News in the Channel - Issue #6

THE RISE OF ‘AS A SERVICE’

At your service In recent years, the ‘as a Service’ model has growth in the UK, as resellers look to provide not just products but longer-term relationships and services to customers. It is now spreading to all areas of the channel and presents opportunities for resellers.

Software as a Service has been around as a term and a concept for about 20 years now, where software is licenced to a customer on a subscription basis and is centrally hosted. But in more recent years, ‘as a Service’ as a concept has grown, and now there are many aspects of the channel being sold on that model. This is set to continue, according to Rachel Rothwell, senior regional director at Zyxel UK. She believes the ‘as a Service’ model and managed services are the future for much of the channel. “I believe that, within three to four years, most reseller businesses will generate the majority of their business from services and subscriptions,” she says. “This is how many customers want to consume IT now. They have quickly become used to software as a service and are now looking at other aspects of their IT that can be offered on a subscription basis or managed remotely. That includes hardware, and while many customers still prefer to buy products outright, partners do need to make ‘as a Service’ options available as part of their portfolio now. “Where we see real acceleration is in remote managed services for networking and security. Our MSP partners that make use of our Nebula management platform are growing quickly. That’s down to two factors. First, customers want someone to take the complexity of managing security and devices off their hands – and that’s especially true now there are so many home and remote workers, and users joining by WiFi all the time. Second, partners are becoming confident in Nebula and the ability it gives them to monitor and manage customers, and actively taking it out and selling their managed services. “Partners benefit from having a more regular, predictable revenue stream. For customers, the managed service has significant added-value and that makes them more loyal and dependent on their partner, so it’s an arrangement that works for everyone.”

Recurring revenue Tim Mercer, CEO of cloud specialist Vapour, agrees that the recurring revenue is a major pull for resellers, adding that the opportunity to develop a deeper customer relationship is also attractive. “Nurtured effectively, this often leads to strong customer retention rates, not to mention upsell opportunities.” He adds that customer finance teams like ‘as a Service’ options because they know exactly how much they’ll spend on the solution, per month, over a defined term. “Cash is king, and ‘as a Service’ offerings keep that cash in the business,” he says. “Budgeting simplicity aside, organisations also often benefit from value added expertise — the service element — that isn’t necessarily a given when it comes to procuring disparate tech products. This depends on the quality of the service provider, of course. “At Vapour, we have a 96% recurring revenue rate, which shows just how important ‘as a Service’ solutions are to our customers and business. And that close-working rapport with our client base drives our ongoing innovation roadmap forward because we don’t believe in introducing cloud solutions for solutions’ sake. Customers talk to us because we feel like an extension of their team, not an arms-length supplier, and that ‘sticky’ relationship strengthens our financial performance and our relevance in the market.” Joining the service With the advantages this brings, it is attractive for resellers to get into this market, but Tim urges caution before any move is made. “First of all, it’s important to understand what you’re going to offer, why, and how you will support it,” he explains. “As is always the case, jumping on a bandwagon is risky. It needs to fit the reseller’s wider proposition, be marketed effectively and be supported by people with the expertise to deliver the solution for maximum customer benefit. This is a crowded market, don’t forget, so authenticity, and some

Rachel Rothwell senior regional director

zyxel.com

Tim Mercer CEO

vapourcloud.com

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