As the digital transformation brings new ways of provisioning IT, it’s also changing the way much of the industry expands its business. It’s not always quick enough or cost-effective to build new technologies companies wish to cash in on, and many organizations turn to another method of expansion: acquisition. Such was the case earlier this month when Intermedia purchased AnyMeeting.
Intermedia has weathered some big changes since its start as a web hosting business in 1995. Shortly after opening its doors, it seized an opportunity to move into hosted exchanges—the first company to do so, according to Michael Gold, Intermedia’s CEO. In 2011, it was acquired by Oak Hill Capital, which had big plans to move Intermedia into the cloud and develop a platform product it could wrap services around.
Over the next few years, Intermedia expanded into adjacent markets such as security, backup, VoIP and unified communications, where it was leveraging Skype to add features such as screen-sharing and video conferencing. But customizing Skype to fit its offerings was becoming cost prohibitive. Enter AnyMeeting.
As Jay McBain, analyst at Forrester, said in his keynote at Channel Partners Evolution this week, the traditional channel is aging out. Many partners are searching for an exit strategy, and some are finding it in the hot and heavy acquisition activity happening today. If your offering is specific, creative and timely, it’s easy to see a future in which you may become the next AnyMeeting.
The channel’s evolution has more or less mirrored Intermedia’s, said Gold when we sat down with him at CPE this week. Traditional VARs made money reselling hardware and software implementation services. MSPs became the hot new business model as partners began to move toward monthly subscriptions to support on-premise equipment.
But this latest disruptor is different. With the cloud, the software resides somewhere else, so the role of the traditional partner—VAR, MSP or what have you—has to evolve to accommodate that shift. It isn’t just about selling services or tweaking revenue streams. This is an entirely different economy, Gold says, with an entirely different administrative and support relationship. The partner’s role has to change.
“In this new territory, in order to make money, we advise partners to differentiate and add value. Just reselling brand name cloud software isn’t good enough. The margins are just too small. Of course they’re still their customers’ ‘trusted advisors,’ and that role can and should continue in the era of the cloud. But almost everything else needs to change.”
It’s a different mindset and approach to doing business. Migration to the cloud requires ongoing support, but it offers partners an opportunity to integrate multiple products and services in order to create a truly unique solution. Ideally, says Gold, it would have the partner’s brand name on it.
“Look, the cloud isn’t new anymore,” added Eric Martorano, Intermedia’s CRO. “I ran U.S. channels for Microsoft, and I remember launching the business productivity online suite and introducing the world to ‘cloud’ eight years ago. We’re at a point now where there are companies that successfully made the transition to cloud and are now working to add value on top of solutions.”
There are lots of partners who haven’t, and Gold and Martorano say the investment in both time and money doesn’t make sense to business owners are “sun-setting” their businesses. But other partners are looking at growth strategies and creative partnerships to offer value to customers in a way that still brings profit.
The new, born in the cloud partners are a bit more progressive, says Martorano. They think outside the box and challenge vendors to think differently about how they provide services and pave this road toward the future channel.
“We’re investing a lot in teaching partners how to transform their businesses to monetize the opportunity in front of them versus just reselling. You won’t make money just reselling software, and that’s not good for us or our partners.”
To that end, Intermedia recently rethought their channel program to better equip partners to create unique solutions. The company identified core IT products and created a suite that includes things like email, voice, phone, UCaaS, backup, security, file syncing and sharing. Martorano says there are about 25 applications in all, and partners take what makes sense for their customers to create their own packages specific to their business. Then they offer to do the bulk of the heavy lifting when it comes to sales and digital marketing that traditional partners may not be familiar with.
It’s this sales engineering, education and enablement that the executives say their partners are clamoring for the most, but in many cases, there’s work to be done to “dispel myths” before a partner even gets to that stage, such as the astronomical costs some partners think come with moving PBX to the cloud.
“We’re out front and center to help educate and talk to partners, showing them the pathway to profitability. We’re out on the front lines creating packages to educate partners in the business side of things: from project services and reselling to managed services and recurring revenue. Only then do we start talking go to market strategies.”
“Our pitch deck has a slide we’ve been using for seven years of a crazy, stressed out guy pulling out his hair. We actually call him ‘the VAR guy,’” Gold admits with a laugh. “He’s so stressed because he knows the world is now moving to cloud across 20 categories, and he has to figure out solutions, develop expertise and integrate it all together. It’s a lot for any size business, let alone a small VAR.”
Intermedia’s pitch is that it’s a provider that can bring all of them together pre-integrated into one UI that works across everything. Let’s hope it makes the VAR guy a little less stressed out.