Partner Perspective: Transitioning To MRR

By Dede Haas, CA-AM, Channel Sales Strategist, DLH Services, LLC

Channel sales strategist and coach Dede Haas is founder of DLH Services, which helps technology vendors and partners create innovative, successful channel sales solutions and programs. Here, Haas discusses recurring revenue with two members of The ASCII Group, a 1,300-member organization of North American VARs, solutions providers, and MSPs offering services to help its members grow their businesses. Check out Haas’ “Channel Knowledge Nuggets” newsletter at dlhservices.com for tips and stories from the trenches.

DES DOUGAN is principal of Dougan Consulting Group Inc., based in metro Vancouver, British Columbia, Canada. Des has been running the consultancy since 2007. Originally focused on break/fix, the company has been evolving toward managed services over the past several years.			ED MANA is the chief technologist and founder of Technolgy On Demand, an MSP located in Yorktown Heights, NY. In addition to MSP services, it provides custom software development and PSA consulting to the MSP community.

QUESTION 1: Have vendors done a good job transitioning their partners from perpetual licenses to recurring revenue? Why or why not?

DOUGAN: A number of vendors have done a really good job at this. I think the 800-pound gorilla in the room is likely to be Microsoft with Office 365. The way they’ve done that has been very beneficial to people who have become Microsoft partners.

In terms of other vendors, I think the market is definitely maturing along that way. For example, I’ve partnered with Calyptix Security. They have a recurring revenue model for network firewalls and appliances that is quite straightforward to work with. Others are moving in that direction.

MANA: I found that some vendors have done a really good job, especially newer vendors to the market that only offer a recurring model. With them, it’s obviously take-it-or-leave-it.

With respect to older vendors, I’ve seen scenarios where they give you the option, move to the model over a certain period of time, or move to the model, and if you’re still trying to go with perpetual licensing, you either get heavily penalized or they render the product useless.

QUESTION 2: What can vendors do better to help their partners through the transition?

DOUGAN: Provide educational materials so that we can educate our clients on the benefits of moving from a fixed price, perpetual license model to a recurring revenue model.

Clients quite often are looking at a bottom line. And one of the things that Microsoft did was allow you to install their license on multiple computers, whereas with the perpetual license, it’s by individual computer only. So there are benefits that the client can see as well as the provider.

MANA: They need to embrace the fact that they’re moving to this model. And they need to do things to make it easier, whether it’s a transition period or a cost buy-in where they ramp up into the new pricing to account for the thousands of dollars, if not tens or hundreds of thousands, the partner has already invested. I think they need to come up with something to make that buy-in a little bit better for their partners.

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The ASCII Group is a vibrant reseller community of independent MSPs, VARs, and other solution providers. Formed in 1984, ASCII has more than 70 programs that provide turnkey cost-cutting strategies, innovative business building programs, and extensive peer interaction. ASCII members enjoy benefits such as marketing support; educational information; group purchasing power; increased leverage in the marketplace; and multiple networking opportunities. These programs enable ASCII members to increase revenue, lower operating costs, and grow service opportunities. ASCII is the oldest and largest group of independent information technology (IT) solution providers, integrators and value added resellers (VARs) in the world. Learn more at www.ascii.com.

This article originally appeared in the March/April 2019 issue of Channel Executive Magazine.