There’s an interesting survey from a company called ServiceSource, which describes itself as "the global leader in recurring revenue management" an epithet that, up until I read the press release about the survey, I would not have put much stock in owning. When I say survey, I should perhaps be a little bit clearer by pointing out that I’m taking my information from the press release announcing the key findings from it .
Anyway, the ServiceSource Global Recurring Revenue Index made me re-evaluate the value of being "the global leader in recurring revenue management" when the company revealed it was "based on analysis of $25 billion in recurring revenue under management globally since 2008". That’s some pretty serious money there.
The survey found that technology companies "consistently underestimate the true recurring revenue opportunity for service, maintenance and other subscription-based offerings" adding that they could boost renewal rates by an average of 18% "by proactively managing data, analytics and selling processes of their direct and channel teams".
It made the interesting point that many companies are generating more revenue from existing customers than new ones with recurring revenue growing 8% a year compared to 6% for new revenue. According to ServiceSource, recurring revenue from software and hardware maintenance and support and SaaS subscriptions can account for 30-40% of a company’s revenues and up to 50% of profits.
Disconnect
I was particularly interested in a summary of one of the key findings which had the heading of Channel Insight. It said that although some companies rely on the channel for 80-90% of their renewals business, "their ability to effectively manage and close renewals business diminishes an average of 12 percentage points lower than direct sales" as they become disconnected from day-to-day channel sales operations.
Leaving aside the issue of whose fault it is that the focus on channel sales operations is not as sharp as it should be, it’s definitely a cause for concern that renewal rates can be so much lower than if pursued through a direct sales strategy. The good news is that, in North America at least, companies were able to increase their renewal rates across all market segments by 20% "with proper insight into channel operations".
While there is no more detail on what is entailed in gaining "proper insight" into channel operations, I have to assume it can’t be that difficult if companies were able to improve their renewal rates so much with it.
Commenting on the findings, Christine Heckart, executive vice president of marketing, strategy, people and systems at ServiceSource, said: "Companies typically take their renewals business for granted. The findings from our study underscore that technology companies significantly underestimate the true performance of their renewals business and must apply the same rigour to keeping existing customers as they would to winning new business."
As someone who is always very happy to promote the value of the channel in the IT industry, might I suggest that Heckart’s comments provide yet another opportunity for channel partners to demonstrate their worth to vendors. For many technology companies that "significantly underestimate the true performance of their renewals business" the people best placed to realise the value of that business and help them to fulfil it are channel partners who own many of those customer relationships in the first place.
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