Article | July 12, 2017

VARs And MSPs – Are You Penny Wise And Pound Foolish With This Revenue Stream?

Recurring Revenue

By Norman Katz, President of Katzscan Inc.

One of the notable highlights of Admiral Nelson’s win at Trafalgar is that he believed his better trained forces would be superior in a battle against overwhelming opposing odds, and he was correct. The more educated the workforce, the greater the productivity: we all know this, or we should.

However, resellers too often get caught up in grabbing for pennies when they should be focused on growing their dollars.  Resellers do this by not educating and empowering their customer to navigate their own proverbial ships independent of the reseller’s flagship.  The result is customer frustration due to reseller productivity bottlenecks which then prevent the reseller from having the resource time to grow into new areas of revenue-generating business.

The most egregious example of this is report writing.  Resellers tend to latch on to report writing as a revenue source like … well … pick your analogy.  There are several notable problems with this business model:

First, customers frustrated in trying to get in touch with the account manager, project manager, or technical contact at the reseller to just discuss the report that is needed.  How many days must pass before the client and the correct reseller contact actually connect?

Second, it takes too long to produce the report.  The client has to explain what they want to someone who doesn’t really understand the end result and may not very well understand the business even if they think they know the client.  The customer may have to document beyond what they would have to normally do for an internal person or someone sitting in front of them or someone more familiar with the business or the results they are seeking.

Third, what is the cost of producing the report to the reseller and what is the perception of the price to the customer?  The standard argument by resellers is that the customer will use the report over and over and over again.  But the truth is that customers don’t like overpaying for reports – period.

Forth, how many iterations did it take to get the report exactly the way the customer wanted it, and how long did it take – how many days or weeks – did the process ultimately take?  The customer needed the report now, not when the reseller was able to schedule it and eventually got it completed. 

Fifth, what if the report needs changing or tweaking?  Is this process starting all over again?  Is the reseller over-charging for simple report changes and taking too long to get them done?   

From my experience with my customers, who often engage me for data analysis, information reporting, and data conversion/migration, usurping their resellers for these services, they are simply tired and frustrated in having to pay excessive prices and suffer long delays with their software resellers to just get quality reports and output that they need immediately to operate their businesses.  My clients appreciate that I can understand what they are try to say by listening in between the words, and my productive output is proof.

My customers understand that data analysis and reporting is something like painting a picture: it very much can be a creative process as digging in the data often will reveal new information insights.  An experienced independent expert like myself typically uncovers patterns, anomalies, and new discoveries during the data analysis process, and my customers really appreciate my findings.  So, the customer does not mind that the result is not as immediate as long as the process is proceeding with haste and is producing results.

But there is a big difference between what I just described above and a reseller’s bottleneck because they have a busy schedule or because they cannot seem to understand the intrinsic nature of what the customer is looking to produce. 

I understand that resellers do not want to give up a revenue source, but the reality is that they are being the proverbial penny-wise and pound-foolish.

Resellers should be educating and enabling their clients to write the own reports, training their customers on how to use software (e.g. ERP) report writers and let the customers take as much command and control over their own independent ships as possible.  Resellers – or the channel software owners – should help their end customers navigate the database tables by providing data dictionaries in easy-to-read formats to facilitate their report writing tasks.  Customers will be able to take control over the majority of reports, especially the more direct, relatively simpler ones.

If the customer still needs help it will be less often; the reseller will spend less time with what I will call less-value-added services with the customer.  Resellers should still strongly consider collaborations with independent experts who can intercede, often at a comparable or typically at a lower hourly rate, helping the customers achieve their reporting goals more effectively and efficiently, acting as extensions at the customer site and also as guardians of the relationship.

Without the burden of this basic task hanging over them, resellers can focus on understanding their customers’ businesses better, seizing upon new market and technology opportunities, exploring new upgrades and add-on modules for the software they sell, looking into adding on new complimentary products lines and services that would benefit their customers, and sales and marketing efforts. 

With the software and hardware landscape changing at the speed that a virus spreads itself across a network, resellers must realize that they have to balance their time better, allocating resources where the return is the greatest.  As an independent consultant, I have always believed that enabling and educating my clients, sharing my knowledge, was in the best interests of both me and my customers.  It is not just the right thing to do, it is the smart thing to do.

Norman Katz is President of Katzscan Inc. ( Norman has written for various trade publications, is a national and international speaker, and is the author of two exclusive books.  Norman is an expert on ERP, EDI, supply chain vendor compliance, data analysis, business operations, and supply chain fraud.