By Dan Shapero

It started with a simple question posed to supplier channel chiefs: “What evolutionary adaptations must your partners make to thrive selling digital services?”

Being the hard-nosed realists they are, a few shot back: “Define digital services. What exactly do you mean by ‘digital transformation,’ anyway? Sounds suspiciously like spin.”

Fair enough. Short answer: It’s about bringing to bear modern technology and processes to achieve business goals in a way that wasn’t possible even a few years ago. For partners, the service opportunity is helping customers imagine what’s possible with cloud, IoT, mobility and a range of new connectivity options — and then making it reality.{ad}

ConnectWise CEO Arnie Bellini tossed back the question “What isn’t becoming digital?”

Everything is up for grabs, says Bellini. “Anything ‘atomless’ is an opportunity for the channel,” he says. “What MSPs once managed on-premises is now evaporating to the cloud. Consider staple services for most MSPs — virus protection, spam filtering, backup and disaster recovery — all served up with zero carbon.”

He points out that even physical surveillance is now managed by digital services, with minimal hardware.

“Digital services are the collection of critical services that enable the second wave of digital transformation happening now in every commercial firm and government agency, regardless of size,” says Janet Schijns, vice president of global channels at Verizon Enterprise Solutions, who lists four technologies that will help the channel win business:

The big risk is to those who don’t embrace digital, says Schijns.

For many partners, this is a lot to absorb. Considering the impact on business processes, sales cycles and technical skill requirements, surviving this digital revolution takes …

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… a plan. The channel chiefs’ advice broke down into five main points that together provide a road map: turn to the cloud, leverage the MSP business model, stay current with skills and embrace millennials and channel convergence.

Hitch Your Wagon to Cloud Nine

“There has never been a more opportune time to seize cloud opportunity,” says Gavriella Schuster, corporate vice president of Microsoft’s worldwide partner group. Schuster says the channel is just scratching the surface in terms of potential and cites a recent IDC study showing that partners with more than 50 percent of their revenue coming from the cloud grow twice as fast. If you do the math, these partners will realize 1.5 times more gross profit and almost twice as much recurring revenue.

However, selling cloud services alone isn’t enough to make up the deficit of revenue from premises-based sales, says Dave Sobel, senior director of community and field marketing at LOGICnow. “The biggest evolutionary adaptation that partners need to focus on is the difference in economics in delivering cloud-based services,” says Sobel. While margins can be maintained on cloud services when compared with traditional on-premises solutions, the raw revenue reduction occurring with lower cost often requires that solution providers have twice as many customers to simply maintain revenue.{ad}   

Using digital services as a door opener is a good start. But to gain real momentum with digital services, partners should plan to attach at least three to five times revenue from their own services for every dollar of cloud services sold.

“By combining services, cross-selling and better pipeline management, the delivery of digital services can result in improved revenue growth at rates that exceed traditional solutions,” says Sobel.

Donna Wenk, senior vice president at Broadview Networks, responsible for channel sales, says that if you have yet to move to cloud, you might need to get creative. “The hosted IP telephony and UC services market continues to move from early adopters to the mass-adoption stage; partners will have to differentiate their businesses and offerings to remain competitive,” says Wenk. To do that, she suggests offering a unique value-add that can position clients and partners for financial success.

Finally, as companies move more of their key applications to the cloud, the need for site-to-site connectivity lessens, says John Hogan, vice president of partner sales and business development at Bigleaf Networks. Hogan advises partners to …

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… offer solutions that leverage cost-effective and ubiquitous broadband, and that prioritize and provide failover for cloud-based traffic.

“If partners are not proactively bringing WAN design options to the table, not only will they be missing out on tremendous growth potential in the cloud space, their existing base of WAN customers will be soon be at risk,” he says, specifically referring to SD-WAN, which plays to Schijns’ recommendation to embrace software-defined networking.

Embrace the Service Advantage

“Managed service started a first phase of transformation for the channel by forcing partners to not only lead with products, but all the things that make up service delivery,” says Rob Rae, vice president of business development at Datto. With the move to the cloud and IoT, Rae emphasizes that partners will need to let go of the data center build-out. The challenge: replacing decreasing margins on hardware and other one-time sales with recurring revenue streams for digital services, while maintaining a direct relationship with customers.{ad}

“He or she who owns the data, owns the customer and the profitability from the relationship,” says Rae.

ConnectWise’s Bellini maintains that partners must open cloud service provider practices and charge for managing services, either physical or digital, on a monthly recurring revenue basis. “Customers will pay for making your life easier,” he says.

It’s a nice vision, but Seth Robinson, senior director, technology analysis at CompTIA, points out that digital requires a mindset adjustment.

“It’s important for channel partners to realize that digital services are not products,” says Robinson. “This may seem obvious, but the implications are hard to put into practice. Managed service providers are well along this path, having made changes to the way they sell to clients and build ongoing contracts. Digital services take things even further, and channel firms that have not yet explored managed services will have a lot of ground to cover. “

There’s also a mindset change to go along with the business transformation.

“Understand what solutions look like in a digital services world,” he says. “Implementing email is a product-based approach; a full communications solution may involve several cloud-based tools that are integrated into workflow and mobile devices while creating metadata that can be analyzed. All implemented with modern security, of course.”

Don’t Be Afraid to Go Back to School

“To succeed today, you must be able to talk with …

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… purchase decision-makers about productivity tools, security, continuity, collaboration, mobility and much more,” says Ken Bisnoff, co-founder and senior vice president, strategic opportunities at TelePacific. “You can’t skate by with a surface familiarity with buzzwords and trending topics — you need expert knowledge.”

Keeping current on how digital services are marketed and sold could make the difference between building a successful practice and falling behind. “It wouldn’t hurt to add social media skills — the kind our teenage kids effortlessly use — to communicate, promote and network effectively,” says Bisnoff.

PGi channel chief Ralph Hawkins says successful partners are accustomed to being experts in the solutions they offer their clients. That needs to continue, even when it involves moving out of their technology comfort zones.

They also need to open their minds to startups and step out of their supplier comfort zones to meet customer needs.

“Partners must make a much more concerted effort to keep themselves informed about the software offerings — apps or full-fledged applications — coming from non-traditional companies,” says Todd Thibodeaux, CEO at CompTIA. Thibodeaux stresses that democratization and consumerization of IT and cloud-based storage have not only affected hardware, both mobile and desktop. These trends are also dramatically affecting what constitutes a “meaningful player” in software.{ad}

Channel partners will need to scan the Apple and Google App stores regularly, poll customers’ mobile devices for the apps they are using and stay on top of trends by visiting sites like www.getapp.com/or www.appsmart.com/home, for starters.

“If you really want to see what’s coming down the pipe, make sure TechCrunch is on your feeds list,” he says.

Finally, learning begins at home, says Jonathan Hartman, vice president of sales at PlanetOne Communications.

“With the abundance of consumer-oriented technologies, there has never been a better time to leverage technology at the application level,” says Hartman. “Partners can connect mobile devices to their desktops at work, to their home and even to their personal health data, equipping a channel partner to be more conversational with clients. Embracing digital services on a personal level will help partners communicate key advantages to their customers.”

Carolyn April, senior director of industry analysis at CompTIA, goes a step further.

“By developing your own intellectual property, you will move your business forward more independently, create differentiation and establish …

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… a brand that is separate from any particular product you resell,” says April. She encourages partners to think outside the box when it comes to IP.

“It doesn’t have to be a product per se, but a process or solution that you have created that solves a business problem for a customer in a particular vertical,” she says.

The Kids Are (Al)Right

“Digital success will come one millennial at a time,” says Schijns. She cites a recent report from CompTIA predicting millennials will make up over 50 percent of the channel workforce by 2022. But in our own 2016 U.S. Channel Compensation Survey, done in partnership with 451 Research, just 20 percent of respondents were under 35.

Many partners are set to retire, often without a succession plan in place. Where does that leave customers?{ad}

If you’re unsure how to attract and retain millennials, Kirk Robinson, senior vice president, commercial markets division and global accounts at Ingram Micro, has some advice. It’s apparent from some comments in the 2016 Channel Compensation Survey that not all partner executives are doing these basics.

“Create an environment that your employees will thrive in and a brand promise they want to promote,” says Robinson. “Give them reason and the resources to show up and succeed. Take the time to establish a repeatable approach to prospecting and onboarding. Also, ensure everyone in the company has clearly defined roles and responsibilities — this will help ensure ownership and accountability as the business grows.”

And, ensure these steps can be done successfully with or without the owner/founder/CEO involved.

“Eating your own dog food” is an adage most entrepreneurs live by. If you use the technology you develop or sell internally, your team members of all ages become evangelists by default.

“Be your best customer — use the services and technology you sell,” says Robinson. “Be exceptional to your employees and they will extend that level of support to your customers. Establish, document and continuously refine processes for prospecting, onboarding new customers and nurturing existing customers and other strategic business relationships.”

Embrace Channel Convergence

Many services, including networking and VoIP, are getting easier to support, driving convergence between the MSP and traditional telecom agent spaces.

“Don’t hesitate to expand your portfolio, especially when it comes to managed print and communication services such as VoIP, where competition is growing,” says Mike Cullen, vice president, worldwide sales and business strategy, MSP business group, at SolarWinds N-able. By expanding your portfolio, you are …

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… staking a bigger claim on your client’s IT cupboard and keeping competition out.

“Services expansion is purely a defensive move and one MSPs need to continue to succeed,” says Cullen.

The same can certainly be said of agents.

Broadview’s Wenk says to use metrics to decide what to sell. “Partners with the most successful ROIs invest in long-term client relationships where the value is built by both their strong performance in a trusted advisory role and the quality of the service providers in their portfolio,” she says.

In other words, be selective.{ad}

“Products with high churn can often lead to winning more deals, but will ultimately cost partners more money and time,” she says. “Offering these products can lower a partner’s brand equity when they are forced to supply constant technological support and maintenance of the client relationship. Replacing these services and products with those that generate lower churn provides clients with a peace of mind and turns technology providers into trusted advisers.”

Convergence is also good for customers — we’ve all used the expression “single throat to choke.”

“When the customer calls with an issue, the channel partner needs to be able to recover data faster, archive data better and support whatever problem occurs,” says Rae. “There is an ever-evolving landscape of customer issues to solve — for example, ransomware.”

The key is, when something goes wrong, you want the customer to call you first — not another vendor or service provider. Of course, loyalty begets loyalty.

“Work to protect your customers’ businesses, not just their data,” says Neal Bradbury, senior director of business development at Intronis MSP Solutions by Barracuda. Bradbury says the conversation around digital services and the particulars of migrating to cloud services is best led by the partner.

“Solving point problems is part of the overall service engagement of a trusted adviser,” he says.

When making the transformation to digital, task the millennials within your own business to implement new and innovative services. Look beyond point solutions, and converge a range of digital services to add margins and growth. In the immortal words of Charles Darwin, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”

Dan Shapero, founder of ClikCloud, is a highly skilled, results-driven technology marketing and business development executive. He has a track record of driving revenue growth and positioning companies for public offerings or acquisition. Shapero is a member of the CompTIA board of directors and held executive positions at Ingram Micro Cloud, Kaseya, Avamar (EMC), Vicinity (Microsoft), State of the Art (Sage) and Platinum Software Corporation (Epicor). He is a frequent speaker on topics including digital marketing, business transformation, managed services, cloud computing, cybersecurity and mobile computing.
LinkedIn: linkedin.com/in/danshapero
Twitter: @clikcloud