Recurring revenue business model: Pretransition considerations

Review factors to think about before transitioning to a managed services model, including pre-assessment, efficiency, financial backing and training.

For IT channel companies, a managed services or a cloud services business model offers an alluring benefit: a recurring revenue stream. The opportunity to achieve a steady cash flow is a welcome change for value-added resellers (VARs) and solution providers that are subject to fluctuating business, as well as to the increasing commoditization of hardware and software. However, experts agree that before IT channel companies adopt a recurring revenue business model, there are several things they should do to help ensure success in their new line of business.

Assess your current business

"One of the things we recommend before transitioning into a new business model is doing an assessment of your current business model," said Carolyn April, director of industry analysis at CompTIA. "Before jumping into something new, make sure that what you do currently is done most efficiently -- that you are getting all the margin you can possibly wring out of a line of business." This means evaluating everything, including costs, operations and accounting.

"It's better to shore up that business and address leaks before you start something new. Really get your ship in order so that you're in a good position to pay attention to the new models that are out there," April said.

This was first published in March 2014

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For those who have already transitioned to a managed services business model, which aspect of the transition was most challenging?

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