Is it time to rubbish the term reseller?
- 13 June, 2018 09:30
James Bergl (Datto)
Rubbishing the term reseller - a controversial issue dominating channel conversations today.
For those that have flourished through hardware, maximised margin opportunities and relished the notion of resell, the idea of "transforming" - as vendor's like to put it - is unappealing.
And perhaps they have a point, given hardware has been a lucrative market for many resellers in Singapore and the wider Asia Pacific region, laying the foundations for the future growth that many partners experience today.
Moving away from this revenue stream would be akin to turning off the money tap for some.
Yet change is constant and innovation waits for no business, meaning the channel must keep pace or risk falling down the technology pecking order with customers.
According to James Bergl - sales director of APAC at Datto - the time has arrived to "stop calling yourself a reseller in Southeast Asia".
"The first thing I noticed when entering the Southeast Asia market is that everyone calls themselves resellers or system integrators [SI] as opposed to managed service providers [MSPs] or service providers,” said Sydney-based Bergl, who holds responsibility for regional sales.
"Southeast Asia is a diverse region but generally speaking the region is probably eight years behind where Australia is in regards to channel partner trends."
Speaking exclusively to Channel Asia, this trend is shifting according to Bergl, but is still a long way off with the exception of Singapore perhaps, who is ahead of the regional pack and more in sync with regions like Australia, Europe, and North America, where such a managed service model is more popular.
"I see the region at a turning point, particularly in Singapore,” said Bergl, who explained why should channel partners stop calling themselves resellers. "The main difference is that one is a non-value add.
"The other is a managed service or technology service provider and is more about delivering a service as opposed to a product. That service is typically going to be delivered on a monthly basis."
The managed services market is expected to grow rapidly in the coming years, reaching a global figure of US$257 billion by 2022, up from its 2017 value of US$152 billion, according to Research and Markets.
The Asia Pacific (APAC) region is expected to grow at the fastest rate among all other regions, signifying significant opportunities for Channel Partners in the coming years.
"I feel the next couple of years will be a tipping point and we are going to see a lot more managed service providers and technology service providers probably across Southeast Asia, but certainly in Singapore,” said Bergl.
MSPs are particularly popular among start-ups and SMEs that may not have the necessary capital expenditure to invest in their IT infrastructure.
This trend bodes well for MSPs looking for regional growth, as 98 per cent of enterprises in the APAC region fall under the SME, and employ 50 per cent of the region’s workforce.
Furthermore, Bergl said a managed service is a value-add, with reporting and monitoring built into the service from the start, without the addition of capital expense often required from a pure reseller.
"A one-off sale is always a race to the bottom in terms of the profit margin because you are just providing a product that competitors are matching and beating you on price,” said Bergl. "Channel partners should move to the concept of cloud solutions provider or technology solutions provider.
"These are the sort of business models that allow you to have an ongoing monthly engagement with customers and deliver ongoing monthly service and value as opposed to a one-off sale."
Bergl sees the move to a managed services accelerating in the region, with some of Datto’s key partners moving to such a model.
Solutions like Microsoft Office 365 are getting users used to such a delivery model and paying the operating expense for a monthly subscription, according to Bergl.
"Based on my feedback that while the system integrator is more inclined towards selling a one-off product because of the initial big cash injection, the end user is asking for a monthly subscription in the operating expense of their business,” Bergl added.
As a channel only security vendor, Bergl said Datto "never competes" with channel partners and instead passes all sales leads directly through the vendor’s ecosystem of providers.
Bergl sees the vendor’s strategy for the regional channel as one of educating and facilitating, a strategy based on helping partners transition to a service model that delivers recurring revenue and offers a monthly service to the vendor’s customers.
"We consider this a journey as opposed to an immediate swap over to managed services,” said Bergl. "We see ourselves as MSP consultants. We want to help out channel partners transition their models.
"We can provide a platform that allows our partners to use white label tailored contents that our partners can imprint their logo on. We have a growing team based in Singapore to help our channel partners take our solution to market and generate recurring revenue for their business."
From a technology perspective, it should come as no surprise that Datto sees security solutions as the most significant opportunity for channel partners in the year ahead.
However, with the growing rate of cyber attacks and recurring natural disasters seen across the APAC region, such a view is not without merit.
The security vendor’s principal offering is a back-up data recovery solution.
On the market front, the global data back-up and recovery market size is expected to grow from US$7.12 billion in 2017 to US$11.59 billion by 2022, according to Markets and Markets.
As with the growth in the managed services market, APAC is expected to be the fastest growing region globally.
Enterprises are increasingly data-rich, and this trend will continue upwards in the years ahead, but in a disaster-prone region such as Asia Pacific, the ability to protect and recover data in case of such a scenario cannot be understated.
"Data has never been more important to a business,” said Bergl. "I do not see security as a product but rather as a bundled set of solutions. We are looking for the forward-thinking partner who is focused on selling solutions, not just products that typically have a recurring revenue division to their business or would like to have a recurring revenue division to their business.
"I think when customers see for themselves that the operational expense route is the correct one they will come on board that service delivery model."