There's no doubt that subscription-based as-a-service models are the future of business, but that doesn't mean VARs have to give up hardware sales.

Kris Blackmon, Head of Channel Communities

January 8, 2018

5 Min Read
Cloud money

There are too many cloud, SaaS, and IoT predictions than we have room to rattle off here, but the general consensus seems to be that 2020 is the magical year where everything that’s seemed futuristic until now will suddenly reach critical mass. Tens of billions of devices will be connected to the internet of things, driving an explosion in cloud-based services to handle all of that data and the emerging tech services that come along with it: advanced analytics, machine learning, decentralized ledgers, and so on. Most important to the channel, IT-as-a-Service (ITaaS) by 2020 will account for more than half of IT spending. For VARs and MSPs, that’s also the year that consumption-based data center procurement will eclipse traditional procurement.

So what does that mean for cloud technology in 2018, as we begin to count down in months to that magical 2020 moment? It can be summed up in one tidy phrase: Everything-as-a-Service (XaaS).

And yes, we do mean everything. 2017 saw a never ending series of vendors and distributors throwing ‘as a service’ programs together. We got advanced capabilities in mature offerings like Security-as-a-Service, Unified-Communications-as-a-Service, and Infrastructure-as-a-Service. We saw some relatively newer solutions like Device-as-a-Service and Desktop-as-a-Service come into their own. Then there are a long list of newborn cloud solutions, some of them brilliant, some of them headscratchers: ID-Authentication-as-a-Service, WiFi-as-a-Service, Compliance-as-a-Service, Project-Management-as-a-Service, Containers-as-a-Service, IoT-as-a-Service, the uncreatively named Technology-as-a-Service…

Like we said. Never ending.

“It’s 2018 and virtually everything is available ‘as a Service’ including your slim electric toothbrush, which now comes with its own app,” says Richard Dufty, SVP of Worldwide Sales, Services & Support at Ingram Micro Cloud.

There are a few primary drivers behind the rise of the aaS model, says Dufty, and they all boil down to freedom. Customers want access to an infinite number of solutions specifically designed for their use cases. They want to be able to pay for it however they want. And they don’t want anyone telling them they’re locked in or can’t make changes when the next best thing comes along.

We said it throughout 2017, and it looks like we’ll be saying it again this year: When every company is a tech company, and every solution is a service, then suddenly the channel gets a lot bigger and more ambiguous.

Over at Progress Software, they’re looking for non-traditional XaaS use cases in industries that have watched the software space move from “hunting elephant-size deals and fasting between ‘kills’…to subscription-based business models that deliver consistent and predictable revenue,” explains Dmitri Tcherevik, Progress CTO. Now you’ve got industries like manufacturing, healthcare, biotech, financial services, and telecommunications moving from outright sales to a services consumption model–and suddenly everyone needs to start thinking of themselves as a service provider.

“That’s where the channel comes in,” says Richard Stone, a strategic partner program manager for Progress. Take the manufacturing sector, for instance, where equipment manufacturers have the capabilities to offer parts as a service, but maybe not to oversee the predictive maintenance (PdM) analytics necessary to keep that equipment operational.

“Channel partners can develop the in-house data acquisition, analytics skills and software necessary for PdM, and then offer it as ‘as-a-service’ to a range of SMEs. Given the huge potential losses involved in equipment failure, this will be an extremely profitable business for a Partner, and a very welcomed service for a non-IT SME.”

Let’s add Predictive-Maintenance-as-a-Service to the list, please.

For VARs, the rise of services and the subscription model offers a ray of hope in a dismal resale world where partners have watched their margins steadily shrinking for years. Vendors and disties are getting into this game and building programs around Device-as-a-Service, which in essence allows customers to lease hardware. Distributor Tech Data, for instance, last month announced a new as-a-Service program that it says is comprehensive for both endpoint devices and advanced metered services. The program pays VARs and MSPs up front, allowing them to sell recurring revenue services without doing the heavy lifting that comes with changing business models. Notably, it also wraps services into the package, whether offered by the partner or through Tech Data.

There’s an additional opportunity in the rapid adoption of emerging tech like blockchain, artificial intelligence, and 3D printing, where specialized, embedded software is often packaged with hardware and services and presented as one solution billed on a regular basis. Servers specially designed for cryptocurrency are one example, or printed parts and equipment for manufacturing use cases. It’s an evolution of the traditional resale model of yore, but one that’s a natural fit for VARs that can understand and leverage the opportunity emerging technology provides.

XaaS is a term that drives a lot of people in the channel crazy because of its ambiguity, but the inability to assign it to a specific technology is what makes it appropriate for what it refers to: an entirely new economy. It isn’t a specific capability, offering, or trend. It’s a fundamental shift in the economic model that underlies the way we conduct business–and partners are well-positioned to leverage and help shape that new paradigm.

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About the Author(s)

Kris Blackmon

Head of Channel Communities, Zift Solutions

Kris Blackmon is head of channel communities at Zift Solutions. She previously worked as chief channel officer at JS Group, and as senior content director at Informa Tech and project director of the MSP 501er Community. Blackmon is chair of CompTIA's Channel Development Advisory Council and operates KB Consulting. You may follow her on LinkedIn and @zift on X.

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