Moving To The New Model

Pat Walsh, the owner of Computer Station of Orlando, is one of those solution providers that has survived by constantly climbing the technology ladder and moving to new business models.

These days, Walsh is moving aggressively into hosted or Software-as-a-Service (SaaS) solutions that his company can brand itself and sell as a monthly service. Whether you call it hosted, SaaS or managed services, the trend is inexorable. Solution providers moving squarely to a recurring revenue model are driving higher profits and sales than those stuck in the old sell-the-next-IT-project paradigm. Walsh recently partnered with eFolder, a SaaS remote backup vendor based in Atlanta, and is keen on Reflexion, a hosted e-mail threat protection, archiving discovery and recovery vendor. "This industry is moving to an all-hosted solutions model," Walsh said. "That's where I'm going. I don't have the risk. I push it out to my clients and charge them monthly." And Computer Station of Orlando is the brand, and it sets the price.

For years, we here at Everything Channel have talked about the solution provider as the defining brand. And no matter how often we hammer it home, there are a lot of big vendors that have not changed their models or mind-sets to capitalize on the new channel dynamics. That failure of some of the big vendors to move quickly is allowing vendors like eFolder and Reflexion to capture critical solution provider share in what is one of the hottest market segments.

Take eFolder. Vice President of Channel Development Jan Spring said at Everything Channel's recent XChange event that she took 18 of her partners to dinner, up from only three a year ago. It's striking anecdotal data about just how fast the hosted recurring revenue model is taking hold. One of the policies that separates companies like eFolder and Reflexion from the pack is they do not publish pricing on the Internet. What's more, both those vendors have a 100 percent channel model that allows solution providers to brand the services as their own. In an age when vendors insist on setting margin and pricing, eFolder and Reflexion are a breath of fresh air. A lot of vendors have forgotten one of the basic maxims of this business: Where there is mystery, there is margin. They understand solution providers need to make a living.

"I was a system integrator," Spring said. "I ran my own company for 12 years. I was part of the channel."

So what's driving eFolder's success? "We're getting a snowball effect," Spring said. "We're seeing increasing adoption of managed services, increasing awareness of SaaS and eFolder's superior technology and infrastructure."

Spring said one of the ingredients that makes eFolder successful is a corporate culture that puts solution provider success at the heart of the company. "Our corporate motto is, 'Your success is our success,'" she said.

BackTalk: Are you having success with the SaaS or managed services model? Contact Steve Burke at [email protected].