The COVID-19 pandemic has changed the game for many businesses, including the Cloud Services Providers (CSP). While there has been a demand for more cloud-based services due to a shift towards digital transformation – increasing competition also requires cloud providers to always put their best foot forward by identifying new opportunities and recurring revenue streams, quickly.
CSPs now need to be comfortable with changes more than ever.
The market is constantly evolving – demand for new services whether it is for improved communication, collaboration, cybersecurity, etc. is also rising.
To set themselves apart, successful CSPs now need to be adept at launching additional services almost instantly. Why?
- Customers prefer service providers who can offer a host of services under one roof
- Selling additional services can help them increase their ARPU (average revenue per user)
The following blog will focus on the importance of ARPU for CSPs and subscription services providers and how can they launch additional services quickly.
What is ARPU?
ARPU or Average Revenue Per User (in SaaS) is a metric used to measure revenue generated from each paid subscription over a certain period – a month or year.
It is sometimes referred to as Average Revenue Per Account (ARPA) and Average Revenue Per Subscription. It varies from one provider to another depending on how they price their customers.
ARPU (monthly) = Total MRR / Total Active Subscriptions
*MRR denotes Monthly Recurring Revenue
In short, ARPU is simply the average MRR in a SaaS or subscription-based business.
How Cloud Providers can increase ARPU?
To increase the ARPU, CSPs need to develop strategies to get more money from their existing customers by selling related services to them.
CSPs who charge a flat price for the subscriptions – can use scalable or variable pricing. This is especially great for capturing revenue from customers who can pay more (by allowing them to upgrade to higher plans) while not losing out on smaller customers.
Apart from the above, other popular ways to grow ARPU include:
Offering add-ons and upgrades
Offering additional services or upgrades can help CSPs earn more from a single customer. Unlike scaling prices, this puts the decision-making in the hands of the customers. For example, a CSP offering domain and web hosting services can also sell SSL certificates, CDN (Cloud Delivery Network), or a database-as-a-service as add-ons.
The key here is to anticipate the needs of the customers and then offer a solution.
Cross-selling related products & services
Another way to increase ARPU is to cross-sell related services.
A SaaS company can offer premium support in addition to their software product as a cross-selling proposition. Or an email automation solution can be sold alongside a core CRM (Customer Relationship Management) offering.
CSPs need to identify what solutions can be sold as a related service along with the primary service the customer is using.
What additional services can CSPs sell?
Your existing customer is your biggest asset.
In the digital age, customers’ attention span is short. A lot of CSPs must be offering similar solutions. How can they distinguish? By selling additional services.
CSPs must focus on helping their customers stay more productive and profitable, by identifying the evolving business needs and selling solutions that fit those requirements.
Let’s look at what additional services CSPs can sell alongside the main cloud offering:
Cloud Solutions: The global cloud computing market is expected to reach US$ 1,614.1 billion by 2030.(1) With changing workplace trends like remote working and increased demand for on-demand solutions, the cloud is here to stay for a very long time. CSPs can sell cloud solutions from leading providers like Microsoft Azure, Amazon Web Services (AWS), and Google Cloud to increase their revenues.
Backup Solutions: Data is the lifeline of modern businesses. Without it, they will not be able to perform. Hence, for every business, protecting data is one of the most crucial tasks. A data backup solution can help them create copies of data that can be retrieved when required – like if the primary data gets stolen or destroyed. CSPs can sell backup solutions along with their primary service offering by either creating bundles or upselling to their existing customers.
The global cloud backup market size is expected to extend from $1.30 billion in 2020 to $4.13 billion by the year 2025, at a compound annual growth rate of 26.1% over the projected period. (2)
Software-as-a-Service Solutions: As we go through a digital-first economy, businesses need access to scalable and agile software technologies. These software-as-a-service solutions are not only easy to deploy but can help businesses accelerate their go-to-market time by delivering improved customer service and providing access to modern productivity tools. A perfect example would be the productivity suites like Microsoft 365, emailing solutions, CRM software, etc.
Hosting Services: Hosting services like WordPress Hosting, Shared Hosting, Dedicated Hosting, etc. have always been in demand and their trend does not seem to die. All businesses need a website to promote their business online – thus they will need hosting services. CSPs can sell various web hosting services and related solutions to their existing customers to help them grow digitally. This also includes SSL and security solutions.
Major challenges CSPs need to overcome
The CSPs can sell several products and services, as we discussed above, along with their primary offerings. However, there are a few challenges they need to overcome to build a successful business. (Shown in the below image)
The traditional model of selling cloud is time-consuming and slows down the pace of new customer acquisition. CSPs need access to the right tool and technologies that give them centralized control over their cloud business – allowing them to manage and run everything from a single interface.
How RackNap can help CSPs launch additional services?
The services we discussed above may help you increase your recurring revenues. However, how you sell and manage these services will ultimately make all the difference. RackNap can help you overcome the challenges associated with selling cloud solutions and launching additional services.
RackNap is an end-to-end automation solution – ideal for subscription and cloud businesses. It is integrated with several software services and third-party software solutions as well as payment gateways to help CSPs and subscription providers launch additional services with ease and increase their ARPU.
From backup solutions to popular hosting services like WordPress, cPanel, and website builders, RackNap provides Cloud providers with a host of integrations to choose from and allows them to launch these services with complete automation.
With pre-paid billing and automatic provisioning, CSPs can start selling these additional services without worrying about operational challenges. CSPs also get an SEO-friendly marketplace to allow direct purchases and improve customer experience.
RackNap can help CSPs launch additional services quickly with complete automation of the customer lifecycle. This includes:
- Automated Billing and Provisioning: Support for multiple billing plans – one-time, recurring, pay-as-you-go, prepaid, postpaid, etc.
- Cloud Marketplace: Complete flexibility to sell cloud and feature support for the automatic lead collection from the website, Live Chat integrations, multiple payment gateways, accounting software integrations, etc.
- Customer Management: Customer self-support capabilities, automatic ticket assignment, intelligent graphical dashboards, SLA triggers, etc.
RackNap can help cloud providers manage all their offerings from one single platform. To know more about the automation and integrations, you can book a demo with us today – mail at [email protected].
Read Next: Is automation a boon or a bane for Service Providers?
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