Key Performance Indicators for Cloud Providers, Resellers, and Channel Partners

Written by Joe Kozlowicz on Thursday, July 13th 2017 — Categories: Cloud Hosting, IT Channel

keep track of key cloud service KPIsAs the IT channel increasingly shifts towards cloud services, resellers, MSPs, agents, and channel partners must keep an eye on business metrics to ensure their operations are improving and revenue continues to grow. This can be a difficult task for even seasoned cloud providers, as there are a variety of factors involved in measuring the financial success of cloud services.

Different departments in your organization will have different Key Performance Indicators (KPIs) that you can track and report to management. Keeping an eye on KPIs is vital to adjust your operations and maximize profitability of your channel sales.

Collecting too much data can end up being a distraction. You still need to be able to digest and glean insights from your metrics. Choose three KPIs — five max — for each employee role and zero in on making meaningful adjustments as needed. Here are a few key KPIs to watch.

 

Customer Growth

This is clearly a sales-focused category. How many new clients are being brought in? And maybe more importantly — are your existing clients adding additional resources and services?

 

What Closes from Your Pipeline

This one is pretty obvious, but you should be tracking your opportunity:close ratio in your sales pipeline. If a lot of leads aren’t signing on the dotted line, it’s time to reevaluate your sales process or your sales team.

 

Return on Marketing Dollars

Many channel partners only spend a few percentage points out of their entire expenses on marketing. Successful sales-driven organizations often spend closer to 10 or even 15 percent. At the same time, you’ll want to compare the amount you are spending in marketing to the amount of leads that marketing is delivering to your sales people. This spend:funnel ratio is a great way to measure marketing effectiveness.

You should also track the revenue from marketing-sourced leads. As long as annual revenue attributable to marketing outweighs your spend, you’re on the right track.

 

ARPU / Profit per Customer

Average Revenue Per User hinges on landing those longer-term contracts. Clients love the cloud because they can scale up and down, requesting resources at a moment’s notice. But that doesn’t always work for multi-year contracts. This KPI is focused on building long term relationships so your clients keep coming back for more.

Your C-Level and finance teams should also keep an eye on the profit per customer. There are different strategies: you could have a large customer roll each with a lower spend, or a small roll with higher spend. But profit or revenue per customer should ideally be growing alongside your business.

 

Churn Rate

Many organizations shoot for less than 10% annual churn, or the rate at which customers cancel their services. At Green House Data, we aim for under 5%, and usually land under 2%. As you scale up, you’ll face a naturally higher churn rate. But focusing on customer satisfaction and service goes the furthest towards reducing churn. We’ll get to customer-facing metrics below.

 

Gross Margins Per Product/Service

You likely offer a variety of cloud services, from public cloud instances to private, fully managed clouds. Each managed service, IP address, bandwidth charge, virtual machine, disaster recovery deployment, and onsite visit comes with a different profit margin depending on how much employee time is spent, what kind of capital expense overhead is involved, and so forth.

One rule of thumb is that managed services should have a 40% return, project services should reach a 30% return, and cloud services should reach between 15 and 50 percent  — a wide range, but one that depends on if you are a reseller or a cloud provider that must juggle more overhead.

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Staff Hours of Utilization

You need to keep tabs on your employee efficiency, especially when managed services or customer support is involved. Employees, especially salaried ones, do not appreciate having to log their hours. But you’ll want to periodically check to see how much time is spent on specific projects or clients in order to identify bottlenecks and see where you might need to invest in employee cross-training, new hires, or a company re-organization.

 

SLAs

You’ll naturally want to track any Service Level Agreement violations, as your customers will likely receive a contract-mandated reimbursement if you fail in your SLA. However, slipping up on your SLA also provides vital feedback for improving your services. If you maintain your SLA on a constant basis, you get some great bragging rights that can be used for marketing and sales.

 

Customer Satisfaction

Many ticketing systems offer a post-ticket survey option to collect some metrics from your customers on how the support experience went. You can collect these, aggregate the totals, and analyze them on a monthly or quarterly basis to ensure that your support services are on the right track. A happy customer is one who will keep coming back, even if your products/services are slightly more expensive than other options.

 

Ticket Time to Resolution

One way to improve customer satisfaction is to solve their problems rapidly and correctly the first time. A key metric for Green House Data is ticket time to resolution, as well as a related metric for ticket response time when a service ticket is initially submitted. The lower the time to resolution, the better. Of course there are always outliers that can throw off your overall stats here, when a single ticket takes much longer or shorter than average. You also need to make sure that quick resolution doesn’t come at the cost of providing thorough support and properly architected solutions.

 

There are many different approaches to KPIs and how they might integrate with your particular service approach and organizational structure. The main takeaway is that you need to be tracking, analyzing, reporting, and sharing your metrics in order to continually improve your business, maintain customer service levels, and increase revenues as you grow your cloud offerings.

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