Unitrends Incentivizes VARs to Go All In on Kaseya IT Complete
Kaseya backup and disaster recovery provider Unitrends announced a new program Wednesday designed to help value-added resellers (VARs) move to a recurring-revenue model. While we tend to think of managed services these days when talking about the IT channel, there are still a good chunk of partners that make their bread and butter on resale.
The 2018 MSP 501 survey showed that 12 percent of respondents identified hardware resale as a growth area for 2019, and on average, the 501 managed service providers that made the list attributed 21 percent of their annual revenue to hardware and software resale. Partners tend to want to service equipment they have vetted and installed themselves, and more and more services are being offered in conjunction with hardware, so it makes sense.
But there’s another resale channel that’s still clinging to the traditional VAR model to make up the bulk of its business. Many partners haven’t made the pivot to managed services. As we’ve written about extensively, it’s a painful process that entails rethinking a partner’s entire operational, sales and finance model. Resellers, a great deal of which built their businesses in a pre-cloud world and have maintained long, personal relationships with their clients, are understandably reluctant to bite the bullet and force customers into a managed-services offering. And while many have begun the transition gradually by signing new business on as recurring customers while simultaneously trying to support their legacy break-fix business, it’s difficult to scale such a splintered enterprise.
Fred Voccola, CEO of Kaseya, told Channel Futures that most partners in the resale channel are not realizing recurring revenues at all. They’re collecting commission on a single sale, and most of their vendors’ channel programs offer their VARs a certain percentage of margin on a single sale that’s directly driven by the reseller. Kaseya, which sees itself as an enabler of managed-service businesses, wants to use the new Unitrends Xtra program to help those resellers ease into an MSP model.
The company says the new program unlocks up to 75 percent greater margin for Unitrends channel partners than any other backup and disaster recovery (BDR) solution provider by providing a “substantial increase” in the upfront initial payment and recurring payments on a perpetual basis for the annual revenue that the customer generates over the life of the account. The program applies to the full suite of IT Complete solutions, such as security products, compliance products and endpoint management.
“[T]his is the real ‘magic’ of the Xtra program,” Voccola told Channel Futures. “[T]he Xtra platform provides the ability for that VAR, reseller or channel partner to create a recurring revenue stream about twice as large as the initial transaction size of that Backup purchase — and we believe that this will massively change the financial profile of the resellers and VARs that participate in the program.”
The company says that based on the expansion of Kaseya customers over the past several years, this equates to an annual recurring-revenue stream greater than the initial margin received on the original BDR transaction. The program allows VARs trying to build a managed-services model to still sell infrastructure management while also receiving compensation on the entire IT Complete stack as customers continue to adopt products from Kaseya — whether that reseller drives the sale or not.
Of course, Kaseya’s message is that it wants to “make it seamless for midmarket enterprises to access the best-in-breed IT infrastructure management solutions they need to run their business.” But it’s also one more avenue the fast-growing MSP management solution provider can leverage to cross-sell between its business units, many of which the company acquired over the last year. In addition to Unitrends, Kaseya brought in RapidFire Tools, which it is positioning as a solution to help MSPs spin up a compliance-as-a-service business; Spanning to cover Office 365 backups; and IT documentation provider IT Glue. Kaseya hopes programs like Xtra will provide its partners with the incentive they need to go all in on the company’s IT Complete suite of products. What’s good for Kaseya’s resellers is good for Kaseya.