Being a healthy business in the IT channel ecosystem takes more than just a solid balance sheet. Channel partners today must take a self-diagnostic approach to truly find out if their business is healthy today and built for long-term success.
While there are many aspects to this self-diagnosis, Eran Farajun, the executive vice president of Toronto-based cloud backup and recovery software vendor Asigra Inc. says channel partners should examine three key areas:
- Control of pricing and margins;
- Control of customer list; and
- How easy would it be for customers to leave?
CONTROL OF PRICING AND MARGINS
Control of the company’s destiny is a very important measure to put in place. Farajun suggests – as part of the self-diagnosis exercise – that business owners review all vendor and supplier partnerships. Obviously, there are some vendor relationships such as Microsoft with Office 365 where channel partners only get a modicum of control. But that will not be the case for other vendors in the channel who offer solutions for monitoring, VoIP and backup.
“What are the things you should control,” Farajun asks? A must are the delivery and technology stack, which involve storage, software and your staff. “By controlling who delivers and monitors the services will bring you control over pricing and margins. One of the ways you gain control is by having the ability to decide if the service builds on your margin play or is used as a loss leader that will lead into several other money-making services,” he said.
CONTROL OF CUSTOMER LIST
This next self-diagnosis part sounds like a no brainer, but there are many solution providers who simply have lost control of their customer contacts.
“Your vendor/supplier should not have open access to your customer list,” Farajun said. There are some exceptions such as the development of case studies. If there is a significant customer win, you may want to create a joint case study with yourself, the vendor and the customer. But even here there are ways to shield the customer from view by only describing them. Another exception is a level three support ticket where you work hand-in-hand with the vendor to trouble shoot the customer problem.
“Just how sticky are your customers,” he added. Farajun had other questions channel partners should ask themselves.
- Do you have an unusually high churn rate?
- How easy would it be for a customer to leave?
- Do you operate with long-term or month-to-month contracts?
- How many other partners in my area offer the same solutions?
- How easy would it be to pull the data off the cloud?
- Do I have control of the data?
- Am I just a broker of services?
“A channel partner needs to determine just how sticky they can be. I’m not saying you hold the customer hostage, but the terms of the off-ramp should be clearly spelled out as well as the costs involved in the agreement. It’s like a pre-nuptial and divorce agreement all in one,” Farajun said.
Another important aspect of the agreement is what level does the MSP take responsibility for performance. This will show the customer that their partner has put their money where their mouth is, while also ensuring confidence and increased stickiness.
Educated customers may also ask challenging questions such as: “why are you not standing by these services?” If the MSP’s answer is “well, these are not my services” it could dramatically decrease your stickiness to the customer.
By taking this type of self-diagnosis a channel partner can determine the health of their business.
Farajun said that the goal for channel partners is to strive for a higher degree of control of their profitable services. By doing so it will increase stickiness with the customer and positively impact the long-term valuation of the company.
Download a recent Backup Disaster and Recovery report from the survey that we did in the channel to better understand what they think about BDR.
Take the second BDR survey that we are currently doing for our 2020 report.