HoJin Kim: Pay-As-You-Go Model Is A Profitability Game-Changer For SonicWall Partners

SonicWall Vice President of Worldwide Channels HoJin Kim said the company’s shift to a pay-as-you-go monthly model opens the door for partners to drive big increases in profitability.

A Fundamental Shift To A Services-Led Model

SonicWall’s Vice President of Worldwide Channels Hojin Kim said the company’s shift to a pay-per-use channel model is poised to drive big services opportunities for partners.

“It’s a huge opportunity for the channel,” said Kim, a 25-year channel veteran who is leading the SonicWall pay-per-use channel charge. “The channel as I have seen it started as a resale channel representing other vendor’s products. Now it has moved to a services-led model … This is the fundamental shift we have been waiting for in the channel for the last 15 years.”

SonicWall is currently piloting a pay-as-you-go model for its Capture Client and Cloud App Security products and is set to expand that to a wider range of products and services in 2020.

“It is vital for partners to make this shift,” said Kim. “There is always going to be some segment of the population that just want to buy something. That is always going to exist. That is not where the real value lies. That is not where the money-making proposition is for our partners.”

How important is it for partners to move to the pay-per-use model with SonicWall?

It is vital for partners to make this shift. There is always going to be some segment of the population that just want to buy something. That is always going to exist. That is not where the real value lies. That is not where the money-making proposition is for our partners. That is a pure resale game. If you want to put yourselves in a commoditized world you are going to get commodity type margins. The real profitability here- the real driver of growth – will be the partner services and how they differentiate themselves based on those and not the product that they represent.

Customers are not only asking for it but it is an opportunity for partners to innovate the way they sell, change the way they sell. Customers are moving this way. There will some segment that just wants the widget but you are not going to make money in that game for very much longer.

How big an impact could this have on the ability for MSPs to drive increased profitability?

Just on the product piece alone it is going to have a huge impact. We are lowering costs (to our partners by) 20 percent. Then when you talk about the ability for them to take that capital and utilize it to do other things it is a huge impact. Then you talk about the ability to have additional stickiness with the customer versus resale. In a resale world I sell you a license and I see you in a year when that licenses expires. Now I am going to communicate with you now every week on everything that I am doing for you. It’s a huge impact.

It’s a pretty fundamental shift and a huge way for our partners to add a lot more value to their customers.

How big a step is the pay-per-use partner model shift for SonicWall?

This is a really important step for us because it is a recognition that the customer consumption models are changing and that the only way we are going to get some level of success here is by supporting that through our partner base. Our partners have been with us for a long time and have seen a lot of change at SonicWall. This is a hugely positive light at the end of the tunnel for our partners.

A lot of our partners are fiercely loyal to SonicWall. A lot of them have borne the cost of this over the past year. This is an important value add we can provide to our partner base. It frees up under-utilized capital for them to be able to invest in other places: more talent, better SOC (Security Operations Center) capability, more service creation activities for them. Today that capital was tied up in buying product from us.

We see a move from the market this way. To a certain extent some partners are leading the transition and other partners are being dragged along. Depending on who you talk to we are helping them make the transition or helping to support them.

You’re starting the pay-per-use model as a pilot with Capture Client and Cloud App Security and then plan to expanded it in 2020. How will that work?

We plan to shift all of our virtual and software-based assets will go this way throughout the course of 2020.

What we are in the middle of piloting now is monthly pay-as-you-go pricing- the ability through your management portal as an MSSP to light up as many clients and tenants as you like on a month to month basis with no annual commitment per entity.

Instead of having the partner do a capital outlay for the full year at the beginning of the period and bearing the risk of a client potentially breaking the contract with them. Partner now have the ability to bill on a month to month usage-based billing. It is per end point- device under management.

What is the difference between the new pay-per-use model and the old annual license model?

It was a cash flow issue for a lot of the partners. For the most part they were signing up their customers to one year or multi-year agreements for their service. The fact is they had to outlay the dollars up front. From a cash flow perspective this is a huge benefit to partner.

What are the financial incentives to drive partners to the pay-per-use model?

Most of the financial incentives that we will provide partners will be around cost reduction not necessarily around back-end incentives. One of our guiding principles as we designed the program is predictability is key. In a managed services model predictability is probably the most important thing. So by putting in things like back end incentives that are performance based that while it is wonderful and adds dollars to a solution provider’s bottom line is not predictable. We would rather focus our efforts on making sure we are driving their costs down overtime in a predictable fashion as opposed to here is a five percent bump.

The more you make those types of offerings available in a managed services world it bleeds and just creates more top line degradation for the managed service provider. At the end of the day if you don’t have predictability for the bottom line and you see top line degradation that is not a game anybody can win.

How big a money-making opportunity is this for the channel?

It’s a huge opportunity for the channel. The channel as I have seen it started as a resale channel representing other vendor’s products. Now it has moved to a services led model which is where we are getting some critical mass now. The channel is now selling themselves and I as a vendor am now along for the ride as opposed to the other way around.

This is the fundamental shift we have been waiting for in the channel for the last 15 years.