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Axcient Disrupts SaaS With Program To Pay Partners Up Front

Axcient will pay partners up front for new and renewing contracts for its disaster Recovery-as-a-Service offering, gambling that customers will stay with the service for the five years it could take for the company to break even on those contracts.

Mountain View, Calif.based Axcient, a developer of cloud-based Recovery-as-a-Service technology, is rolling out a new program it said will compensate channel partners up front for the sale of its services rather than force them to wait for their monthly recurring revenue checks.

Channel partners looking to build a solid business model around selling cloud-computing solutions may be getting a boost via a completely new compensation model being rolled out by Axcient.

Axcient's new SaaS:FLO, or Software-as-a-Service: Front Loaded Option, program gives solution providers five months of recurring revenue up front on a new sale, or an upgrade to an existing deployment, said Justin Moore, Axcient CEO.

[Related: Axcient Unveils Virtual Appliance Version Of Its Data Protection Appliance ]

When customers renew contracts, Axcient also will provide one-month of recurring revenue up front, Moore told CRN.

To finance the new program, Axcient said it has received $25 million in new capital from its investors, including new debt financing from Silver Lake Partners. That brings total funding in Axcient to over $80 million, Moore said.

Axcient designed the new SaaS:FLO program to be as disruptive as the company's Axcient Business Recovery Cloud, which Moore called the first solution to eliminate data loss and make sure IT operations don't go down.


"The Axcient Business Recovery Cloud is a new consumption model," Moore said. "It's disruptive. We wanted to align partner compensation with it."

SaaS:FLO is definitely an attractive proposition, said Jeff Dickey, senior vice president of cloud solutions at Redapt, a Redmond, Wash.-based solution provider and provider of cloud services.

"That makes me want to contact them to hear more about the program," Dickey told CRN.

Dickey said he had not heard of another IT services provider offer a similar program to partners, although he said telcos in the past had been known to provide two or three years of commission up front.

The benefit of SaaS:FLO to solution providers depends, in part, on how much money in dollar terms is paid up front, Dickey said.

"But it should give VARs wiggle room to buy better hardware or provide customers with consulting," he said. "There's a lot we can do to help customers under such a model."


A program like SaaS:FLO has risks for Axcient, Dickey said. "They have to be confident that customers will be happy with the service, and that demand for the service will grow," he said.

Moore said Axcient said the risks of the program to Axcient extend beyond providing partners with five months of recurring revenue up front.

"We're making an assumption that we will generate long-term customers," he said. "If we can't keep customers for five years minimum, our program won't work for us. So we need deep pockets."

When asked why five years minimum is needed to work, Moore said the average SaaS offering doesn't break even until 18 months to 24 months after it starts.

"Now we're giving partners five months margins up front," he said. "So it will take 18 to 26 months just to break even. We have years of data proving that customers stay with us for seven or more years. And now we have the financial backing to do this."

The new SaaS:FLO program is part of a move to continue to be 100 percent focused on the channel, Moore said.

"We believe partners are important to Infrastructure-as-a-Service and disaster Recovery-as-a-Service programs," he said. "These solutions are sold to IT departments, not to line-of-business executives."

PUBLISHED MARCH 6, 2015

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