Time is Linear. Revenue Should Not Be!

Author: Howard M. Cohen

Before there was “the cloud” there were the Application Service Providers (ASP) who ran your workloads on one of the servers in their data center. Back then, you could only run one instance of the operating system on a server, so each new ASP customer got their own dedicated server. This made the growth of the ASP’s business linear, with cost being directly proportionate to revenue. Every time they gained a new customer, they incurred the cost of a new server.

Even worse, for the ASP to be profitable the customer ultimately had to pay the entire cost of the server. Add that to the cost of connecting to a remote data center plus maintenance and operation of the servers, there was no economy available to the customer, no financial justification.

The ASP initiative died a quick and dismal death and fell with a thud on the fabric of IT history.

What Made Cloud Different?

The introduction of server virtualization changed the strategy completely. Now, operators can run many instances of the operating system on each server machine. This meant they could accommodate many customers on each server device. The only direct costs were operating system licenses for each new customer. Cost was no longer directly proportionate to revenue. These operators could add many, many new customers before they had to invest in another hardware asset.

This was a great financial opportunity for customers, too, who only had to return a fraction of the cost of the server unit they were tenants on. They shared that cost with all the other tenants. When an engineer drew an illustration of this, the internet was rendered as an amorphous blob. One viewer remarked that the blob looked like a cloud, and cloud computing was born.

Of Project and Managed Services

Systems Integrators (SI) are similarly challenged when they sell their personnel’s services by the hour. Once again, cost is directly proportional to revenue. For each hour of an engineer’s time they sell, the SI must pay an employee for an hour of work. The more hours they sell, the more skilled people they need to hire. All growth requires further investment.

The introduction of managed services toward the end of the last century was driven by the advantage of offering services that did not require human intervention. The more automation they could involve, the more service they could sell without having to increase their costs. The key was to achieve as much service in an indirect proportion between cost and revenue as possible.

The Financial Key to Managed Services is Increased MRR

So why do you sell Azure?

Ultimately, the reason you sell Azure comes down to an opportunity in which the revenue you generate is directly proportionate to the Azure services your customers use. If you want to increase your revenue, you simply innovate new ways to drive more Azure consumption among your customers.

Innovating new ways to increase Azure consumption can also raise your revenue in other ways!

A dozen years ago, a Microsoft executive observed that, “Microsoft only has one job, and that is to provide an excellent platform for partners to run their solutions on.” If you, as a Microsoft partner, have your own solutions to run on Azure, you create new revenue for yourself when you run those solutions for your customers.

But Wait, There’s More

Never sell Azure alone.

That’s not to say you need to have someone with you whenever you sell Azure. Rather, Azure should never be the only thing you sell to a customer. Never the only line item on your invoice.

Azure is an operating environment. Similar to your previous on-premises environment it requires a variety of utilities and services that you don’t want Microsoft or anyone else to provide. You and your customer own responsibility for their data, so you can’t just depend upon any organization to protect it.

Whenever you sell Azure you want to also sell management and maintenance of the Azure instance. You want to include a reliable data backup strategy, reliable high-availability, reliable business continuity and disaster recovery provisions, application management, communications management, and more.

Each of these services provides needed significant value to your customer and also delivers a wealth of additional monthly recurring revenue (MRR) to you over and above your compensation for Azure consumption.

How to Sell Services You Don’t Produce

The only thing required to successfully sell services you don’t provide yourself is to find a trustworthy, reliable partner to provide each of those services for you. Once again, the more services you sell the more revenue you drive. Revenue that’s directly proportionate to services sold. Nirvana!

Microsoft estimates that partners earn more than $4 in additional revenue for every dollar of Azure revenue. You don’t want to leave that on the table.

Partnering is at the core of success in the Microsoft Partner EcoSystem. The Idenxt team is composed of long-time Microsoft partners who have been among the foremost proponents of partner-to-partner (P2P) partnering. Idenxt was built to provide Microsoft partners with a totally reliable, AI-based Azure management and operations automation solution.

If you don’t perform any management services, Idenxt creates the opportunity for you to add automated Azure management and operations to your offerings.

If you do provide such services, Idenxt can be employed to resolve any anomalies that can be handled remotely, while alerting you to take action in situations that do require human intervention. This, of course, creates another revenue opportunity for you to add onsite coverage to the automated solution.

For more information and insight into how to leverage Idenxt to increase your revenue without proportional increases to operating costs, contact us here.

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