Times are changing for resellers. Up until now, businesses purchased Enterprise grade Wireless LAN systems from their local reseller. The reseller (a.k.a VAR) would have been well trained on the complexities of the technology by a vendor. Resellers would help customers with their Wireless LAN purchase, setup and installation. The reseller would also be a conduit to the equipment vendor. For a fee, they would occasionally pick up complex technology support cases and work with the vendor to resolve them. As compensation for the sales and support of the vendor hardware equipment, they earned a modest profit margin.
Reseller model is on the decline
However, competition has increased and hardware prices continue to decline. Vendors have started competing aggressively for customers. Often at the expense of the resellers profit margin. Yet, the work expected of the reseller in terms of demand generation, sales and support has continued to increase. This has forced some resellers to rethink their strategy. Others have exited the business in search of newer profitable businesses. Amidst channel consolidation, vendors are slow to help resellers shift to recurring revenue models.
MSP is the new Reseller
There are a few important trends that will continue to impact the current channel eco-system.
- Customers are rapidly moving business critical applications to the cloud. Network infrastructure is not far behind. Cloud networking has shown to dramatically simplify management of Wireless LANs. New software is delivering powerful analytics and orchestration capabilities to further simply network operations. This will accelerate the move to Networking-as-a-Service.
- The emergence of a very large number of Managed Service Providers. Small and large MSPs have allowed buyers to pick and choose from a broad set of services across multiple technologies. Be it desktops, unified communications, mobile devices, business applications or the network itself. This drives down the need for silo’d technology resellers.
- Customers are looking for broad expertise across technologies. They are not seeking deep support and optimization expertise in one technology area from their partners. They expect to pay for these services as a simple, monthly subscription fee. Customers favor this model as there is a single throat to choke for support and optimization. The partner is expected to play the role of a “One-Stop Solution Provider”. Thereby eliminating any requirement for customers to go between multiple technology resellers.
- Everything is moving to an “as-a-service” model. This provides many financial benefits to the customer. It is not simply the option of having a graduated payment plan versus paying for solutions with upfront capital. It is also the promise and expectation of a greatly simplified approach to technology installation, use and operation. All at a much lower total cost of ownership.
MSPs will win in the cloud
These trends stand to benefit MSPs, as they now become the orchestrators of many different cloud based “aaS” applications and networking solutions. The benefits are obvious:
- Increased opportunities to build recurring revenue businesses and more customers served
- Management of “evergreen” networks, where traditional refresh cycles are replaced by continuous “service” upgrades that include hardware
- Ease of deployment, machine based proactive support, continuous monitoring and rapid customer on-boarding
- Solution cross-selling without the friction of deployment and optimization
- Increased profitability and customer satisfaction
At KodaCloud, we have found MSPs to be natural partners. We have complementary business models and share a common vision of delivering the best user experience at a reasonable (recurring) cost. We continue to work hard to build the best service possible, and are more energized than ever about helping resellers evolve into MSPs. And in doing so, we hope to pave a renewed path to profitability for them.
CEO & Founder