Tips To Finding the Right Vendor Partner

It’s a decision every managed service provider must make: which vendors to represent and support in the marketplace and which vendors to stay away from. It’s not a decision that should be taken lightly and there are many steps in the process.

The hard fact is that when choosing the right vendor partner, MSPs need to consider more than just the price of their wares or service. Partnering should be a long-term decision based on many factors including training, sales support, marketing assistance, lead generation, scalability and whether that particular vendor sells direct and will compete with you in the marketplace. This is particularly important as more MSP move into cloud services and toward recurring revenue.

These are all intangibles, but ultimately are the building blocks of a strong partnership. As an MSP, you need to have the mindset that you own the customer and the vendor is there to support your efforts. If something goes wrong, your phone should be the one ringing in the middle of the night.

I recently participated in a webcast with Michael McCarthy, founder and director of Armada Backup Services, a backup and storage-focused MSP and Eran Farajun, executive vice president of Asigra, a cloud backup and disaster recovery vendor. The executives outlined the seven key steps to successfully choosing the right cloud backup services partner. While cloud backup services was front and center in the conversation, many of the same rules should apply to all aspects of the business.

Here are the seven steps that MSPs need to check through, according to Farajun and McCarthy.

1. Decide on a business model: In the backup/recovery space, there are three different business models, leading complementary, trailing complementary and backup/storage-focused. MSPs need to take a hard look at their core competencies and decide where backup and storage services fits into their overall business model and move from there.
2. Create a shortlist of vendor partners: Put it all down. Do your homework. Create a checklist. Go through the pros and cons. Evaluate vendor not just on their technical products and ability but also their business models. Are they going to be competing with you for that customer relationship or are they going to support you?
3. Conduct a technical review: Farajun and McCarthy stressed there are many questions you need to ask. Does the solution provide service delivery modules? Was the solution designed for service providers? Will the solution enable you to expand your market reach over time? Will the solution enable you to capture and increase market share? And perhaps most importantly, can you provide a secure, reliable service to vertical markets that meets strict regulatory and compliance requirements? You need to feel confident in the products and services you are going to represent.
4. Understand the vendor’s program support: Sounds simple but all vendors support their channel partners differently. You need to know if they are going to help provide marketing support. Do they have a dedicated channel portal to provide information when needed specifically related to service providers? And again, as an MSP you need to know clearly if that vendor sells direct and, if they do, what their rules of engagement are.
5. Pricing and margin flexibility: There are many different ways to price support services. How flexible is the vendor on letting you set your own pricing based around the services you bundle with it? You need to understand which pricing model compliments your business model best—capacity-based pricing, usage-based pricing or recovery-performance-based pricing.
6. Revenue recognition models: Certainly key is how the revenue is going to be recognized. There is no one model that fits all MSPs here. Is it a wholesale model, own-your-own-vault or software license resale? This needs to be determined and then evaluated up front to ensure it fits with your overall established selling and revenue recognition practices.
7. Scalability: Smart MSPs partner with vendors that have products and channel programs that scale as their business grows. In McCarthy’s case, Armada grew its business from focusing on small business to focus also on some larger and midsize customers. The transition was done smoothly because the company’s vendor partners were able to scale along with it. That’s key to successful growth.

Choosing the right vendor partner is not an easy decision but it is a critical one. MSPs need to do their due diligence and make educated decisions that support not only their current business model but also where they want to be five years down the road.

Knock 'em alive!