It takes a lot to get a standing ovation from a crowd of leery solution providers, but Trend Micro's Chee Tan accomplished it last week after introducing a new usage-based licensing model at Tech Data's TechSelect Partner Conference in Salt Lake City.
Through the program, Tech Data solution providers receive a master Trend Micro software license with no up-front investment required. End users will be charged monthly, and solution providers receive a recurring revenue stream. No license renewal is required.
Solution providers pay only for the number of Trend Micro licenses used during the previous month, according to Cecilia Lessard, director of software product marketing at Tech Data. As a result, resellers reduce financial risk with no up-front investment, she said. Licenses are based solely on the usage of Trend Micro technologies or services, according to both companies.
Tan, senior director of business development, sales and marketing for Trend Micro's service provider and OEM business, hopes that the usage-based model will serve as a "tipping point" for solution providers to switch customers to Trend Micro from Symantec, McAfee or other security vendors.
"VARs were telling me [at TechSelect] this is the one reason they were looking for to switch. In many cases, there was no motivation to switch them until this program. This gives them the high-margin, high-value they were looking for. We become the catalyst for the VAR to get closer to his customer," he said.
After Trend Micro's breakout session, some VARs said they ran to ask their other security software vendors where their usage-based programs are.
The solution providers said Trend Micro has a big head start, and some already using a managed services model said vendors have been too slow to react to their changing models.
"We don't use any Trend Micro products right now. So I'm going back to my [security vendor partners], and I have some screaming to do. The whole industry needs to look at this. It's a big deal," said Stephen Alexander, president of Third Eye Technologies, Valley Cottage, N.Y.
Added Angela O'Donnell, managing director at W. O'Donnell Consulting, New York, "We are forced to be nimble with our customers. We need that corresponding response from the vendors. Certain vendors can react to our needs. Others, when an organization gets bloated, huge, it's like trying to move an ocean."
Trend Micro's Tan likened the new model to a cell phone bill. You don't switch users because of a dropped call. The carriers add value such as a free phone or free calls to family and friends as incentives to keep customers.
"Stickiness. That's the kind of model we're looking to. It really empowers the reseller to talk about quality and value of service instead of how much. Are you charging $2 more than the other guy? This helps move away from that discussion," Tan said.
Solution providers can expect a startling increase in margins too, Tan said. Whereas Trend Micro's traditional licensing model yields 20 percent profit at best, he said conservative estimates in the new usage-based model are 73 percent to 120 percent.
And as solution providers add more end-user seats, their costs go down while their charges to customers remain the same, yielding more profit.
"It's a real win-win situation. The resellers and [end users] don't have to cough up a lot of money up front," Tan said.
There are about 400 usage-based SKUs available through Tech Data, accounting for pretty much all that Trend Micro offers minus appliances, Tan said.
Solution providers can place the application in their own hosted environment or at the end user's site. If a solution provider has visibility into the customer, he or she can remotely remove the license as needed if the customer wants to stop the monthly charge.
To protect solution providers, end users must maintain a relationship with the VAR that originally deployed the software or risk losing their license if they attempt to establish a relationship with another provider.
"The resellers own the license, not the end customer. We gave them the flexibility to move the license around. In the [traditionial] licensing world, the license is non-transferable," Tan said.
For the foreseeable future, Tech Data will be the only distributor to have the usage-based program with Trend Micro.
"Since last year, we've been working hard with Tech Data to engineer the workflow, process and logistics on how make changes and handle usage reports," Tan said.
Now that the news is out, Tan said he expects Trend Micro's other distributors to ring his phone off the hook. "Tech Data earned [the initial partnership]. They worked herd on it, and I know we can count on them to execute," he said.