By Jason Bystrak, D&H Distributing
The industry is at the brink of transformation, where the channel has the opportunity to become purveyors not just of technology and hardware solutions, but of ongoing service delivery and expertise that can be leveraged for the long haul as annuity-based revenue. Many a savvy channel partner has an eye toward capturing the cloud market opportunity, hoping to take advantage of cloud solutions that can help them reduce costs and add scale to their businesses—especially in the SMB sector, where a good percentage of solutions providers are still ramping up to this model.
This has been a huge part of my own mission in the technology channel. I’ve been immersed in this industry for close to twenty-five years, concentrating on cloud and managed services for more than half of my career. This is also why I joined up with D&H Distributing early in 2019, to focus specifically on helping partners in the SMB space transition to cloud services. Yet in creating cloud solutions programs specifically for SMB, it was critical to first consider the best path to market for VARs in this unique space, many of whom have smaller staff and a finite amount of in-house resources to devote to the transition.
Small business VARs have traditionally provided services such as solution design, resale of hardware and software, implementation, and break-fix projects. These are typically billed by way of time and materials as opposed to a recurring monthly annuity. Such VARs are generally not ready to sell cloud, since they often lack remote service delivery skills, sales, and marketing processes for a digital world and are not financially engineered for monthly revenue. In contrast, managed service providers (MSPs) operate under an ongoing service agreement, usually billed monthly, to manage IT infrastructure and provide specific services outlined in a statement of work. This includes areas such as help desk services, remote monitoring and management, security, data backup, and disaster recovery. They have greater influence on the IT products deployed since they operate under an SLA, and standardization on cloud solutions drives down the cost of service delivery. They are much more prepared and focused on selling cloud. This is why D&H is focused on developing and enabling MSPs within our cloud business.
We’ve found that many SMB resellers have already begun to call themselves MSPs by virtue of the fact that they’ve deployed one of the above services with an end-customer. Yet closer review usually reveals they have yet to implement a scaled services model across a wide base of clientele, and they face notable challenges in making the full migration to this business model.
As a go-to SMB distributor, the first step in accelerating a cloud offering for these VARs was to align on a strategy, or a specific framework that would allow us to execute the mission of empowering partners to capture the cloud opportunity. That required educating independent resellers who have only dabbled in cloud and managed services and creating a structure by which they could easily proliferate services across multiple business end users.
This is how D&H came to attract a roster of new vendor partners for its Cloud Solutions offering, most recently ConnectWise, which offers flagship services automation and remote management products; and SkyKick, which provides cloud migration, backup and management software. The strategy was to help fill gaps in the channel that would drive technology transformation. This required a serious commitment to building not just a robust digital marketplace, but also to providing the resources and expertise that would help solutions providers adjust their offerings.
For partners like ConnectWise, the relationship with D&H offered the potential to capture a new segment of customer: the “S in SMB” solutions providers who need to rely on a partner in order to migrate to the MSP model. As an SMB-focused organization, D&H has deep relationships with smaller partners that are underserved by large broadline distributors. That’s an advantageous proposition for MSP vendors, in that D&H still has a lower ratio of MSPs to VARs, presenting more of a greenfield opportunity.
These VARs need support in evolving toward the MSP model; the vendor can’t convert them as easily on their own. For example, a VAR with little experience in managed services wouldn’t look to sell ConnectWise’s products, because those solutions are geared for MSPs. However, a VAR who is working with a distribution program such as D&H’s “Success Path to Cloud” will have access to the resources that will help them transform from VAR to MSP, making them key targets for MSP vendors.
By developing this market and speeding the adoption of cloud services throughout the small business community, cloud-based providers like ConnectWise will help us grow the numbers of partners that eventually move “upstream” and capture larger business opportunities in the future. We’re developing a pipeline of self-perpetuating managed service providers, which helps accelerate success for all parties in the channel.
As a go-to distribution partner for the SMB segment, we focus on five areas of execution for this strategy. Here’s what we advise for independent VARs looking to make the transition to a services-based model:
Seek Out Cloud Expertise and Support. Success always starts with partner relationships. To that end, D&H launched a formal Cloud Business Unit, bringing together solution management, business development, sales, marketing, technical support, and operational experts to form a unified team to help partners thrive and grow in the cloud.
Engage in Partner Programs Like Success Path to Cloud. Partners can reduce their time to market and increase their success by relying on partner support programs to navigate the cloud services market. That applies to VARs who are looking to make the transformation to an MSP model, as well as to successful MSPs looking to profitably scale and grow. For instance, D&H developed its Success Path to Cloud program to provide tailored content and resources to help partners capitalize on opportunities in this evolving market.
Focus on Intelligently Designed “Cloud Clusters.” MSPs shouldn’t try to tackle the MSP market one solution or service at a time. Rather, they should implement a bundled portfolio of thoughtfully developed vendor products that add end client value while increasing partner profitability —what we call “cloud clusters.”
Take Advantage of XaaS Enablement and Financing. The market increasingly asks to consume “everything as a service.” As a distribution partner, we’ve combined a Device as a Service (DaaS) program with cloud services, allowing partners to bundle their own managed and professional services to meet this demand. MSPs can take advantage of partner-based financing with cash flow acceleration options to improve profitability. Cloud will always require endpoint devices, and hybrid cloud won’t be disappearing any time soon, so hardware is a key part of the solution.
Leverage a Digital Commerce Platform Across Multiple End-users. These “cloud clusters” can be aggregated across a single, intuitive partner platform, making it easier for a novice MSP to sell full solutions that add user value while increasing partner profitability. That infrastructure should be MSP-centric. Partner-inspired features of D&H’s Cloud Marketplace, for example, include integration with MSP service automation tools, the ability for partners to add their own products and services, and MSP branding options.
The more we can enable solutions providers in SMB markets to capture the full range of this opportunity, the better for the channel as it progresses through its digital transformation.