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 degree of ‘stand out’ quality is important.
“Secondly, there are financial considerations. While many start-up tech firms have offered subscription model solutions since day one, it is comparatively much harder for existing resellers to transition to a full ‘as a Service’ offering — particularly from a cashflow point of view.
“If a firm is used to selling hardware on a lease, for example, with a defined upfront payment, that’s cash in the business on day one. So, while the recurring revenue benefits of ‘as a Service’ contracts are plentiful long-term, it could create some shorter-term financial pressures.”
Anything as a service
‘As a Service’ models are now becoming widespread across the sector for difference niches. For instance, for Vapour, ‘Firewalls as a Service’, or managed firewalls, are a hot topic now. “That’s come from multiple conversations with clients, where we know this would ease security, performance, productivity, agility and financial pressures within their organisations — almost irrespective of sector,” Tim says.
Markus Rex, head of SYNAXON Managed Services, notes that XaaS – everything as a service – offerings are already popular. “That is only going to increase,” he says. “The benefits are well understood, and we certainly see excellent potential for growth with our managed backup, antivirus, endpoint security and remote monitoring and management services. We’re also seeing more interest in our Managed Workplace device-as-a-service offering.
“We offer these as standardised, ready-to-deploy services, with all support provided by our own experts on behalf of the partner. That makes it extremely simple for reseller partners to enter the XaaS market and offer consistent, tried and tested services to their customers.
“It’s a zero-risk way to enter the managed services market as they don’t have to make any up-front investment and find or retain skilled staff. That’s an important advantage because the skills shortage is probably the biggest challenge that managed services providers are facing right now.”
STaaS growth
Another as a service product that is gaining popularity is storage as a service (STaaS), according to JT Lewis, director of channel sales, EMEA and APJ at Infinidat.
“STaaS has been around for a while, but not all resellers may be aware that it exists – STaaS really plays into enterprises’ current strategic priorities,” he says.
“The outlook for STaaS is very positive for resellers considering a new model. Three trends are converging here – data volumes are growing at exponential rates, enterprises need to find ways to reduce costs to manage in the economic environment and cloud hosting continues to grow in popularity – so STaaS is well worth adding to a reseller’s business service portfolio.
“STaaS is a flexible, cloud-like consumption model whereby the users only pay for the storage capacity needed – exactly what many IT buyers are looking for.
“Offering enterprise customers the chance to switch to STaaS is a powerful strategy to lower costs, without sacrificing availability, reliability, cyber storage resilience and application performance. From Infinidat’s experience working with resellers, offering STaaS improves client retention rates and attracts new customers keen to try out new, low cost and low risk storage. For the reseller, the many different STaaS business models available now from storage vendors make it a lucrative addition to their service mix, with the chance to secure valuable recurring revenues.
“To offer STaaS, resellers would typically need to have a robust infrastructure for data storage, such as a data centre or a cloud platform. They also need to have the necessary expertise in managing and securing data to ensure that their customers’ data is safe and accessible.”
Future
The trend for ‘as a Service’ options is likely to continue to grow in the coming years, with even more options coming into the market, according to Tim. “But the market is becoming very ‘busy’ with seemingly endless ‘XaaS’ offerings, which is why I think the next notable shift will be a move to ‘wrapped’ or bundled solutions that include more commodity-like products, such as lease lines, included for free.”
Tim adds that, as competing on price alone is risky, we will see expertise-rich resellers differentiate themselves according to the level of added value they can offer. “For example, we deliver our consultancy expertise as standard on so many of our customer projects, because we feel so ingrained and invested in their businesses. This is something that many other resellers can’t touch. Tech players need to think carefully about where their ‘as a Service’ proposition(s) will benefit them and customers alike.”
