reseller license resellers. "
The fact is that Salesforce and its followers mainly use the direct sales model, mainly through online. With the help of mass (really mass - including on radio and television) advertising, they attract customers who come to the site, register and start working. The client signs up for the trial, tries, if he likes it, then he starts paying for the service.
As you can see, there are no resellers in this scheme, at least those that cannot boast of “special” relations with the vendor (i.e., in fact, small and medium ones). At the moment, some Western cloud providers in the West offer referrals when rewards are paid to attract customers, but this is very different from what happens with the classic sale of licenses.
Russia is among those countries where in order to carry out a “sell-buy” business transaction, it is necessary to issue and print several paper documents, sign, print and exchange copies with the counterparty. Without going into the moral and ethical features of this concept, I want to note that this set of documents significantly increases the cost of each transaction, which, as suggested by the concept of SaaS, take place monthly.
Also in Russia, interaction with foreign contractors is fraught with a lot of difficulties and peculiarities, what feeds the mass of customs brokers and distributors (not only software, but also ordinary goods). In the case of SaaS, this translates into the fact that the western vendor practically cannot sell anything directly to Russian enterprises, hence the need to distribute SaaS services ... Which, by the way, almost all vendors in the current standard versions of licensing agreements prohibit reselling. Why it is forbidden to understand simply, they do not need “collective farm” uncontrolled distributors, and have not yet decided how to make non-collective farms.
In general, selling SaaS directly from world vendors for various reasons is difficult in Russia. But difficulties, as is known, do not frighten, but only stimulate to overcome obstacles. In addition to these problems, there are a number of points that hinder SaaS sales.
Contact patch
Each reseller has a certain circle of customers and roughly predicted customer flow - roughly speaking, how many customers it attracts monthly. As I showed in the previous part , a relatively small number of customers purchasing on-premise licenses (that is, not for rent, but for hosting) provides a small reseller with the opportunity to somehow exist and hope for future victories of the Russian economy, thanks to a large% of resale (large not in the sense that it is large in a specific sense (~ 10%, as you remember), but in the sense that the resulting profit (10% * license value) is pretty decent).
Now imagine that the reseller begins to resell the SaaS service based on the same product that he previously sold on-premise (CRM, ERM, whatever). The cost of a monthly subscription to SaaS services is usually 24-36 times less than the price of a regular license (that is, the price of a license is divided by 2-3 years).
This means that when switching to sales, the SaaS-monthly money flow with an unchanged customer flow (the number of customers that the reseller “processes”, his “contact patch”) will decrease by 24-36 times, and it will take 2 to 3 years to go to the same level of profitability (typing customers) that the reseller received when selling regular licenses. Usually, SaaS propagandists hold back this moment or disguise it with the promise that more customers will come running to a cheap monthly subscription ... but not 24 times more.
There is no tragedy in this, but resellers understand better than anyone else that it will take a long time to exit the resale of SaaS services for payback (from a reseller point of view), and, of course, consciously push the client to SaaS at the current moment permanent license) no one will.
Thus, SaaS competes within the current circle of reseller clients not only in terms of its functions and risks, but also in terms of the profit that the reseller will receive from the transaction. You have to have nerves of iron to sell SaaS to a client, which will bring “spread out” profit (monthly payment) and completely repulse in 2-3 years instead of a similar offer, but get “all at once” money. Especially in our country, where in 2-3 years everything can change a lot.
Azm is King
Many foreign colleagues love the place and out of place to utter the phrase "Customer is the king". The phrase is pathetic and common, therefore it is pronounced out of place and out of place, but it is often remembered with reference to the concept of “ownership of customer”, i.e. customer ownership The one who bills the end consumer is, in some way, the “owner” of the client, i.e. controls the relationship.
Resellers greatly value this customer relationship, and there are a number of reasons for this.
First, it is a “single window” . Customers do not like to run around different shops for the right things, but prefer supermarkets to buy everything at once. Similarly, with the software - if they came to the reseller for an OS, then most likely they will buy an office suite and an antivirus, or maybe something else, i.e. reseller will earn more money. It also means simplified bookkeeping. If it is possible to resolve the issue with one set of documents, then most companies will prefer to do just that, since the preparation of accounting documents, distribution, signing of acts, etc. worth the money.
Secondly, the price . Reseller can play the price for the end customer. This may be dumping to win a tender and earn something else (future sales, other licenses and implementation services), or vice versa, an overpriced price to achieve another goal (redistribute the cost of different positions of the tender or simply popular in Russian reseller layers receive additional "exhaust", which I will not touch).
Third, trust. This factor is difficult to overestimate, but resellers are well aware that they talk with the person who paid the money much more willingly and trust more, which means there is an opportunity to maintain relationships and sell more in the future.
In Western conditions, service providers sell directly, i.e. the reseller becomes in fact referral and loses ownership of the client. Naturally, there are also large partners who bargain for convenient conditions for themselves and therefore do not lose a client, but for the majority of Russian distributors and resellers, until some special mechanisms are invented, there will be big questions as to whether they will be profitable SaaS.
In my opinion, now it is the large resellers who have a chance to grab a significant chance of the SaaS market in Russia - they can donate part of their profits and hold out for several years, and thus expand their market share. Softline and Softkey have already made their projects, I think, on the queue integrators and local resellers with strong positions and connections in the regions.
Source: https://habr.com/ru/post/90808/
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